In a decision of May 11, 2023, the French Supreme Court confirmed the possibility for an employer to condition an employee’s full acquisition of a welcome bonus on the continuance of employment up to a specific date.
In this case, an employee was hired as a financial market operator and resigned 15 months later. After the resignation, the employer company filed a claim before the Employment Tribunal to obtain reimbursement of part of the welcome bonus, as agreed upon in the employment contract.
The relevant clause in the employment contract stated: “the employee will receive as a welcome bonus the gross lump-sum payment of €150,000, the payment of which will take place within 30 days after the employee’s hiring, in accordance with the terms of the employment contract. In the event that the employee resigns or is dismissed for gross or wilful misconduct before the end of the third year from the start date, the employee will have fully acquired 1/36th of the welcome bonus for each month fully worked after the hiring date. The balance of the welcome bonus will be refundable to the Company upon the date of termination or on the day notice of termination is given, whichever is earlier.“
The Court of Appeal decided that the employer’s claim had no merit. It agreed with the employee that this clause constituted a violation of the employee’s freedom of work.
Conversely, the Supreme Court endorsed the employment contract clause, ruling that “a clause subordinating the acquisition of the full amount of a welcome bonus, having no impact on the employee’s remuneration, to a condition of employment continuance with the company after its payment for a period agreed between the parties and providing for the acquisition of this bonus in proportion to the time spent by the employee in the company and the reimbursement of the balance in the event of a resignation before the planned deadline, does not infringe on the freedom of work”.
Two schemes can therefore be contemplated by an employer when paying a welcome bonus:
- Either pay the welcome bonus on a prorated basis at the end of each year. This scheme would be safer for the company by ensuring that no payment is made in excess of what has been fully acquired by the Employee. However, this does not fully match the logic behind a welcome bonus.
- Or pay the full amount agreed upon and include a covenant setting out the modalities of acquisition and reimbursement depending on the duration of employment.
In any case, our team at MGG Legal can help your company include suitable provisions in employment contracts providing for a welcome bonus.