Employment Law Newsletter September 2009
"Extension of the indispensability criterion?
As of 1 August 2009 Section 4:2 subsection 4 of the Dismissals Decree has been amended for a limited period of time (until 1 September 2011). According to the Ministry of Social Affairs and Employment, this amendment will make it easier to spare employees the effects of a reorganization on account of their specific knowledge and skills, even if they would qualify for a dismissal on the basis of the principle of proportionality. An employer must in that case demonstrate that the employee concerned has €œspecific knowledge and skills€ which are considered essential to the enterprise's functioning to such extent, that the dismissal of that employee must be prevented. As a result, the next employee in the same age category, lacking such knowledge and skills, will be placed on the list of employees to be dismissed. Before this temporary amendment became applicable, the employer was required to demonstrate that an employee was indispensable to the organization. The principle of proportionality may be deviated from in accordance with the new regulation, provided however that the employer has a clear and stable policy framework for the accumulation of knowledge and skills. Furthermore, after having made a selection of employees with specific knowledge and skills, the employer may not propose over 10% more employees for dismissal from the youngest and the oldest age category (15-25 years of age and 55 years of age and older) than would be dismissed on the basis of the (accurate) application of the principle of proportionality. It remains to be seen whether the new regulation indeed widens the scope of the Dismissals Decree, as the Ministry argues. Practice will show. New formula applied by the Courts of Appeal: XYZ If the consequences of the dismissal are too serious for the employee in comparison with the employer's interest in his dismissal, the employee has an opportunity to start proceedings on the basis of a €œmanifestly unfair dismissal€. In these proceedings the employee will submit a claim for compensation. For some time now, both case law and literature have shown disagreements on how to calculate the compensation in proceedings on the basis of a manifestly unfair dismissal. On 7 July 2009 the Courts of Appeal of Amsterdam, 's-Hertogenbosch and Leeuwarden (as a subsidiary place of session of Arnhem) ruled in three difference manifestly unfair dismissal proceedings. For the calculation of the compensation the Courts opted for a 'new' uniform method: the XYZ formula. The formula is as follows: X (number of weighted years of service) * Y (the most recent salary) * Z (correction factor). In calculating the X factor, the years of service until the age of 40 count as 1, from the age of 40 to 50 as 1.5 and the years of service from the age of 50 count as 2. All circumstances at the time of the dismissal are weighted in the correction factor (Z). However, the maximum compensation will, in principle, not exceed 0.5. The formula strongly resembles the former cantonal court formula 'cut in half'. It remains to be seen whether the Courts of Appeal in future times will switch to an X factor following the new cantonal court formula. The Court of Appeal of the Hague does not apply the XYZ formula. This Court has been using its own formula since last year, applying for the compensation a standard percentage of 70% of the cantonal court formula. It is not yet clear what the Supreme Court's opinion is on these formulas applied by the Courts of Appeal.
Does full and final discharge entail a forfeiture of the non-competition clause?
In practice, it is more common to insert a noncompetition clause in an employment agreement than to refrain from inserting such clause. If the employment agreement is terminated by means of a settlement agreement (in mutual agreement), the agreement concerned will often include a provision stating whether or not the non-competition clause will be forfeited. The judgment rendered on 28 April 2009 by the Court of Appeal in Amsterdam shows that it is of vital importance to include such a provision in the settlement agreement. In the case brought before the Court of Appeal a non-competition clause and a confidentiality clause are applicable between the parties (which have been agreed in accordance with the law). Whereas the settlement agreement explicitly refers to the confidentiality clause, it does not provide for the forfeiture of the non-competition clause. However, the settlement agreement does contain a provision stating that the parties have no further claims against each other (full and final discharge). It is not clear whether the non-competition clause will remain valid in spite of the fact that both parties have stated that they have no further claims against each other. The Court of Appeal has ruled that the employee was allowed to understand that the employer could no longer invoke the non-competition clause. The Court of Appeal does not concur with the employer's position that the settlement agreement covers only the financial settlement. The agreement does contain provisions regarding the confidentiality clause and the submission of a positive reference. In its decision, the Court of Appeal has taken into consideration that the termination of the employment agreement was instigated by the employer, that the employee was wholly unfit for work at the time when the termination was discussed, and that the employee did not have legal assistance. All in all an understandable judgment."