Dismissal Cases after the Introduction of the Work and Social Security Act per 1st July 2015

Year of publication

2015


Edition number

256



Decision

On 1st July, 2015 the main part of the Work and Social Security Act will enter into force: the amendment of the dismissal law. How this change will turn out in practice remains to be awaited, but the expectations are that, in many cases, it will be more difficult for employers to dismiss employees.

Main changes

The main changes (in this context) to be introduced by 1st July 2015 are the following:

• An employer who wants to dismiss an employee and who can not reach an agreement with the employee about it can no longer choose between two different dismissal procedures (requesting a dismissal permit from the UWV (Employee Insurance Agency) or submitting an application to dissolve the employment contract to the Sub-district Court). Depending on the reason of the dismissal either a request needs to submitted to the UWV (namely in case of reduction of jobs due to business discontinuation or business economic reasons and in case of long-term labour incapacity) or, in six other cases, an application to dissolve the employment contract needs to be submitted to the Sub-district Court.

• Both for the UWV and for the Sub-district Court it applies that they will only be allowed to proceed to granting a dismissal permit or dissolving an employment contract by the Sub-district Court when it can be ascertained that one of the eight grounds for dismissal, mentioned in the law, applies. The law or a Ministerial regulation (the Dismissal Decree) regulates when the conditions for proceeding to dismissal on these grounds are met.

• The employer always has to pay dismissal compensation when the employment contract has lasted for two years and is terminated by the employer or discontinued by the employer. The amount of the dismissal compensation is regulated by law. A higher or lower compensation or no compensation is only possible in (rare?) exceptional cases. This can only be the case when there is a strong degree of seriously culpability in the employer’s or employee’s conduct.

• The prohibition on termination during illness also applies in case of dissolution of the employment contract by the Sub-district Court, in cases of termination of the employment contract due to job reduction as a result of business discontinuation and business economic circumstances.

• A decision by the UWV on an application for a dismissal permit can always be submitted for judgement to the Sub-district Court. A decision or order of the Sub-district Court will be subject to appeal to the Court of Appeal (and then possibly an appeal in cassation to the Supreme Court).

• When the employee and employer have reached an agreement on the termination of the employment contract, the employee can always change his mind on the reached agreement within two weeks (reflection period).

Consequences

The consequence of these changes is that the employer can only realize a dismissal without the employee’s cooperation when he can demonstrate that the conditions set by the law for a particular ground for dismissal are met. When the employer succeeds in demonstrating, then the transitional compensation is payable. When the employer fails to do so, there will be no dismissal. Different from before, the Sub-district Court does not have the freedom anymore to still dissolve the employment contract when the conditions are not (entirely) met and to compensate this by granting a (higher) dismissal compensation. The knowledge that, in case of dissolution, the employee will receive much lower dismissal compensation than before, when the ABC-formula still applied might also encourage Sub-district Courts to strictly assess the compatibility of the intended dismissal with the grounds under the law.

If the assessment of the grounds for dismissal leads to the conclusion that the employment contract can be terminated or dissolved, one should take into account that the employee might lodge an appeal, which makes that the delay can be considerable before there is any certainty about the dismissal. If the assessment of the grounds for dismissal does not lead to the conclusion that the employment contract can be terminated or dissolved, then the employer -except for the possibility of appeal- is entirely dependent on consultation with the employee in order tot still realize termination of the employment contract. Knowing that the UWV or the Sub-district Court failed to authorize the employer to terminate the employment contract, the employee might charge a high price for his cooperation with termination of the employment contract. If nonetheless the employee and the employer reach an agreement on termination of the employment contract, it remains to be seen whether the employee may still rely on the two-week reflection period. If that is the case then, perhaps, second negotiations may be needed before the final agreement can be reached.

More often (attempted) termination by mutual consent

In this perspective, it is expected that, in many cases, employers will prefer to avoid the risk that the UWV or the Sub-district Court will refuse the requested permission for the dismissal and that, therefore, they will try to early reach agreement with employees on termination of the employment contract. Here, however, the employee will take payment of the transitional compensation for granted and, as a prize for his contribution to the dismissal, expect an additional amount of dismissal compensation, referring to the time and cost that the employer would have to spend for a dismissal procedure and -especially- the risk that the UWV or the Sub-district Court might reject the requested permission for termination of the employment contract.

Proper substantiation of the grounds for dismissal required

If employers want to avoid the costs of paying this additional dismissal compensation, they must ensure that they can properly substantiate the grounds for the proposed dismissal.

Employee Redundancy

Regarding the dismissal because of any job redundancies there is no real difference.

In particular, the principle of proportionality will continue to define the order in which employees are eligible for dismissal when jobs become redundant.

The most significant amendment is that the prohibition on termination during illness also applies to employment contract dissolution by the Sub-district Court. More than ever, it remains important to avoid that employees can anticipate on the employer’s intended dismissal by (rightly or wrongly) reporting ill before the UWV receives the employer’s request for dismissal. When reporting ill is done later, the prohibition on termination does not apply.

