Largest severance compensation awarded
Recent case law has indicated (Court of Gelderland ECLI:NL:RBGEL:2016:7113) that the termination of an employment contract of a Managing Director without reasonable cause can result in substantial (additional) severance compensation being awarded. In this case the Court awarded the largest (additional) severance compensation to date.
The Managing Director reported ill in September 2015 due to a burn-out. In January 2016 the employer reduced his salary, which until then was fully paid, to 70% of the maximum daily wage. Although the Managing Director and the Employer came to an agreement on their salary dispute, the company doctor concluded that the incapacity for work was no longer caused by illness, but caused by a labour dispute.
Despite the company doctor’s advice for both parties to resolve their dispute, the employer planned a general meeting of shareholders with as item on the agenda the intended dismissal of the Managing Director. More than two weeks after the general meeting of shareholders had taken place (whereby it is unclear whether the Managing Director attended the meeting), the Managing Director received a termination letter. The employer argued that there was a reasonable ground for termination because the shareholder had lost confidence in the employee in his capacity to act as Managing Director and that this lack of confidence constituted a reasonable ground for dismissal.
The Court considered that there was no reasonable ground for dismissal, since it was not evident that there was a lack of confidence at the time that the Managing Director became ill. The Court further ruled that the opinion of the company doctor that the Managing Director’s inability to perform duties was no longer caused by illness did not imply that he had fully recovered to perform his duties. In view of this, the Managing Director was still ill when he received the termination letter.
In view of the foregoing, the Court ruled that the employer was seriously negligent, resulting in a liability for payment of (additional) severance compensation. In determining the amount of (additional) severance compensation, the Court took into consideration the loss of income, due to the fact that the Managing Director’s gross salary was considerably higher than the maximized unemployment benefit. In addition the Court took into consideration the fact that termination without reasonable ground should not be possible without financial compensation. Consequently, the Court estimated that the punitive nature of (additional) severance compensation justified awarding an amount of EUR 141,500.00 gross (in addition to statutory compensation of EUR 26,637.00 gross).
Although the award and the amount of (additional) severance compensation naturally depends on the particular facts and circumstances, the foregoing case indicates that –unlike before– the introduction of the new dismissal regulations under the WWZ in July 2015 implies that an unsubstantiated lack of confidence in the ability to perform as Managing Director does not qualify as one of the exhaustive reasonable grounds for termination of an employment contract of a Managing Director.
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