A recent Dutch Court of Appeal decision demonstrates the importance of conducting a fair investigation into charges of employee misconduct. The court in this case awarded “immaterial” damages to a manager whose job was terminated lawfully for the injury to her reputation resulting from a lack of due care in the misconduct investigation.

Background

A dispute arose within the management team of childcare organisation KinderRijk due to internal reports of disrespectful and unacceptable behaviour on the part of the manager and several other management team members. An external management consultant conducted an investigation into these allegations, which included, among other things, “elements that have negatively affected and/or are negatively affecting trust within the organisation.”

This investigation resulted in the suspension of the operations manager based on accusations of sexual harassment, sexual innuendo, intimidation, coercion and aggressive and indecent language. This behaviour had apparently manifested itself, for the most part, in messages sent via the management team’s internal messaging app. The company suspended the manager after a brief meeting at which the management consultant had also been present.

While the investigation was ongoing, a report was drawn up, which included the reasons for the manager’s suspension. The company shared the report with others in the organisation before the investigation findings had become definitive and before the manager had been given the chance to respond to them. This is not a typical course of action, and was likely taken to “appease” other employees.

Termination Proceedings

In the termination proceedings KinderRijk initiated, the subdistrict court found that the manager had indeed violated standards of decency and had gone far beyond the bounds of acceptable behaviour. The employment contract was dissolved on the grounds of the manager’s imputable acts. The Court of Appeal concurred with this ruling in its judgment in mid-January.

The manager, however, claimed EUR 75,000 in fair compensation, with a net sum of EUR 10,000 of that amount constituting immaterial damages due to the serious harm to her personal integrity. Under Dutch law, fair compensation is pay a court can award an employee in the case of seriously culpable acts or omissions on the part of the employer, such as using false grounds for dismissal, intentionally creating a strained working relationship, non-fulfilment of reintegration obligations, discrimination or sexual intimidation. Immaterial damages are other damages than material loss.¹ The manager likely made the claim “net” because actual damages are untaxed whereas “purely” fair compensation is taxed.

Damage Award

Given that the employment contract had rightly been dissolved due to the manager’s imputable acts, the Court of Appeal found that the manager was not entitled to fair compensation for material damage. But it found that she was entitled to fair compensation for immaterial damage. By catching the manager off guard with the suspension and communicating details of the suspension to the other staff while the investigation was still ongoing when the manager had not yet been properly heard on the subject, the investigation had not met the requirements of due care and breached the principles of a fair hearing. The Court of Appeal therefore found that the manager should receive immaterial damages for this due process misstep.

Wrongfully Decided?

If the Court of Appeal had interpreted the application for payment of net immaterial damages strictly, dismissing the damage claim would have been the logical decision. After all, feeling more or less severe psychological discomfort or feeling hurt is not sufficient for granting net immaterial damages. What is more, in general, the existence of psychological damage may only be determined by a court if this pertains to disease profiles recognised in the field of psychiatry. The manager failed to make a plausible case for this type of injury.

In this regard, the Court of Appeal considered that, even though fair compensation is not specifically intended purely as punishment, some situations can call for it. This aligns with the Dutch Supreme Court’s New HairStyle decision, in in which the court – briefly put – ruled that all circumstances, including the consequences of the dismissal, should be weighed when calculating fair compensation for wrongfully dismissed employees. This decision is understandable in light of the facts of the instant case. Nonetheless, the Court of Appeal should actually have awarded gross compensation instead of net compensation.