The Supreme Court ruled in a decision of 18 January 2016 that when a judgment is still appealable, and the parties conclude a settlement agreement that ends the dispute, this agreement can be opposable to third parties, including social security authorities.
Principles. In Belgium, social contributions for severance pay and salary arrears are due by the employer the month following the right of the employee to the amount(s) recognized by the employer or pursuant to a judge’s decision which has the force of res judicata, meaning the decision has acquired a definitive character and appeal is no longer possible.
In the past, the Belgian Supreme Court ruled that the calculation of social contributions for severance pay is based on the amount due by the employer and not on the amount effectively paid by the employer to his employee.
Consequently, as soon as the right of the employee to severance pay is established, either by the recognition of his former employer or following a judgment which has the effect of res judicata, social security contributions are due, notwithstanding the employee agrees afterwards to the payment of a lower amount of severance pay.
Key facts. In a recent case, an employer was ordered by the Labour Court to pay his former employee a severance indemnity equal to nine months’ remuneration. However, before the appeal term expired, both parties agreed on the payment of a severance amount equal to six months, concluding the settlement.
Notwithstanding this agreement, the social security authorities claimed social contributions for severance pay equal to nine months’ remuneration, instead of the six months agreed between the parties.
Judgment vs. settlement agreement. In a decision of 12 December 2014, the Labour Court of Appeal had ruled that, according to Belgian law, a judgment which is still appealable does not prevail over a settlement agreement. Moreover, the purpose of such an agreement is to definitely end a dispute between parties.
In the absence of the force of res judicata of the judgment, the agreement prevails over the judgment and acquires the force of res judicata. Accordingly, the social contributions should be calculated on six months’ remuneration, not nine months.
Opposability of a settlement agreement vs. third parties. The Supreme Court ruled in a decision of 18 January 2016 that when the judgment is still appealable and the parties conclude a settlement agreement that ends the dispute, this agreement is opposable to third parties, including social security authorities. Third parties can no longer state that the rights of one of the parties were definitely established by the judgment prior to the agreement. As long as the content of the agreement does not breach mandatory legal provisions, the parties are free to agree on the subject of their dispute, and it is irrelevant that the rights of third parties such as social security authorities are of public order.
To remember. When a judgment is still appealable, and parties conclude a settlement agreement that ends their dispute, the agreement can be opposable to third parties, including social security authorities.
Hilde Possemiers (hilde.possemiers@cms-db.com)
Jef Degrauwe (Jef.Degrauwe@cms-db.com)
