An employer may be bound to an offer of financial compensation made to an employee in the negotiation of a severance payment, even though no agreement is reached with the employee. That is the outcome of a recent manifestly unreasonable dismissal procedure at the court of appeal in The Hague.
In the underlying case the employer had displayed a willingness to offer financial compensation, by offering a severance payment based on the provisions of a social plan. Three offers were made over a period of seven months. The employee refused each offer. Since no agreement was reached, the employer applied for a dismissal permit at the Employment Insurance Agency (UWV). After obtaining this permit, the employer dismissed the employee without offering any financial compensation other than the salary of the notice period, during which the employee was released from his work duties.
The unwillingness to pay financial compensation is generally not enough to make a dismissal manifestly unreasonable. According to article 7:681 paragraph 2 sub b Dutch Civil Code (Burgerlijk Wetboek), there have to be additional circumstances. The consequences of a dismissal have to be too severe for the employee in comparison to the interest of the employer to terminate the employment agreement, taking into account the provisions made available to the employee, and the possibilities for the employee to find suitable employment elsewhere.
In the underlying case, such additional circumstances were present. Due to the employee’s age, his many years of service to the employer and the one-sidedness of his work experience, resulting in bad prospects on the employment market, the negative consequences of the dismissal were too severe for the employee.
The court of appeal ruled that the employer violated the principles of good employment practices, as laid down in article 7:611 Dutch Civil Code (Burgerlijk Wetboek). The employer had thus far always displayed a willingness to pay financial compensation, and the difficult circumstances causing the bad career prospects had not changed since the last offer. The court therefore ruled that a dismissal without severance payment was manifestly unreasonable. The employee’s rejection of every offer does not relieve the employer of his obligation to pay compensation under the given circumstances.
The court ordered the employer to pay compensation equal to the previous offers. Employers should therefore take into account that offers of financial compensation may be taken into account by a court. The amount of payment offered, could even be used by a court to determine the amount of compensation. After displaying a willingness to pay compensation to an employee who is likely to suffer severe consequences of a dismissal, the employer could violate good employee practices by dismissing an employee without compensation. Negotiating a severance payment with employees may thus be less non-committal than expected, especially with regard to employees with bad career prospects.