This blog discusses the judgment of the Hague Court of Appeal dated November 20, 2021. This judgment is a very clear example of how important the wording of (clauses in) contracts is.
Claimant is an employee. Employee was born in 1958. Employee joined employer in 1995. In 2007, Employee suffered cardiovascular problems and since then employee has been under strict medical supervision. Employee has been permanently disabled due to illness since September 5, 2016. Since May 19, 2017, employee has been receiving IVA benefits (IVA stands for: Income Provision for the Totally Disabled). As of October 2, 2019, employee's dormant employment was terminated via a termination agreement. This was prompted by a television program on dormant employment, after which an agreement was finally reached after extensive negotiations.
Among other things, it was agreed that the employer would pay a transition fee and the agreement included final discharge, with the exception of the employee's duty of confidentiality. Furthermore, in the last sentence of Article 8 of the termination agreement the following was agreed upon:
"Furthermore, the final discharge does not include any fair compensation owed by the employer, according to the employee, due to alleged serious culpable actions on the part of the employer, the indebtedness of which is disputed by the employer."
In the first instance, the employee requested that the employer be ordered to pay fair compensation in the amount of € 94.115,- gross, and that the employer be ordered to pay the costs of the proceedings.
Judgment of Subdistrict Court
The Subdistrict Court denied the request and ordered the employee to pay the costs of the proceedings. In this connection, the Subdistrict Court considered the following: in the event of termination of the employment contract by mutual agreement, there is no statutory basis for awarding fair compensation. Labor law has a closed dismissal system, and it is clear from the legislative history that fair compensation can only be awarded in exceptional cases.
The fact that the employee stipulated an exception to the final discharge in the termination agreement does not change this. Employee had the option of dissolving the employment contract himself or requesting the subdistrict court to do so. Then the possibility of receiving fair compensation would have remained open to him.
In essence, the employee's grievances focused on the subdistrict court's judgment that there was no legal basis for awarding fair compensation in cases of termination by mutual agreement.
The Court of Appeal begins by interpreting the last sentence of Article 8 of the termination agreement. Employee argues that his intention with the text in question was to preserve the possibility of submitting the question of whether employer had acted seriously culpable to a judge (Article 96 of the Dutch Code of Civil Procedure). In support, employee refers to correspondence allegedly showing that this agreement was made.
Employer disputes that the parties made such an agreement and points out that the present case was only brought by employee and was not jointly submitted to the Subdistrict Court pursuant to Article 96 of the Dutch Code of Civil Procedure. Employer further argues that during the negotiations it disputed that it had acted in a seriously culpable manner and would therefore be liable for fair compensation.
The Court of Appeal held that it had not been established that the parties had agreed (or intended) to submit to the Subdistrict Court whether the employer had acted in a seriously culpable manner.
Furthermore, the Court of Appeal considered that outside the cases regulated by law, there is no basis for claiming fair compensation. The cases provided for by law always concern a unilateral termination of the employment contract by giving notice or a dissolution of the employment contract by the Subdistrict Court at the request of one of the parties to the employment contract. The Court of Appeal ruled that the Subdistrict Court had rightly considered that dismissal law does not offer this room in cases where the parties have jointly reached the end of the employment contract. But, the Court of Appeal did consider that there would have been other possibilities to arrive at a compensation. It would have been possible to include in the termination agreement that the employer owed compensation, the parties could have left open the possibility of a test on the basis of Article 7:611 of the Dutch Civil Code (good employment practices), or, instead of entering into the termination agreement, the employee could have had the agreement dissolved through the Subdistrict Court and then immediately applied for fair compensation.
The Court of Appeal upheld the contested decision and ordered the employee to pay the costs of the proceedings.
According to the Court of Appeal, outside the cases regulated by law, there is no basis for claiming equitable compensation. Not even if the parties have so stipulated compensation. This judgment is remarkable, to say the least.
What is further striking is that if the exception of Article 8 of the termination agreement had contained a compensation for bad employment practices, the possibility of substantive review would have been present according to the Court of Appeal.
The way in which a clause is worded is thus of crucial importance. In this particular case, the wording of the clause directly resulted in it not being open to substantive review.
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