The relevant facts of the case
The individual concerned was both a statutory director and an employee of the company. In 2021, he received a letter referring to possible prohibited commission arrangements. Two years later, the Fiscal Information and Investigation Service (FIOD) carried out a raid, and a criminal investigation was launched into forgery, private-sector bribery and money laundering. The director had approved invoices that included prohibited commission arrangements. Although he had previously received warnings from colleagues, he did not conduct further inquiries.
In January 2024, the company decided that, despite the suspicions, the director could remain in his position because his knowledge and expertise were considered indispensable. The company then entered into discussions with the Public Prosecution Service (OM) to reach an out-of-court settlement. However, the OM indicated that it regarded the director as one of the instigators of the prohibited commission arrangements, making such a settlement “difficult”. On 25 November 2024, the company dismissed the director and terminated his employment contract. The employer argued that there was a disrupted working relationship and/or a difference of opinion. The director, however, maintained that there was no valid statutory ground for dismissal, rendering the termination unlawful.
Dual test and financial consequences of unlawful dismissal
The dismissal of a statutory director involves two dimensions: corporate law (Book 2 of the Dutch Civil Code (DCC)) and employment law (Book 7 DCC). In its 15 April rulings, the Supreme Court held that a valid corporate law dismissal resolution generally also terminates the employment contract, unless a statutory prohibition on termination applies or the parties have agreed otherwise. The court cannot reverse a valid dismissal resolution, but if there is no reasonable ground for dismissal, the director may claim fair compensation (breach of Article 7:669 DCC).
In this case, the employer relied on three grounds: a disrupted working relationship (g-ground), a difference of opinion (h-ground) and a combination of both (i-ground). The court found that the employer had not sufficiently demonstrated efforts to restore the relationship for the g-ground. For the h-ground, there was no convincing substantiation, given that ten months earlier the company had decided the director could remain in his position. The combined ground failed because the individual grounds were not sufficiently substantiated.
As the dismissal lacked a valid statutory ground, the court awarded the director a total of EUR 300,000 in compensation. The court also declared the non-compete clause invalid, allowing the director to take up employment elsewhere.
The tension between cooperating with the OM and providing sufficient pushback
This judgment highlights the tension between an employer seeking to settle and the OM’s position. The company wished to resolve the criminal case out of court and initially did not want to dismiss the director due to his indispensable expertise. However, the OM exerted pressure on the company to dismiss the director, as it considered him one of the instigators and, at the very least, suspected him of criminal offences. Article 27 of the Dutch Code of Criminal Procedure defines a suspect as someone against whom there is a reasonable suspicion of guilt based on facts or circumstances. This suspicion, however, is not a proven fact. The civil court assessed the director’s conduct as naïve rather than fraudulent. In the court’s view, there was insufficient evidence to regard the director as an instigator. The OM therefore appears to have taken an incorrect position from the perspective of the civil court.
The court held that the company too readily accepted the OM’s stance. It ruled that the employer should have pushed back and at least requested further substantiation from the OM, rather than proceeding directly to dismissal. By acting immediately on a (possibly incorrect or insufficiently substantiated) suspicion, the company closed the door too quickly, making it impossible to continue the employment relationship.
The fact that the director was retained in January 2024 – after the FIOD raid – because of his knowledge and expertise led the court to conclude that there was no difference of opinion at that time. Ten months later, following the OM’s statement that settlement would be difficult, the director was dismissed. There was no evidence of a difference of opinion arising during that ten-month period (or at least none demonstrated by the employer), so this ground also failed.
Following the OM’s lead under pressure, without sufficient independent investigation or critical questioning, can therefore amount to seriously culpable conduct by the employer and result in significant compensation being payable to the employee. In practice, however, it is not easy to strike a balance between cooperating with the OM to achieve an out-of-court settlement and safeguarding a careful weighing of interests towards the employee.
Practical tips
Employers are well advised to conduct their own thorough investigation before deciding on dismissal. In some cases, it may be appropriate to suspend the employee while the criminal (and/or internal) investigation is ongoing. This can help to substantiate a valid ground for dismissal later and, among other things, can prevent discussions in light of the h-ground that the employment relationship still continued for months or years. Given that a criminal investigation can last for years and suspension for that entire period will not be sustainable, greater emphasis will however fall on the employer’s own investigation.
It is essential to align the corporate law, employment law and criminal law dimensions carefully during decision-making in cases like these.
Do you have questions about the dismissal of statutory directors or the impact of criminal investigations? Please feel free to contact our team.
