Permission isn't a full safeguard

Terminating a permanent employment contract in the Netherlands is not a simple matter from a legal perspective. You generally need assistance from either the employee themselves, the sub-district court or the Administrative Office for Employed Persons' Insurance Schemes (Uitvoeringsinstelling werknemersverzekeringen or UWV) Work Company. To terminate employment with the aid of a dismissal permit, the employer needs to go to the UWV Work Company. Of course their permission isn't given lightly. You will need to satisfy a number of conditions to get it. But even if employment is terminated with the permission of the UWV Work Company that does not automatically mean that the employer is safeguarded against having to make a termination payment.

The legal basis for the requirement that permission is normally needed in order to terminate employment is contained in Art. 6 of the Extraordinary Decree on Labour Relations 1945 (Buitengewoon Besluit Arbeidshoudingen or BBA). The only situations where permission does not have to be obtained in advance are summary dismissal, dismissal during a trial period and dismissal due to insolvency. The decree does not apply to certain groups of employees, such as government employees, teaching and lecturing staff, ministers of religion and domestic staff in part-time employment. Nor does the BBA apply to company directors. Art. 9 of the BBA provides that the employee may invalidate any termination without the required permission within six months.

The government introduced this permit system immediately following the end of the Second World War in 1945. The government's aim was to combat the chaos that had arisen at that time, help to get production going and promote employment. Everyone whose employment had been interrupted by the occupier after 9 May 1940 was to be taken back into employment. The prohibition on dismissals supplemented this re-employment obligation. The government aimed to prevent employers from depriving the re-employment measure of its effect. The government also intended that this system would prevent employees from moving to branches of employment that were less essential than building and food production. Despite increasing protests from employers, the Dutch legislator still maintains this system of permits today in order to protect weaker groups on the labour market and in an attempt to prevent improper entry to the social security system.

Policy rules

This type of permit system could not function without rules being established in advance about the conditions under which permission should be granted. The aim of these rules is to promote legal certainty. Every employer must be able to rely in advance on the UWV Work Company granting him permission to dismiss if all the published conditions are satisfied. Those rules are also designed to ensure that identical cases are not dealt with arbitrarily but with proper transparent reasoning. The conditions that must be satisfied in order to obtain a dismissal permit from the UWV Work Company are, in the first place, set out in the Dismissal Decree issued by the Minister for Employment and Social Affairs. In addition, since October 2005 the UWV Work Company has also published its own policy rules. This action was taken with the express aim of offering more legal certainty for employers, so that they are more inclined to choose this method of dismissal. This is a significant advance.

When it comes to assessment of the permit application, the legislation distinguishes between financial reasons for dismissals and other reasons. Such other reasons are intended to cover an employee who is performing poorly, an employee whose actions or omissions are culpable, an employee who fails to cooperate to achieve reintegration, an employee who has been put in prison, an employee who has reached pensionable age and a breakdown in the working relationship. The aforementioned UWV Work Company policy rules contain an assessment framework for each of these situations. These can be found on the UWV Work Company website, www.werk.nl. If the UWV Work Company grants the permit requested, it can attach further conditions to this. A permit for dismissal due to financial reasons is usually subject to a condition that the position may not be filled by someone else within a period of 26 weeks (the 'reemployment condition').

No safeguard

However, obtaining and using a permit from the UWV Work Company does not safeguard the employer against any claim the employee may make for damages. It is still possible for the dismissal to be 'manifestly unfair'. The court is entitled to reach an independent decision on this issue, regardless of the conclusions of the UWV Work Company. This has repeatedly been confirmed by the Supreme Court. This is because the UWV Work Company is not regarded as an independent, non-partisan judicial authority. So the certainty given to the employer regarding whether a permit will be granted is eroded by uncertainty as to the outcome of any separate judicial proceedings before the sub-district court. In spite of this, it is to some extent possible to identify from published judgments in decided cases the situations in which an employer should, despite having obtained a permit from the UWV Work Company, be concerned about the decision that the sub-district court will take.

The fact that the court is entitled to conduct an independent assessment without being bound by the opinion of the UWV Work Company is again confirmed in a Supreme Court judgment dating from 1997 (Employment Law Cases 1997/90). In that case the employee argued that the employer had not applied the length of service rule correctly. In calculating length of service for the permit application the employer had assumed that an interruption in employment meant that the number of years of service restarted from zero. The court did not agree with this. A significant reason for dismissal being manifestly unfair is if the dismissal was carried out under a sham or falsified reason but a dismissal can also be held to be manifestly unfair if the sub-district court considers that the consequences of the dismissal would be too severe for the employee if insufficient financial compensation is provided. This last element is an important factor in motivating many employers to offer a severance payment.

Not only is it possible that dismissal with the permission of the UWV Work Company can still be held to be manifestly unfair. There have also been cases in which the court held that the UWV Work Company had acted unlawfully towards the employee by giving permission. This has primarily been the case in situations where the UWV Work Company did not apply the compulsory rules of the General Administrative Law Act properly, for example by failing to take principles of good governance into consideration. This would include failing to give all parties a proper hearing and failing to provide clear reasoning for the decision. There have also been cases where the UWV Work Company had incorrectly omitted to investigate whether any other suitable positions were available for the employee.

If a dismissal is found by the court to have been 'manifestly unfair' the consequence is generally that the employer has to pay compensation to the employee. Decided cases show that the magnitude of this compensation can vary significantly for cases with similar facts. There is no formal guidance for sub-district courts in calculating this compensation. Judges sometimes try to follow the sub-district court formula, which they apply in proceedings to rescind an employment contract. However, the two types of proceedings are not fully comparable. For example, rescission proceedings are much quicker. The uncertainties associated with this tend to make compensation awards in rescission proceedings higher than compensation awards for manifestly unfair dismissal. In addition to awarding compensation, the court can also decide that employment must be reinstated. However, in practice this option is rarely exercised, although it is often used on behalf of the employee to threaten the employer.

Example

UWV punished by Ombudsman for careless investigation

The facts of the case are as follows. The employer applies to the UWV for permission to dismiss the employee due to poor performance. The employee puts up a defence. He argues, among other things, that a heavy workload, a backlog of work and the absence of supervision have prevented him from performing properly. Despite this defence, the UWV grants the permit requested. The UWV holds that it has been adequately demonstrated that in spite of his efforts the employee has not been successful in mastering the work required.

The employee then submits a complaint to the National Ombudsman. He argues that the UWV was incorrect in finding that the poor performance claimed had been proven. In addition, in his opinion the UWV incorrectly omitted to conduct a second round of hearings for both parties. The National Ombudsman upholds both complaints.

The National Ombudsman holds that the UWV could not have determined properly whether the employee was suited to his position and whether the employer had had sufficient contact with the employee to improve his performance. In response to the employee's defence that work circumstances, pressure of work and insufficient supervision had prevented him from performing properly, the UWV should have actively sought information about this. A second round of hearings of both parties was therefore unavoidable. The UWV acted incorrectly and to the disadvantage of the employee in omitting this investigation.

With this judgment in his hand, the employee is in a strong position when making a claim against his employer for compensation for manifestly unfair dismissal. The UWV is also at risk of having to pay compensation. This judgment shows that as an employer you cannot afford to rely too lightly on the permission of the UWV alone. It also shows that not only are employees often able to get the sub-district court on their side in these matters, they can also turn to authorities such as the National Ombudsman.