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Supreme Court clarifies reasonable compensation

In a much debated ruling of 30 June 2017, the Supreme Court has now issued guidelines for establishing the height of the reasonable compensation.

Date:
10 Jul 2017
By:
Marieke ten Broeke, Hylda Wiarda

You will in all likelihood have learned that the Supreme Court has recently ruled on the issue of which elements may play a part in the assessment of the height of a reasonable compensation. This ruling attracted great media attention, since with it, employees could once again claim a higher compensation upon dismissal. This while the implementation of the WWZ (‘Act Work & Security’) was aimed at limiting the costs of a dismissal for employers. The conclusion that employees could now once again claim a higher compensation, is however not correct.

Two types of severance compensation

In case an employee has been employed for two years or more, that employee will in principle be entitled to a transition payment. Legislation has stipulated a calculation method for the transition payment, which results in (barely) no uncertainties regarding its height.

In case the termination of the employment agreement is the result of a seriously culpable act on the part of the employer, the employee will additionally be entitled to a reasonable compensation. For the calculation of that compensation, however, there is no statutory directive. As of the implementation of the WWZ there has therefore been quite some uncertainty regarding the height of this compensation as well as the elements, such as the consequences of the dismissal for the employee, that need to be considered in determining its height.

Scope reasonable compensation

In the much debated ruling of 30 June 2017, the Supreme Court has now issued guidelines for establishing the height of the reasonable compensation. The matter concerned a hairdresser, whose employment agreement had been terminated without the prior permission of the UWV (‘Employee Insurance Agency’). Such a termination without prior permission is to be considered a seriously culpable act on the part of the employer, which entitled the hairdresser to a reasonable compensation. The hairdresser and her employer however failed to agree on the issue of which circumstances ought to be considered in determining the height of the reasonable compensation.

The Supreme Court has now confirmed that the consequences of the dismissal can and may be considered when establishing the height of the reasonable compensation. Thus, in a case such as that of the hairdresser’s, her loss of income as a result of the dismissal may be taken into account when determining the reasonable compensation. Relevant in that respect is whether or not the employee has already found alternative employment. If and to what extent the loss of income plays a part, must be assessed on a case by case basis.  

The Supreme Court has furthermore indicated that the reasonable compensation is aimed at preventing seriously culpable acts on the part of the employer, and is not intended to penalise after the fact. The reasonable compensation is therefore not of a punitive nature.

The Supreme Court ruling does indeed allow for the possibility of tailor-made solutions in case of dismissals. This however concerns only those matters in which a seriously culpable act on the part of the employer has already been established. Practice shows that this is not always so readily the case.

This article is intended to provide you with ad hoc information regarding new regulatory and case law developments and does not contain any legal advice. If you want to know more on the subject or need legal advice please contact us: info@bd-advocaten.nl