Invalidly Represented Employer was nevertheless Bound by the Employment Contract

A Foundation was represented by someone without the required authority when it entered into an employment contract, since only one director had signed the employment contract. Nevertheless the Foundation was bound by the employment contract because the employee was entitled to rely on the apparent director’s authority to represent the Foundation on entering into the employment contract.
Shortly after the beginning of the Russia-Ukraine war, three people jointly set-up a Foundation with the aim of supporting Ukrainian refugees. The Foundation was a charity that was dependent on donations. The three founders became the directors of the Foundation. The articles of association provided that the Foundation shall be represented by two directors acting jointly. The Foundation also may authorize a director or a third party to represent the Foundation within the limits described in the authorisation.
On May 15, 2022, an employment contract was signed, stating that, as of that day, a woman would be employed as an all-round employee for a period of seven months, for an average of 40 hours per week and against payment of the minimum wage. On behalf of the Foundation, the agreement was signed by one of the directors.
No salary was ever paid to the employee, however.
In March 2023, a lawyer summoned the Foundation on behalf of the employee to pay the outstanding wages. One week later, the founders resigned as directors, leaving one director. On behalf of the Foundation, he claimed that no legally valid employment contract with the Foundation had ever been entered into and that there was no entitlement to any wages. According to this director, there had only been a “no cure, no pay” agreement and the employee had not performed any work for the Foundation, so there had not been a need to pay wages.
The Sub-district Court, however, held the opinion that the Foundation incorrectly stated that one director cannot independently be authorised to represent the Foundation, since this director may have been granted a power of attorney. The employee had not proven that this had been the case, however. Nevertheless, according to the Sub-district Court, the Foundation was bound by the employment contract due to the created appearance of a granted power of attorney. The Sub-district Court deduced this appearance from a number of circumstances:
• The director in question had always presented himself as an authorised representative on entering into the employment contract.
• Discussions about entering into the employment contract had taken place at the office of the Foundation's accountant in the presence of one of the other directors.
• This other director had given the employee the key to a workshop where books for Ukrainian children were stored.
• The accounting office had drawn up a salary specification for twelve days worked in May 2022.
• The employee had maintained contacts with the accounting office about opening a bank account for the Foundation, necessary for payment of the salary.
The Sub-district Court believed that these circumstances lied within the control of the Foundation and, on this basis, it assumed that the employee was protected against the appearance of granted power of attorney to the director who had signed the employment contract.
Therefore, the Foundation was ordered to pay wages.
There was still a dispute about the extent of the wage payment obligation.
On this point, the Sub-district Court ruled in the favour of the Foundation, meaning that, in the end, only the hours actually worked, as specified by the employee, had to be paid.

When entering into employment contracts, legal entities are very often represented by a person who, under the articles of association, is not authorised to enter into this employment contract. In practice, this rarely poses a problem, since the employer does not appeal to the fact that the legal entity is not validly represented. Such appeal would probably yield little in practice, since it is quite easy to argue that the legal entity has given the impression that the person who signed the employment contract was authorised to do so. For example, if this is it was an employee of the HR department, the appearance may already have been created just by holding that position. Employers who want to protect themselves against unauthorised representation can register written powers of attorney in the trade register. The extent of this power of attorney registered may enable the employer to also invoke it in relation to an employee. But this only applies to representation by persons whose power of attorney has been registered.