The Supreme Court has determined that a retention bonus did not constitute renumeration and was an award to an employee for remaining in the position during a critical period for the company.
The case concerned three employees who had entered into an agreement with their employer for a retention bonus of up to three months' salary. Payment of the bonus was conditional on the employees remaining in their positions until the end of January 2019.
The employer in this case had gone bankrupt and the bankruptcy estate effectively entered the employment relationship with the employees. The employee’s employment was terminated. However the employees were working fir the estate at the end of January 2019, thus satisfying the condition for payment of the retention bonus.
In a bankruptcy situation the Bankruptcy Act provides a ranking of the claims against the estate. Claims that arise in connection with the administration of the bankruptcy estate will be satisfied before all other claims, these are often referred to as preferential claims. Second priority is given to the pre-preferential claims which concern costs incurred for attempts to restructure the company. Third priority is given to claims from employees. After the employees' claims have been met, certain suppliers' excise duty claims will be met. Following this any remaining claims will be met on equal terms and covered by the remaining dividend (if any).
The employees had claims for remuneration for their ongoing work for...
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