Lucía Seigido
LABOUR AND SOCIAL SECURITY DIVISION
The recent Supreme Court Judgment (STS) 165/2026 of 17 February, issued by the Labour Chamber of the Supreme Court, is one of the most significant decisions of recent years concerning variable remuneration and incentive schemes.
The judgment fully upholds the position previously adopted by the National Court and declares null and void two clauses incorporated by CaixaBank into its commercial bonus programmes.
Beyond the specific dispute, the legal significance of the ruling lies in the fact that it establishes very precise limits on an employer’s ability to unilaterally design incentive systems and, in particular, to influence the accrual of variable remuneration through disciplinary criteria or subjective performance assessments. The judgment also adopts a particularly demanding interpretation of the principles of transparency, predictability, and objectivity in remuneration, which underpin both the Workers’ Statute and the most recent European legislation.
The dispute arose from a collective action brought by FeSMC-UGT challenging several clauses contained in CaixaBank’s commercial plans and bonus programmes.
The contested clauses were essentially twofold.
The first provided that employees sanctioned for serious or very serious misconduct related to the marketing of financial products would not be entitled to receive the incentive payment. The company argued that this did not constitute an additional disciplinary sanction but rather a necessary condition for the entitlement to the bonus. In its view, the incentive simply did not accrue where significant regulatory breaches had occurred.
The second clause allowed area managers—known as DANs—to adjust the calculated bonus by up to ±15%, and even beyond that percentage in “exceptional cases”, taking into account qualitative factors such as customer complaints, commercial evaluations, or compliance with internal conduct rules.
With regard to the first clause, the Court held that the automatic loss of the incentive as a consequence of disciplinary sanctions effectively introduced a punitive mechanism that had not been provided for in the applicable collective bargaining agreement. The Court recalled that Article 58.3 of the Workers’ Statute expressly prohibits financial penalties and emphasised that this prohibition applies regardless of the origin of the remuneration affected, including variable remuneration schemes designed unilaterally by the employer.
The judgment stresses a particularly important principle: employers cannot unilaterally create a disciplinary regime parallel to that established by law or collective agreement, even under the guise of conditions governing entitlement to a bonus. The employer’s autonomy in designing incentive systems is subject to non-negotiable limits imposed by mandatory labour rules and the fundamental principles governing employment relationships.
Even more significant is the Court’s reasoning regarding the second clause. The Supreme Court concluded that the bonus-adjustment mechanism left the final determination of remuneration to the employer’s unfettered discretion, thereby violating Article 1256 of the Civil Code, which provides that the validity and performance of contracts cannot be left to the will of only one of the parties.
The Court found the criteria used by the financial institution to be inadequate and expressly described them as “generic, sparse, and indeterminate references.” Of particular importance is its statement that qualitative objectives based on performance evaluations “fall squarely within the realm of pure subjectivity” when they are not accompanied by clear, verifiable, and previously disclosed parameters known to the employee.
The practical significance of this ruling extends far beyond the financial sector. STS 165/2026 potentially affects any company that uses bonus schemes, commercial incentives, or performance evaluations linked to variable remuneration.
For years, many remuneration models have relied on partially implicit criteria, subjective assessments by middle management, or broad clauses granting employers considerable discretion. The judgment does not prohibit such mechanisms, but it significantly raises the standard of judicial scrutiny to which they will be subjected.
The true significance of the decision becomes clearer when one considers the distinction the Court appears to draw between business rationality and legal demonstrability. Most organisations use internal criteria that may be entirely reasonable and coherent from an operational perspective. However, the judgment shifts the focus to a different issue: the ability to objectively demonstrate how and why a particular remuneration decision was made.
The ruling also forms part of an increasingly strong European regulatory trend towards pay transparency and predictability in working conditions. The Court expressly links its reasoning to Directive (EU) 2019/1152 on transparent and predictable working conditions, as well as to the European Pillar of Social Rights, both of which promote remuneration systems that are transparent and understandable for workers.
From this perspective, the judgment is likely to herald stricter judicial scrutiny of poorly defined remuneration policies, particularly in sectors where qualitative performance assessments play a significant role.
The principal practical consequence of STS 165/2026 is that it requires a thorough review of many internal bonus and performance-evaluation systems.
However, compliance does not simply consist of putting previously unwritten criteria into writing. The logic of the judgment demands something more sophisticated: the transformation of subjective criteria into objective, verifiable, and auditable standards.
Common expressions such as “proactive attitude,” “corporate commitment,” “alignment with company values,” or “customer orientation” are unlikely to withstand judicial review unless they are accompanied by specific indicators showing how they are assessed and what remuneration consequences they produce.
In this regard, advanced performance-evaluation methodologies that have long been used in human resources management become particularly relevant. Systems such as Behaviorally Anchored Rating Scales (BARS) make it possible to translate qualitative concepts into observable and measurable behaviours. A criterion ceases to be a purely subjective assessment when employees know in advance which specific behaviours correspond to each evaluation level.
In light of the judgment, at least three essential requirements can be identified for the future validity of incentive systems:
- The criteria governing both entitlement to and adjustment of bonuses must be defined before the start of the evaluation period.
- Employees must clearly understand how the various elements of the bonus are weighted.
- The employer must maintain sufficient documentary evidence to reconstruct the decision-making process and justify it in the event of judicial challenge.
Ultimately, STS 165/2026 does not eliminate employer discretion in the field of incentives, but it does impose significantly stricter limits upon it. Employers will continue to be able to design bonus policies and assess qualitative aspects of performance; what they will no longer be able to do is rely on ambiguous formulas or mechanisms whose application depends exclusively on the unreviewable judgment of the evaluator.
The judgment therefore marks a paradigm shift in the management of variable remuneration: from employer discretion towards remuneration transparency and traceability. It is likely to compel many organisations to reconsider remuneration systems that, until now, had been regarded as firmly established.
