The Dutch Court of Appeal recently addressed damages owed in a dismissal action where both the employer and employee acted with serious culpability. The question for the court was who was to blame for the termination of the employment contract? Should the employee lose her right to any payment? Should the employer pay everything? Or were both of them in the wrong?

Background

The employee had been employed as a director/general manager with the employer since 2003. She had also been having a lengthy affair with the sole shareholder, who was also a director of the employer (the 'shareholder'). The relationship between the two deteriorated after the affair came to an end in late 2018. The breaking point came when the shareholder accused the employee of fraudulent conduct, which then led to a host of disputes and litigation between the parties.

The employer terminated the employment contract on 6 September 2019, without a dismissal permit.¹ The employee acquiesced in the dismissal but claimed over EUR 1 million in compensation. The Sub-District Court ordered the employer to make a fair payment of EUR 44,064 gross, but did not award any transition payment because the employee had been at fault in her actions.

The employee filed an appeal. The employer once again adopted the position, on appeal, that the employee's actions had been seriously culpable and she should not therefore be entitled to anything.

Transition payment

An employee loses the right to the transition payment if they are guilty of seriously culpable acts or omissions. In its ruling, the Court of Appeal explored three specific and substantiated charges against the employee in this regard:

1. arranging to pay herself a bonus of EUR 72,348;
2. awarding herself an additional salary of EUR 100,000 via a foreign group company;
3. awarding a colleague an extraordinary severance payment of EUR 500,000.

The employee claimed that the employer had backed her into a corner and she then had to protect herself. The Court of Appeal disagreed and held that the employee had deliberately acted in breach of the applicable rules, thereby sidelining the employer. In doing so, she seriously breached the employer's trust. In addition, she was only thinking of her own (financial) interests. These actions demonstrate seriously culpability, according to the Court of Appeal, so that she had forfeited her right to a transition payment.

Fair payment

If an employer has acted with serious culpability, the Sub-District Court may award a fair payment when the employment comes to an end. In addition to the dismissal without an appropriate permit, the Court of Appeal here again confined itself to three specific and substantiated charges against the employer:

1. passing on the employee's salary and bonus details to the press;
2. posting messages about the dispute with the employee on the employer's website;
3. searching through the employee's business emails, which included looking at private emails.

The Court of Appeal regarded these charges as serious and felt that they had contributed to the disruption of the employment relationship and the ending of the employment contract. For these reasons, the employee was entitled to a fair payment assessed in line with the New Hairstyle judgment, where the Dutch Supreme Court established standards for assessing the fair payment and held that the consequences of the dismissal on the employee may be taken into account when fixing this payment, to the extent that those consequences were the employer’s fault. If the employer had terminated the employment contract correctly, it would only have continued for an additional five months (notice period and procedural time), given the disrupted employment relationship. Over that period, the employee was entitled to salary of EUR 84,160. Taking this culpability into account, as well as preventing similar conduct on the employer's part in the future, the Court of Appeal rounded the fair payment up to EUR 100,000.

Two-way street

In situations such as the one involved in this case—i.e., both the employer and employee acted with serious culpability—the court will consider whose culpable actions led to the dismissal and is free to adopt its own approach or strike its own balance. The Court of Appeal in this case opted for a tailored approach and allocated the blame between the employee and the employer. It held that the dismissal was caused by a concurrence of events and that the transition payment and the fair payment could be dealt with independently of each other. The fact is that a fight is a two-way street.

*Petra Greuter is an associate at CLINT | Littler in Amsterdam.