Subdistrict Courts Formula Applied or Not in Cases of Manifestly Unfair Dismissal?
Severance Pay on Rescission or Termination of the
Employment Agreement
An employer may terminate an employee's employment agreement
either by requesting a rescission from the Subdistrict Court or by
giving the employee notice of termination after having obtained
permission from the UWV WERKbedrijf. The Subdistrict Court can
award a severance pay with the rescission; the UWV Werkbedrijf
cannot. However, an employee who considers his termination to be
manifestly unfair may claim compensation in separate proceedings.
The Subdistrict Courts Formula is used to calculate the severance
pay on rescission. The Courts of Appeal usually dismiss the
application of the Subdistrict Courts Formula to the calculation of
compensation in cases of manifestly unfair dismissal. However, in
literature we find that there have been discussions for a long time
about the desirability or undesirability of the difference in the
financial settlement of termination of an employment agreement in
the case of rescission and in the case of manifestly unfair
dismissal proceedings conducted after termination. Furthermore, it
is often not clear in which way the payment that must serve as
compensation for the manifest unfairness is
calculated.
Calculation Severance Pay on Manifestly
Unfair Dismissal According to the Court of Appeal of The
Hague
On 14 October 2008 the Court of Appeal of The Hague ruled in
seven judgments that the Subdistrict Courts Formula must be taken
as a standard also in manifestly unfair dismissal proceedings,
since both in rescission proceedings and in manifestly unfair
dismissal proceedings it concerns a compensation in view of the
consequences of the end of the employment, in which the damage is
calculated abstractly. However, the Court of Appeal does not think
that the formula applies unimpaired, and also that manifestly
unfair dismissal cannot be assumed in all cases where no
compensation was awarded. However, if in the scope of the dismissal
procedure a compensation of at least 70% of the compensation to be
calculated according to the Subdistrict Courts Formula reduced by
30% has not been offered, the dismissal has usually been manifestly
unfair. Thus, the seven judgments of the Court of Appeal of The
Hague imply in brief that if not at least 70% of the compensation
to be calculated according to the Subdistrict Courts Formula has
been paid, there is a presumption that the termination was
manifestly unfair. Since the judge who considers the termination to
be manifestly unfair is not free to award no compensation
nevertheless, the employer must in that case remove the unfairness
by paying the amount calculated according to the Subdistrict Courts
Formula, less 30%. Has the Court of Appeal started a permanent
policy change here? In other words, will this new policy with
regard to the calculation of compensation for manifestly unfair
dismissal be followed by other courts?
Manifestly Unfair
Dismissal After 14 October 2008
From the rulings that were given after 14 October 2008 with
regard to manifestly unfair dismissal can be concluded that the
Court of Appeal of The Hague is not being followed by all judges.
For example, the Subdistrict Courts of Utrecht, Amsterdam and
Enschede have recently ruled that, partly from the perspective of
legal certainty and equality of rights, a link with the Subdistrict
Courts Formula should be sought. Meanwhile, on the other hand,
several other rulings have been given in which judges have
expressly distanced themselves from the analogous application of
the Subdistrict Courts Formula. For example, the Court of Appeal of
Leeuwarden has ruled that the Subdistrict Courts Formula was
designed in order to determine the compensation in rescission
proceedings, taking into account a number of details of the
rescission that do not apply to the termination, namely i) the
absence of the option to appeal, and ii) the option to terminate an
employment agreement in the short term, without giving notice.
According to the Court of Appeal of Leeuwarden the Subdistrict
Courts Formula is not intended to offer a standard to determine
compensation in manifestly unfair dismissal proceedings. In short,
no clear line in case law can be discerned as yet, and we will have
to wait and see whether the course pursued by the Court of Appeal
of The Hague will really be followed.
Tips
- In each individual case employers should weigh the pros and
cons of terminating an employment agreement by rescission or by
giving notice.
- Case law in the Netherlands is divided on the question of
whether the Subdistrict Courts Formula also applies when
determining compensation for manifestly unfair dismissal. The
prevailing doctrine is therefore not that
there is a presumption that the dismissal is manifestly unfair
if not at least 70% of the compensation to be calculated
according to the Subdistrict Courts Formula has been paid.
- Be alert to the fact that the rulings of the Court of
Appeal of The Hague may lead to it that after giving an
employee notice of termination, he might be more likely to
bring an action for manifestly unfair dismissal.