Long-term labour incapacity

Regarding the request for a dismissal permit for more than 104 weeks of labour incapacity there is no real difference. Like before, the only requirement is that no recovery of the employee is to be expected within 26 weeks and that in the employer’s company (and the companies affiliated with the employer’s company), there is no suitable work for the employee. If the answers to these requirements are not obvious, they need to be made plausible by an advice from the company doctor or a report from an employment expert. The most significant amendment is that the transition compensation is always payable on termination of the employment contract. In this case the employment contract has, by definition, lasted for two years.

Grounds for dissolution by the Sub-district Court

Out of the six grounds on which the Sub-district Court can dissolve the employment contract in practice only three are really important. The grounds “Frequent labour incapacity", "Conscientious objection" and "Other circumstances that are of such a nature that the employer can not reasonably be expected to continue the employment contract" are either so rare in practice or so strictly defined that they can only be applied in very exceptional cases.

Dysfunctional employee

A common ground for dismissal is the inadequately performing employee. A successful request to have the employment contract dissolved by the Sub-district Court requires that the employer has timely informed the employee that he is considered unsuitable for his job and, thereafter, that he has given the employee sufficient opportunities to improve his performance. Additionally, in this context, the training of the employee and the working conditions, for which the employer is responsible, should be irreproachable.

A successful appeal for dissolution on this ground requires that the employer has his personnel file well organized and, if contested by the employee, that he can prove that in the past the latter’s dysfunction has been discussed and that then, unsuccessfully, an improvement process has taken place. In practice, especially in small companies, there are quite some difficulties in combining documenting such a file and maintaining a workable employment relationship. That is why the employer should ensure that the employee’s performance appraisal is a common and periodically recurring event, even when there are no meaningful comments on the employee’s performance. Therefore it is, more than ever, necessary to structurally work on having and documenting performance appraisal interviews, as well as evaluating the agreements made and documenting these evaluations.

Seriously culpable behaviour

If the employer wants to have the employment contract dissolved because of the employee’s seriously culpable behaviour, this behaviour has to be such that the employer can not be expected to continue the employment contract thereafter. In any case, this ground for dismissal applies when there is an urgent reason for summary dismissal, but also when an employee, in spite of refusal of payment of sick pay, fails to perform suitable work or to meet reasonable instructions in the context of re-integration. Whether and to what extent culpable behaviour that does not reach the level of the urgent reason (for example, frequently arriving late at work) may be sufficient to terminate the employment contract is not clear. Legislative history, however, shows that it should have been clear for the employee what the employer considers to be admissible or not (except obvious things like theft, etc.). The usefulness of or the need for using protocols, for example in respect of the use of internet and e-mail, but also in respect of desired and undesired conduct, therefore remains. The requirements laid down for the employee must be prevailing and not disproportional. Also in this case a lot depends on documentation in advance by the employer.

Disrupted employment releationship

The last but certainly not least important ground for dissolution of the employment relationship is the disrupted employment relationship. The law requires that in such case the disruption of the employment relationship is such that the employer can not reasonably be expected to continue the employment contract. This last requirement is elaborated in legal history by referring to the Ministerial Decree on dismissal, in force until 1st July 2015, which stipulates that, in principle, the disruption of the employment relation has to be serious and sustainable. The requirement of sustainability of the disruption of the employment relationship might, in practice, entail that Sub-district Courts will require that an attempt to an amicable approach is or has been made first. Therefore a more important role of mediation in this context is by far not impossible.

The question is whether the Sub-district Court will also be prepared to dissolve the employment contract because of a disrupted relationship when this disruption is indeed serious and sustainable, but when, in the eyes of the Sub-district Court, it is the employer who, to a high extent, should have the blame for it. The reference to the Dismissal Decree, applicable until 1st July 2015, is insofar interesting that the UWV amended its policies, applicable to the Dismissal Decree (the UWV Dismissal Guidelines), on 31st July 2012 and then stopped to take the question of guilt into account. The idea was that the Dismissal Decree did not allow for it. In serious and sustainable disruption of an employment relationship, according to the UWV, under the Decision Decree a dismissal permit had to be granted. If necessary, the question of guilt could be addressed before the Sub-district Court in the context of a claim for unfair dismissal. This procedure will expire under the new law, however. Instead, there will be the transition compensation which should, in principle, sufficiently mitigate the effects of the dismissal. Only in case of seriously culpable behaviour of the employer, the employer may be obliged to pay a "fair compensation" to the employee in addition to the transition compensation. This might imply that Sub-district Courts can only take the question of guilt for the disruption of the employment relationship into account when the guilt of the employer reaches the level of seriously culpable behaviour. Thus it was the legislator’s intention to set a very high standard, so it should be considered that it is very unlikely to happen. The question is whether, in practice, Sub-district Courts will be willing to accept that the question of the employer’s guilt, arising from the disruption of the employment relationship, can indeed only play a role in such a limited number of cases.

Work and Social Security Act, Staatsblad 2014, 216



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