The end of the saga? Antwerp Labour Court rules on social security treatment of RSUs awarded by parent company
27 Nov 2023
In a judgement of 20 November 2023, the Antwerp Labour Court ruled on a highly contentious case regarding the social security treatment of benefits – more specifically: restricted stock units (‘RSUs’) – awarded to the employees of a Belgian company by the latter’s American parent company. In its judgement, the court found that – taking into account the specifics of how the RSUs were awarded – they didn’t constitute salary on which Belgian social security contributions were due.
The notion of ‘salary’ subject to social security contributions
In recent years, a lot has been written about whether or not benefits awarded to employees by a third party (usually the parent company) constitute salary on which social security contributions are due. As a reminder, according to Belgian law, social security contributions are due on an employee’s ‘salary’, which first of all constitutes every benefit that an employee receives as the counterpart for the work performed in execution of the employment agreement. In addition, this definition is expanded to include every other benefit that cumulatively meets the following criteria: (i) in cash, or measurable in cash, (ii) to which the employee is entitled as a result of their employment and (iii) that is borne by the employer.
Of these conditions, it’s usually the third requirement – that the benefit is borne by the employer – around which the discussion revolves. Note in this respect that, based on the Court of Cassation’s case-law on this topic, even when a third party bears the financial cost of a benefit, the benefit is still considered to be borne by the employer if it can be argued from the circumstances that the latter has made the legal commitment to grant the benefit.
…as interpreted by the Court of Cassation
The case in which the Antwerp Labour Court passed its judgement was referred to it by the Court of Cassation. Indeed, in this dispute on whether or not social security contributions are due on the RSUs that are awarded to the employees of a Belgian company by the American parent company, this question was first answered affirmatively by the Ghent Labour Tribunal and Labour Courts, which both sided with the National Social Security Office in this respect. However, in its judgement of 5 September 2022, the Court of Cassation overturned the decision of the Ghent Labour Court and sent the case to Antwerp. For more information and background, we refer to our newsletter of 27 October 2022 on the Court of Cassation judgement.
…and applied by the Antwerp Labour Court
After examining how the RSUs were awarded to employees of the Belgian company in light of the Court of Cassation case-law on the notion of salary, the Antwerp Labour Court ruled that:
The RSUs didn’t constitute the counterpart for work performed in execution of the employees’ employment agreements. Indeed, the Court found that the allocation and payment of the RSUs were made by the parent company based on its own decision, which was not based on the employment agreement but on its intention to let the employees in question participate in the capital of the parent company, thereby trying to bind them in the longer term;
The RSUs were not borne by the Belgian company. The Court found that, not only was the cost of the RSUs not borne by the Belgian company, it can furthermore not be argued that the latter made any type of legal commitment to grant the RSUs. The only contractual relationship that arose from the allocation of the RSUs was one between the employee that received the RSUs and the parent company. As such, and as mentioned under point 1, the allocation of the RSUs was rooted, not in the Belgian employment agreement, but in the parent company’s global retention policy. Therefore, the RSUs could not, in this case, be regarded as borne by the Belgian company.
In conclusion, the Antwerp Labour Court ruled that – in the case at hand – the RSUs didn’t constitute salary and, consequently, no social security contributions were due.
Conclusion
This seems the end of the story, at least in this specific case. What’s important to take away from this, is something we already mentioned in our October 2022 newsletter, linked above. Whether or not a benefit awarded by a third party constitutes the counterpart for the work agreed in the employment agreement or – if not – whether or not the benefit is borne by the Belgian employer, is a highly factual assessment. In the case at hand, the Antwerp Labour Court examined the specifics of the grant of the RSUs and answered these questions in the negative. However, if some of these specifics would have been slightly different, the outcome might be different. As such, when determining if social security contributions are due on a benefit awarded by a third party, the details of the grant (selection process, bonus plan, communication …) must be carefully examined.
If you have any questions regarding this topic, don’t hesitate to reach out; we’d love to hear from you.
