Introduction
It is a common practice for the employers to grant benefits to the employees on a voluntary basis, i.e., on top of the statutory provisions, or in addition to benefits which are mandatorily granted, as provided for by court rulings, arbitral awards, collective labor agreements etc. Such benefits may be granted in cash or in kind and may include indicatively bonuses, private insurance schemes, stock options and free share award plans.
Though a useful tool for employee attraction, retention and performance motivation, the grant of benefits is not without legal risks. Professional advice on the structuring and implementation of the relevant policies is vital to avoid unexpected increases in personnel cost and maximize their positive effect.
The main concern is that, on the one hand, the granting of voluntary benefits may lead to legal repercussions in case the employer revokes the granting of the benefit on a unilateral basis, without having reserved the right to do so. On the other hand, employee claims may be raised in case the employer does not apply objective criteria on the basis of which the benefits are granted and subsequently the employees are not treated equally.
Thus, the provision of voluntary benefits must be carefully drafted in the employment agreements and accompanied by a revocability disclaimer, whereas it must also be aligned with the principle of equal treatment.
Business practice: risks and case law
In case the voluntary benefit is repeatedly granted over a long period of time and on a uniform basis, it results in the creation of an implicitly established agreement between the parties (business practice), according to which the employer is obliged to maintain granting thereof under the same terms in the future. In other words, granting of the benefit can no longer be unilaterally revoked by the employer, since it is part of the employment agreement. If the employer proceeds to unilateral revocation, this may be considered as a detrimental change of the employment terms, which may give rise to employee claims. Moreover, the benefit may be considered part of the regular wages. The latter form the basis of, inter alia, the dismissal compensation, leave allowance, overwork compensation etc. and may subsequently lead to increased personnel cost.
In order to mitigate such risks, the employer can include in the employment agreement an express revocability disclaimer with regards to the voluntary nature of the benefits and the fact that they can be freely revoked or amended on a unilateral basis at the employer’s discretion.
Supreme Court case law, which adopted the respective opinion supported by legal writing, (cases 1174/2017 and 1158/2018 of the Supreme Court) introduced a distinction between two categories of such revocability disclaimers, each one of which may produce different legal effects.
More specifically, according to the aforementioned case law, the employer can either introduce in the employment agreement a reservation that the benefit is voluntarily granted («επιφύλαξη ελευθεριότητας» in Greek) or a revocability clause/right («ρήτρα/δικαίωμα ανάκλησης» in Greek), each one of which leads to different legal consequences. More specifically, according to the prevailing opinion in case law in the former case, no obligation for the provision of the benefit is created. On the other hand, in case only a revocability clause has been included in the employment agreement, the employees can claim that an obligation for the provision of the benefit has been established based on the business practice, but the employer can revoke the benefit, by notifying the employee in that regard.
We note that a general reference in the employment agreement that the benefits are of voluntary nature and are not granted on the basis of a statutory obligation may not suffice. Thus, it is important, not only for the employment agreement, but also for all policies, terms and announcements in relation to specific benefits to be carefully drafted, so as for the risks of employees’ claims to be granted the benefits in the future and of increased personnel cost, to be reduced.
Principle of equal treatment
The content of the principle of equal treatment in the context of the employment relationship is provided for by the Greek Constitution, as well as European legislation and is further determined by the national jurisprudence (e.g., rulings 1031/2012, 536/2018, 446/2019 of the Supreme Court). Based on this principle, unequal treatment of the employees having the same qualifications, holding the same position or providing the same services under the same conditions is not allowed. Granting of voluntary benefits is governed by the principle of equal treatment, according to which the employer, granting the voluntary benefit to the personnel of the company, must treat the employees in the same manner throughout the period during which the voluntary benefit is granted, regardless of whether or not a contractual commitment for granting thereof in the future has been created and therefore irrespective of whether this benefit has been the content of a binding business practice. Any differentiated treatment of employees with similar employment positions, providing the services of the same significance/kind under the same terms, must be objectively justified to avoid any employee’s claims for the granting of the same benefit on the ground of the principle of equal treatment.
It is important to note that the principle of equal treatment does not impose a unified treatment of all employees. Thus, employers have the flexibility to use voluntary benefits as a tool to motivate people holding specific positions or working on specific projects and/or to reward high performing employees, even by setting specific targets e.g., for bonuses. What is important is to set clear and objective criteria for the grant of benefits, so that any differentiated treatment of people can be objectively justified.
Correlation between the business practice and the principle of equal treatment
The employees’ claim to be granted a voluntary benefit which has been revoked or which is granted only to several company employees (without an objective justification being provided), may be based on business practice and on the principle of equal treatment. Thus, if the employer, despite the existence of a business practice with regards to a specific voluntary benefit, excludes arbitrarily from granting thereof one or more employees, the latter have on the one hand a claim based on the business practice and on the other hand a claim based on the principle of equal treatment. In this case, if the existence of a business practice is proven, the employee already has a claim based on the implied agreement concluded between the parties since the employer offers and the employee accepts the benefit, which creates the contractual obligation. The principle of equal treatment is of subsidiary nature, and it is sufficient that the employer arbitrarily excludes one or more employees from the certain provision.
Conclusion
The granting of benefits by employers is significant for the corporate culture but is in parallel a matter which can create controversy. Claims may be raised by employees based on business practice and/or the principle of equal treatment. Careful structure of the relevant policies and drafting of the relevant agreements and programs is important to mitigate any adverse legal repercussions.
