Date of Decision: December 16, 2016 (Tahsas 07, 2009 E.C.)
Litigating Parties:
Applicant: Tikur Abay Shoe Share Company
Respondents: W/ro Haregewein Tilahun and W/ro Azalech Mengesha
Summary of the Case:
The respondents, after being discharged from their employment due to retirement, filed a lawsuit claiming they were entitled to a one-month salary payment granted by the applicant to existing employees, asserting that said payment constituted a “bonus.” The applicant countered the claim, arguing that the payment was not a bonus for past services but rather an “incentive” intended to motivate employees for the upcoming year’s performance.
Legal Rule:
A “Bonus” is a reward granted in recognition of past achievements and performance. Conversely, an “Incentive” payment is a forward-looking remuneration intended to motivate and align employee behavior toward the attainment of future organizational goals and objectives.
Reasoning:
The documentary evidence submitted by the applicant, specifically the internal correspondence, clearly demonstrates that the payment was intended to incentivize employees for the 2008 E.C. work year. Since the respondents were not in active service during the 2008 E.C. period due to their retirement, they cannot claim a payment designed to motivate future performance as a matter of right.
Ruling:
The Court held that the payment is an incentive for future performance rather than a bonus for past services; therefore, the respondents do not have a legal right to claim said payment. Consequently, the decisions of the lower courts are hereby reversed.