Compensation for Failure to Extend Fixed Term Employment Contract

After it was found that an employee had falsely been accused of sexual harassment, the employer withdrew the given notice of the summary dismissal and he still paid the wages. But the employer was not willing to extend the fixed-term employment contract after expiration of the agreed term. This was contrary to good employment practices and therefore the employer had to pay compensation to the employee.

Since November 2009, a now 40-year-old employee had been working as a shift manager at a fast-food restaurant. It was in March 2014, in the fifth consecutive one-year of his employment contract, that he was summarily dismissed. At the time, the applicable CLA for the catering industry made use of the option, which still existed at the time, to deviate from the law by stipulating that six fixed-term employment contracts could be entered into within a period of six years.
The reason for the dismissal was sexual harassment of a female colleague on 13 February, 2014, combined with some other signals of improper conduct. The summary dismissal had been preceded by a suspension during which period the employer had talked to two female colleagues who had made complaints and during which he spoke with three other employees about their experiences with the employee. On 13 February, 2014, the employee was said to have intimately hugged a female employee and to have tried to kiss her on the mouth by embracing her tightly with both hands. This incident was said to have been confirmed by two more employees.
Twice the employee was given the opportunity to respond to these accusations.
But, after the employee had requested annulment of the summary dismissal, witness hearings before the Sub-district Court in July 2014 made it clear that the employees had falsely accused the employee. The employer then withdrew the notice of the summary dismissal and resumed paying the employee’s wages. The Sub-district Court also ordered the employer then to pay the statutory increase and the statutory interest. When the employee was called to resume work, however, he reported ill with psychological complaints.
And the employer did not extend the employment contract that expired in November 2014.
The employee then requested the Sub-district Court to rule that the employer should pay compensation because the employer had failed to fulfil its obligation to apply good employment practices by refusing to offer him a permanent employment contract as of 17 November 2014.
When the Sub-district Court rejected the claim and the employee had lodged an appeal, it was up to the Court of Appeal’s to rule on the case. Although the Court was somewhat critical on the employer's investigation of the complaints, it decided that the investigation had been sufficiently careful and that the employer could reasonably believe that the kissing incident had actually taken place and that for this reason the suspension and the summary dismissal had not been conflicting with good employment practices.

The Court of Appeal did, however, notice another conduct that was contrary to good employment practices. The Court believed that more than four temporary annual contracts had created an employment relationship that "to a certain extent had become sustainable" and that therefore, in case of continued good performance, the employee could rely on it that the employer should continue the employment contract for an indefinite period once the fifth contract year had expired. Even though the employer had disputed this good performance for a while, the Court of Appeal held the opinion that this dispute should be ignored under the established facts.
The Court rejected the claim for compensation of non-material damage but, according to the Court of Appeal, in principle the employee was entitled to the compensation of one year's salary as he had claimed.
Further legal action will be needed, however, to determine what impact the received unemployment benefit and the wages from a new job as a driver since April 2015 should have on this compensation.

The judgment of the Court dates from 2016, but has only recently been published.
Freedom of contract implies that an employer is, in principle, free to offer or not to offer an employee a new employment contract after the agreed term of a fixed-term employment contract has expired. However, the employer is not allowed to exercise this power in violation of the prohibitions on discrimination. For example, the employer cannot refuse to offer an employment contract because a candidate is pregnant.
In the above case, the Court of Appeal assumed that decision not to offer a new employment contract was contrary to good employment practices. The fact that the Court reached this conclusion may have largely been dictated by the fact that the earlier accusation of sexual harassment had turned out to be false. But the Court of Appeal failed to further substantiate its judgment that the employment relationship had become so sustainable after five fixed-term employment contracts that, depending on his performance, the employee could have counted on a permanent employment contract. It is also not simply incomprehensible since even a sixth fixed-term employment contract had been possible at the time.
There is a European Directive stipulating that a permanent employment contract should be the general form of an employment relationship and that the abusive practice of consecutive fixed-term employment contracts should be prevented, but the Court did not invoke this Directive.