Termination employment agreement due to cessation of the business manifestly unreasonable

Year of publication

2009


Edition number

164


Reference

Subdistrict Court of Maastricht, 25 March 2009, www.rechtspraak.nl, ljn: BH7645


Decision

A wholesaler in sports goods suffers losses in 2005 and 2006. For that reason it wishes to cease its activities on 1 January 2007. Therefore, the employer applies for permission to ter-minate employment at the Center for Work and Income (CWI) for (apparently) its only two employees. One of these is the son of the managing director and the other one the former spouse of the son. After the divorce between these two, the employer has fruitlessly attempted to dismiss her for theft. The employee states that the employer has manipulated the figures to show the necessity for termination of the business, and that the business had also not actually been ceased. Nevertheless, the CWI grants permission to terminate employment, reasoning that the decision to cease business activities is part of the freedom of policymaking of the employer. The employment agreement is terminated on 1 July 2007. At that time, no wages had been paid since December 2006, because the employer stated that there was no money to do so.

The employee claims a declaratory judgment at the subdistrict court, because the reason for termination was false or a pretext. The employee claims a dismissal compensation according to the subdistrict court standards with a correction factor of three, meaning an amount of over €116,000.-, which is claimed net.

The subdistrict court finds that the marginal test of the reason for dismissal by the CWI was very brief, and investigates this reason itself. Witness statements show that the profits were manipulated by debiting invoices from an Italian sister company, and by pretending that the stocks were lower than they actually were. The subdistrict court concludes that “the managing director has a casual way of dealing with financial data”. She cannot appeal to the fact that the annual accounts were drawn up by a reputable accountants firm, because that accountant explicitly stated to assume the correctness and completeness of the data provided by the em-ployer itself.

The subdistrict court finds that the business economic necessity of ceasing the business has not been shown sufficiently. The subdistrict court also finds that it has been proven that the activities were continued after 1 January 2007. The employer had stated that the managing director’s son had only done some work to make a start as a self-employed business.

Based on the aforementioned, the subdistrict court finds that termination of the employment contract was done for false reasons. Even if the employer is free to cease the business without urgent financial cause, still the dismissal is manifestly unreasonable, because there was no form of consultation with the employee, and no provisions were offered to her. However, the subdistrict court finds that the required dismissal compensation is too high. A gross amount of €95,000.- is granted, taking into account the falseness of the reason for dismissal.


Comments

In principle, cessation of company activities is sufficient cause to obtain a permit to terminate the employment of employees. Whether the dismissal is manifestly unreasonable if no dismissal compensation is offered, depends on the circumstances in the case, and specifically if the employer can be considered capable to pay this. However, in this case the reason for dismissal was false. According to the subdistrict court, the reason for cessation of the business was not business economic, but rather the divorce between the employee and the son of the managing director was the true cause of termination of the employment contract.



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