It is often unclear to employers whether they are permitted to terminate the employment contract of a pregnant employee. Over the past six months, four judgments addressing this issue have been published. This article discusses the effect of an employee’s pregnancy on the employer's termination rights under Dutch law, particularly in light of the recent judgments.
Under Dutch law employers are not permitted to unilaterally terminate an employment contract without the intervention of an external authority except during the trial period or if there is an urgent cause for summary dismissal. The only other situation in which an employment contract can be terminated without external intervention is if the employee agrees to the termination, which he/she will usually only do if some form of compensation is paid.
Apart from the above methods, the employment contract can only be terminated in two ways. Firstly, the employer can give notice of termination after having received a dismissal permit from the relevant government agency. The permit will only be issued if the employer can show good cause. (This form of termination will be referred to below as dismissal.) Secondly, the employer can request the competent court to rescind the contract. The court will only grant such a request upon a showing of serious cause justifying the termination. Serious cause includes circumstances of such a nature that the contract should in all reasonableness be terminated on short notice, such as financial necessity, poor performance by the employee or an impaired working relationship. Upon rescission, the court will generally award the employee compensation calculated according to what is called the "subdistrict court formula".
This article discusses whether the employment contract of a pregnant employee can be terminated by dismissal or rescission.
Under Article 7:670(2) of the Dutch Civil Code ("DCC"), an employer cannot dismiss an employee while she is pregnant, during her maternity leave or for a period of six weeks following her return to work after the leave or after a period of occupational disability resulting from the pregnancy or birth, where the disability period succeeded the leave. There are three exceptions to this prohibition on dismissal, laid down in Article 7:670b (1) and (2) of the DCC. The prohibition does not apply (i) to dismissals during the trial period (provided that the dismissal is not based solely on the pregnancy), (ii) if there is an urgent cause for summary dismissal or (iii) if the dismissal occurs because the employer discontinues its business activities or the part thereof in which the employee works (unless the employee’s maternity leave has already started, in which case the prohibition still applies).
Instead of dismissing an employee, an employer may request the court to rescind the employment contract. Rescission may be requested even when the employee is pregnant or on maternity leave. What is the effect, if any, of the prohibition on dismissal?
Under Article 7:685(1) of the DCC, before granting the employer's request the court must determine "whether or not there is a connection between that request and the existence of a prohibition on dismissal”. This has been interpreted to mean: has the employer requested rescission solely because of the employee's pregnancy? According to the legislative history of Article 7:685, if the court concludes that a connection exists, (that the employer has requested rescission solely because of the pregnancy), it must reject the request. Therefore, although the prohibition on dismissal does not as such apply to a request for rescission, it has a kind of carry-over effect (reflexwerking). Because of this, the court must exercise restraint in granting rescission in a situation in which dismissal is prohibited. The following cases published over the last six months show how the courts deal in practice with a request to rescind the employment contract of a pregnant employee.
Utrecht District Court (8 June 2009)
The employer sought, for financial reasons, to rescind the employment contract of a pregnant employee. As a result of a reorganisation, the employee's department and therefore her job had been eliminated. The employee tried to invoke the "carry-over effect" (reflexwerking) of the prohibition on dismissal, arguing that the court was required to exercise restraint on account of her pregnancy. However, the court held that the employer had sufficiently shown that there was a financial need to reorganise its business, and that therefore the request to rescind the contract was not connected to the employee's pregnancy. Accordingly, the court granted the employer’s request and awarded compensation in the usual manner i.e. by applying the "subdistrict court formula". Based on the employee's weakened employment market position due to her pregnancy, the court multiplied the amount of compensation that it would normally award to an employee who was made redundant by a factor of 1.7.
Enschede District Court (21 August 2009)
As a result of poor financial results, the employer decided to carry out a reorganisation. As a result of the reorganisation, the jobs of a pregnant employee and several other employees were eliminated and replaced by jobs involving greater responsibility. Nine employees qualified for the new jobs, but only eight positions were available. Application of the proportionality principle would have resulted in an employee in the age category 45-55 being made redundant. The employer believed that this result would have been unreasonable in view of the long-term employment relationship with the individual in question and his weak position in the job market. The employer therefore decided to instead apply the seniority principle, which meant that the pregnant employee would be made redundant.
