Pro-rated transition payment in the event of partial redundancy
16 October 2018
As lawyers we have always learned that an employment agreement is an indivisible whole. In actual practice, however, partial termination of the employment agreement does occur. It has long been debated whether a transition payment (partial or otherwise) is due in the event of partial termination. Recently, the Dutch Supreme Court (Hoge Raad) clarified this matter (HR 14 September 2018, ECLI:NL:HR:2018:1617).
The employee has been in the employ of combined school ‘Kolom’ since 1980. After two years of illness, she was granted a benefit under the Work and Income (Capacity) Act (“WIA”) on the basis of 43.83%. disability. The employee's full-time employment was terminated on 29 February 2016, but was followed, however, by a part-time employment as from 1 March 2016 on the basis of 55% of a full-time employment agreement. The employee agreed to this and subsequently claimed the - partial - statutory transition payment.
First and second instances
The subdistrict court awarded the request for grant of the partial transition payment of EUR 33.394,40 for the part of the employment (45%) that was terminated. According to the subdistrict court, a pro-rated transition payment is due because the employment agreement has been terminated. On appeal, however, the employee's request was rejected. The Court of Appeal held that termination of the employment and re-appointment of the employee does not qualify as ‘termination’, after all, those acts were not aimed at actual termination of the employment, so that no transition payment was due. The employee lodged an appeal in cassation.
The Dutch Supreme Court held that the law does not provide for partial termination of employment. Nor does the law provide for any right to a partial transition payment in the event of reduction of working hours. Nevertheless, according to the Dutch Supreme Court, the possibility of part-time redundancy and the associated entitlement to a partial transition payment must, under special circumstances, be accepted. By way of example, the Dutch Supreme Court referred to (1) the situation where it is necessary that jobs become partially redundant due to economic circumstances, and (2) the situation where an employee will permanently remain partially disabled. In those circumstances, the reduction of working hours must be at the employer's risk, according to the Supreme Court.
The Supreme Court has formulated two conditions for awarding a partial transition payment, namely:
- the reduction of working hours must be “forced by circumstances”; and
- the reduction of working hours must be substantial and structural.
The Supreme Court has not provided any further explanation of the first condition (“forced by circumstances”). In respect of the second condition (“substantial and structural”), the Supreme Court has indicated that the reduction of hours must be at least 20% and reasonably be expected to be permanent.
The partial transition payment must be calculated in proportion to the reduction of working hours. It is not relevant for the entitlement to a partial transition payment how the part-time redundancy is effected. This means that it is not relevant whether the decision to reduce the working hours was made (unilaterally) by the employer or in mutual agreement between the employer and the employee. Note that if the reduction of the working hours has taken place at the employee's request, the employee is not entitled to a transition payment.
Do you have any questions regarding pro-rated transition payment in the event of partial redundancy? Please contact Karol Hillebrandt.