Discussion concerning the applicability of the WNT
A recent ruling of the Arnhem-Leeuwarden Court
In a recent ruling (ECLI:NL:GHARL:2018:4989), the Arnhem-Leeuwarden Court of Appeal clarified the question whether a healthcare institution is authorized to make supplementary arrangements for a severance scheme under the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act (Wet normering bezoldiging topfunctionarissen publieke en semipublieke sector, WNT). The Court of Appeal also considered the consequences of the dismissal as a director under the articles of the foundation.
In this case, the central issue is the dismissal of a director under the articles of a healthcare institution ('the Foundation') and the potential severance pay under the WNT. The parties had been in discussions since 2015 on ending the employment relationship involving more than 30 years of service. Agreement was eventually reached in 2016 on the departure of the director, but there was still some lack of clarity concerning the severance scheme. The employment contract contained an article, on the grounds of which the director was entitled to a set amount of severance pay, along the lines of the subdistrict court formula (where roughly speaking a month's salary would be awarded for each year worked). The parties disagreed about the awarding of this severance pay in relation to the WNT (under the WNT, severance pay is maximized to EUR 75,000). However, when it became apparent on the basis of recommendations by the lawyers of both parties that the parties were indeed bound to the provisions of the WNT, the director made it known that he was no longer willing to cooperate in terminating the employment contract, and wished to remain in post as director until reaching retirement age. The Foundation then applied to the subdistrict court to terminate the employment contract on the grounds of Article 7:669(3) under (g) or (h) of the Dutch Civil Code (DCC) (damaged working relationship and an employment contract devoid of substance). The subdistrict court denied the application to terminate the employment contract. The subdistrict court held that the damaged employment relationship as well as the fact that the employment contract had become devoid of substance was largely caused by the Foundation. In this context, according to the subdistrict court, it was up to the Foundation to repair the breach of trust by seeking a solution to the situation other than termination. In its decision, the subdistrict court did not express a view on the authority of the Supervisory Council (Raad van Toezicht) to apply a severance scheme where it involved the application of the WNT (therefore the question whether the Supervisory Council could have awarded the contractually agreed severance pay under the employment contract, or a higher payment than is permitted under the WNT). It was for the subdistrict court to give a decision on the options open to the Supervisory Council concerning the payments under the WNT.
The Foundation lodged an appeal against the decision of the subdistrict court and requested the Court of Appeal to terminate the employment agreement after all as soon as possible, again on the grounds of Article 7:669(3) under (g) or (h) DCC.
The Court of Appeal concurred with the Foundation's view and terminated the employment agreement on the grounds of Article 7:669(3) under (g) or (h) DCC, finding as follows:
- In view of the circumstance that the Foundation, following completion of the reorganisation, needed a different kind of director, and in view of the problems the director himself had identified, in the interests of its organisation the Foundation could decide not to retain the director. The interest in replacing the director, in view of the discussion concerning the applicability of the provisions of the WNT, had become only greater.
- Since the employment contract was entirely designed for the position of director, the dismissal as director under the articles meant that the employment contract had become devoid of substance. Reassignment of the director within the Foundation was no longer appropriate, according to the Court of Appeal. The employment contract devoid of substance qualifies as a well-considered ground of other circumstances (h-grond).
- Under the WNT, the Foundation is not authorised to cooperate in making supplementary arrangements for a severance scheme.
The Court of Appeal terminated the employment contract, awarding the statutory transition payment.
It is apparent from the Court of Appeal's ruling that it is not possible to reach supplementary arrangements within the scope of the WNT.
Hermine Voûte and Roos van den Berg, of the Healthcare team at Loyens & Loeff, advised the winning party, the Foundation, in this case. For questions about the WNT or other aspects of employment law, please contact them.
Hermine VoûtePartner Attorney at law
P. Hermine E. Voûte, attorney at law, is chairwoman of the Employment & Benefits practice group. She has over 31 years’ all-round experience in employment law, with a particular focus on high-profile dismissals, restructurings and collective dismissals, and co-determination procedures.T: +31 20 578 59 75 E: firstname.lastname@example.org