The court held that the employer's decision, which was based on loyalty and social aspects, should be respected. In the court's view, the rescission request was not connected to the pregnancy. However, the court was unhappy with the fact that the employer would enjoy a financial benefit of EUR 40,000 by applying the seniority principle instead of the proportionality principle, as the pregnant employee was entitled to less compensation than the older employee. In view of the pregnant employee's less favourable employment market position as a result of the pregnancy, the court held that the employer had to split the financial benefit with her.
Zaandam District Court (25 August 2009)
The employer sought to rescind the employment contract of a pregnant employee on financial grounds. According to the court, the rescission request was not connected to the pregnancy, as the employer had sufficiently shown that its poor financial situation had made it necessary to eliminate the relevant employee's job. The request was granted and compensation was awarded in the usual manner, as if the employee were not pregnant.
Utrecht District Court (14 September 2009)
In this case too, the employer sought to rescind the employment contract of a pregnant employee because of financial factors which made it necessary to eliminate the employee's job. Based upon the proportionality principle, the employee was first in line for redundancy, but she argued that the request to rescind the contract related solely to her pregnancy. According to the court, however, the employer had sufficiently shown that it was in financial trouble and that the redundancy was necessary. In addition, the court held that, even though a pregnant employee is protected against dismissal by the employer, this does not preclude termination by rescission based on urgent financial reasons. The court granted the request for rescission and increased the compensation that would normally be awarded in the case of redundancy (without providing further grounds).
Pregnancy not an obstacle to rescission of employment contracts
As is clear from the above case law, pregnancy is not necessarily an obstacle to the rescission of an employment contract by the court. In each of the cases discussed, the request for rescission was based on financial reasons. Three of the four cases did not involve the discontinuation of the employer's business activities or part thereof, so the third exception to the prohibition on dismissal did not apply. The carry-over effect of the prohibition apparently does not go so far as to make rescission during pregnancy only possible if one of the exceptions under Article 7:670b (2) of the DCC applies. This is logical, as Article 7:685 of the DCC requires only that there be no connection between the request and the pregnancy.
Few court decisions have been published in which an employment contract was rescinded during the employee’s pregnancy on grounds other than financial grounds. In that situation, employers may be reluctant to seek rescission because they fear the court will reject their request. After all, if the request is based on non-financial grounds, e.g. unsatisfactory job performance by the employee, it is more likely to at least appear to be connected to the pregnancy. However, if an employer can convince the court that there is a valid ground for rescinding the contract and that there is no connection to the pregnancy, the request can in principle be granted even if dismissal would not be permitted. Note that in such cases, the court will be very careful in concluding that a connection does not exist.
A request to rescind an employment contract while the employee is on maternity leave, however, is probably less likely to be granted. During maternity leave, an employee's salary (up to a maximum of 70% of the “maximum daily wage”) is paid by the government. As a result, the employer's interest in rescission is less evident, and moreover it is arguable that an employee requires additional protection during this period. However, we are not aware of any court decisions confirming this.
The cases discussed above show that when making a pregnant employee redundant, the employer must take into account the possibility of having to pay higher compensation than would otherwise be required, due to the pregnant employee's less favourable position in the employment market. However, the cases also show that not all courts award higher compensation. Whether or not a court will do so is unpredictable, and this is certainly true of a decision such as that by the Enschede District Court, in which the employer's financial benefit was divided between the employer and the employee.
Assuming that the trial period has passed and there is no urgent cause justifying a summary dismissal, employers are only permitted to dismiss a pregnant employee if they discontinue the business activities or the part thereof in which the employee works. It goes without saying that a dismissal permit is required. If there are no plans to discontinue the relevant activities, but the employer has another good reason for wanting to terminate the contract, it may submit a request to the court for rescission. The court will examine carefully whether there is a connection between the request and the pregnancy. If there is no such connection, it will probably grant the request, provided that the other requirements for rescission are met. The amount of compensation awarded will probably be higher than usual.