In a case between Shell and an expat, the Supreme Court of the Netherlands ruled on 18 January 2019 (ECLI:NL:HR:2019:64) on the scope of the reinstatement obligation. This ruling is especially relevant for Dutch employers who are part of an internationally operating group. The Supreme Court confirmed that employers have a certain margin of discretion when examining the possibilities for reinstatement. According to the Supreme Court, employers are obliged to make best efforts to find a position for the employee, but this best efforts obligation is limited by reasonableness.
The reinstatement obligation
At the entry into force of the Act Work and Security (WWZ) the reinstatement obligation is laid down in the law for the first time. Due to the chosen wording in the act, the question arose whether the legislator intended to change the scope of the reinstatement obligation.
The obligation is included in article 7:669 paragraph 1 of the Dutch Civil Code, which states that an employer can only terminate an employment contract with an employee if the following two conditions are met:
- There must be a reasonable dismissal ground; and
- The employer must investigate whether reinstatement is possible within a reasonable period of time, whether or not with the help of training, and is not impossible or illogical.
Therefore the employer must investigate whether reinstatement in a suitable other position within the company is possible prior to a dismissal. If a company is part of group entity, the appropriate and available positions in other companies within the group must be taken into account as well. All this applies according to the legal text unless reinstatement is not possible or logical. In the case before the Supreme Court the question was how the latter phrase should be interpreted.
The employer has discretion when examining reinstatement possibilities
The general rule is that employers must examine group-wide reinstatement possibilities, both at home and abroad. In addition, the employer cannot assume that the employee will not be interested in a position abroad (see for example the recent decision of the Den Bosch Court of Appeal (ECLI:NL:GHSHE:2018:5118)
The Hague Court of Appeal ruled earlier that Shell had complied with its reinstatement obligation (ECLI:NL:GHDHA:2017:2654). According to the court, the reinstatement obligation does not require a Dutch (parent) company to enforce the priority of the employee over other candidates in the case of vacancies with local foreign companies (at the expense of the local recruitment policy). The Supreme Court now confirms that the court has interpreted and applied the law correctly. In addition, the Supreme Court ruled that it is a best-effort obligation of the employer and not a result-obligation. The employer has a certain margin of discretion when examining the reinstatement possibilities and the employer can, in this respect, invoke arguments to (in view of the circumstances) substantiate why further efforts by the employer to reinstate an employee are not reasonable.
The impossibility to reinstate an expat is reasonable cause for dismissal
Furthermore the decision of the Supreme Court clarifies that the absence of reinstatement possibilities can qualify as a reasonable cause for dismissal. However, that will only be the case under special circumstances. In this case it was an expat whose work permit had expired and therefore a new position for this employee had to be found. In view of the special circumstances of this case and the fact that Shell had rightly come to the conclusion that reinstatement was not reasonable, this circumstance falls under the ‘residual category’ of the dismissal grounds (the h-ground). The Supreme Court’s decision offers special insights for employers and employees (expats) who are part of an internationally operating group of companies, and shows the importance of a good understanding of (the scope of) the reinstatement obligation.