In a recent 2025 ruling, the Supreme Court of Justice (hereinafter, the “Court”) issued a decision on the scope of coverage for salaries and social benefits under performance bonds for private contracts.
Background:
Two employees of a contractor responsible for expanding a production plant filed a claim seeking recognition of extralegal bonuses agreed upon in a collective bargaining agreement as part of their salary for the calculation of social benefits. The contracting company was sued as jointly liable, and the insurers that issued the performance bond were called upon to provide coverage for potential indemnification.
After analyzing the case, the Court declared the joint liability of the contracting company but exempted the insurers from paying the indemnification, based on the following:
Considerations:
- Joint liability between the contracting company and the contractor
Pursuant to Article 34 of the Substantive Labor Code, the Court determined that the contracting company was jointly liable with the contractor for the payment of social benefits, as the functions performed by the workers were part of the company’s ordinary course of business.
- Salary nature of extralegal bonuses
The Court concluded that the additional payments had a compensatory and frequent nature, as they depended on the employees' attendance and performance. Therefore, they had to be integrated into the salary and considered in the calculation of social benefits.
- Inapplicability of indemnification
The Court held that the insurers could not be ordered to pay the indemnification since the performance bond expressly excluded coverage for extralegal benefit obligations or those arising from collective agreements or pacts with employees.
For more information, please contact our insurance and reinsurance team.