Severance pay in proceedings for manifestly unreasonable dismissal or dissolution proceedings?

Year of publication

2009


Edition number

174


Reference

Supreme Court 11 December 2009, www.rechtspraak.nl, ljn: BJ9069


Decision

For business economic reasons, an employer wishes to terminate the employment contract with an employee. On 16 August 2008 he applies for a dismissal permit at the (then) CWI (Center for Work and Income; this would now be: “UWV WERKbedrijf”), which is granted on 25 September 2008, resulting in termination of the employment contract by the employer on 1 January 2009. During the term of notice, i.e. on 10 November 2008, the employee applies to the Subdistrict Court of Haarlem to dissolve the employment contract. As the employment contract shall end shortly, the employee is obviously interested in the severance pay demanded by her, i.e. € 40,000. If the employment contract is terminated by notice of the employer, the employee would have to start the ‘manifestly unreasonable dismissal proceedings’ at the Subdistrict Court, to receive severance pay. In these proceedings she would first have to show that the dismissal without severance pay is ‘manifestly unreasonable’, after which the Subdistrict Court would determine the severance pay, based on the actual damage suffered by the employee, assessed according to the situation at the time of termination of the employment contract. The ‘manifestly unreasonable dismissal proceedings’ are ordinary proceedings in writing with the possibility of appeal to the Court of Appeal and to the Supreme Court, in which it is difficult to predict in advance if the employee will receive severance pay and if so, how much. The employee prefers the dissolution proceedings because these last much shorter (approx-imately two months), after which appeal is in principle not possible, whilst allocation of severance pay is much more likely and the Subdistrict Court formula more or less determines the amount thereof. If the employee wants to achieve her goal, the Subdistrict Court has to dissolve the employment contract before 1 January 2009. That is the date that the employment contract is terminated by dismissal and once the employment contract is terminated, of course the Subdistrict Court can no longer dissolve the contract. The employee appears to achieve her objective to receive severance pay quickly, because on 22 December 2008 the Subdistrict Court dissolves the employment contract starting 29 December 2008. The Subdistrict Court awards the employee severance pay of € 27,500 gross. The employer apparently sees this coming. In any case, he now terminates the employment contract again, by letter of 19 November 2008, starting 1 December 2008. This termination without the legal term of notice obliges the employer to pay damages for premature termination of the employment contract, but he hopes to achieve that the Subdistrict Court no longer has an employment contract to dissolve and can therefore not grant severance pay. However, the Subdistrict Court was not affected by this second termination and still dissolves the employment contract starting 22 December 2008 and grants severance pay. The employer does not accept this. He appeals to the Court of Appeal in Amsterdam against the decision of the Subdistrict Court. In principle, no appeal is allowed against dissolution of the employment contract, but there is an exception if the issue is whether the Subdistrict Court correctly applied the legal stipulation for dissolution of the employment contract or not. The Court of Appeal rules that the appeal is admissible, but dismisses the appeal. The Supreme Court reaches the same conclusion, but on different grounds. Like the Court of Appeal, the Supreme Court finds that a request for dissolution is possible during the term of notice, but the Supreme Court rules that there must be a reason that the employment contract has to end earlier than as per the term of notice. According to the Supreme Court, severance pay has to be calculated according to the premise that the employment contract has already been terminated as per the term of notice. This means severance pay has to be determined in the same manner as in ‘manifestly unreasonable dismissal proceedings’. This also means that the Subdistrict Court formula does not apply. Contrary to the opinion of the Court of Appeal, that the employer could not cancel the first notice by the second notice without the employee’s cooperation, the Supreme Court has a different opinion. According to the Supreme Court there was no cancellation of the first notice. The employment contract is only terminated at an earlier date. The fact that the term of notice was not observed while there was no urgent cause for summary dismissal does not change this, according to the Supreme Court. Still, this does not help the employer. The Supreme Court agrees with the Court of Appeal that the employer has abused his right to termination with the second notice and thus acted contrary to his obligation as a good employer, because the employer was only interested in blocking the dissolution proceedings.


Comments

Although in this case the severance pay granted by the Subdistrict Court was maintained, employers can be content with this ruling. After the Supreme Court had already decided, in its ruling of 27 November 2009, that severance pay can only be granted in ‘manifestly unreason-able dismissal proceedings’ if it has first been determined that dismissal without severance pay is manifestly unreasonable and that the Subdistrict Court formula or suchlike cannot be applied to calculate severance pay, the Supreme Court has now decided that, although a request for dissolution is possible during the term of notice, this will not result in severance pay being granted according to the employee’s wishes. That the employer cannot frustrate a request for dissolution by the employee during the term of notice by giving summary notice (assuming that not only a second notice is abuse of rights), is therefore not a major disadvantage to the employer. The ruling means that, if the employer chooses to terminate the employment by giving notice after having received a dismissal permit from the UWV WERKbedrijf, severance pay shall in any case only be granted if the dismissal is manifestly unreasonable and shall be calculated without applying the Subdistrict Court formula.



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