What to do for an employer that has a suboptimal relationship with an underperforming employee but that has not fully documented the underperformance and its efforts to improve performance, while there may still be a chance that the relationship gets better?
The Dutch dismissal regime is very rigid and has the concept of an exhaustive list of reasonable grounds for termination of the employment agreement, including underperformance, culpable behaviour of the employee, or a damaged working relationship. An employer seeking permission from the cantonal court for the unilateral termination of an employment agreement must be able to substantiate one of the dismissal grounds. If the employer is not able to fully substantiate at least one individual dismissal ground, the court will not dissolve the employment agreement. Until 1 January 2020, it was not possible to combine two or more of the reasonable grounds for termination that were not fully fulfilled into one complete reasonable ground for termination. In the example at hand, the employer could thus not come to a unilateral termination because it did not meet the bar for a termination for underperformance, nor for a termination because of a damaged relationship. This rigid dismissal regime thus led to situations where a court denied a request for dissolution of the employment agreement, because not all criteria of an individual dismissal ground had been met, even though it was clear that a constructive continuation of the employment relationship could no longer be expected. This was usually the case in situations of underperformance of an employee in combination with a damaged working relationship.
On 1 January 2020, the Labour Market in Balance Act (Wet Arbeidsmarkt in Balans) introduced a ‘cumulative dismissal ground’, which aimed to provide some flexibility to the Dutch dismissal law regime. With the introduction of the cumulative dismissal ground, it became possible for the courts to dissolve an employment agreement on the basis of a combination of circumstances, which fall under two or more specified different dismissal grounds and that together result in a fulfilled ‘cumulative ground’ for termination. When dissolving an employment agreement on the basis of the cumulative ground, the court can impose a higher statutory transition payment: 1.5 times the ‘regular’ transition payment. In addition, they can award an equitable payment in case the employer can seriously be blamed for the ground for termination.
It was generally expected that the cumulative dismissal ground would make it easier for employers to dismiss employees. Would the cumulative dismissal ground thus be a solution for the employer in the example at hand? That does not immediately seem to be the case. It follows from case law since 1 January 2020 that the courts apply the cumulative dismissal ground restrictively and that the introduction of the cumulative dismissal ground has thus far not opened the door to a more employer-friendly dismissal regime. Although many rulings have been published in 2020 in which an employer claimed a termination of the employment agreement based on the cumulative dismissal ground, only three such claims were successful to date. So far, an illusion rather than a solution.
Zooming in on the only cases in which employers were successful so far. In two separate but almost identical rulings, on 6 July and on 24 July 2020, a cantonal court for the first time dissolved an employment agreement based on a combination of dismissal grounds (the new cumulative dismissal ground). In both cases the working relationship had become distorted following discussions about the employee’s underperformance. The court considered in both rulings that the dissolution of the employment agreement could not be based on underperformance alone, since the employer had failed to properly execute the employee’s performance improvement plan. Furthermore, the court considered that the dissolution could also not be based on a damaged working relationship alone, since the distortion of that relationship was primarily a result of discussions about the employee’s performance, which discussions could have been avoided if the employer had properly executed the employee’s performance improvement plan. However, given that both employees involved were members of the management team, the court recognised that a breach of trust at management level could not lead to a successful performance improvement plan. In both cases, the court dissolved the employment agreement on the basis of a combination of elements from both dismissal grounds, with the main focus on the damaged relationship, and granted the employees the maximum statutory severance of 1.5 times the transition payment.
In a case that resulted in a ruling of the same court of 10 September 2020, an employee of a centre for physiotherapy with 22 years of service had approached clients and colleagues to model for art photography, which the employee practised as a hobby and which also included nude or semi-nude photography. After considering the specific circumstances, the court came to the conclusion that the employee had acted unprofessionally, but that his behaviour was not culpable to the point that it justified, in itself, the termination of employment. The court also rejected a dismissal based on a damaged working relationship, considering that the employer had chosen to aggravate the distorted relationship rather than try and repair it. Ultimately, the court dissolved the employment agreement on the basis of the cumulative dismissal ground. The court considered that the working relationship had been damaged beyond repair as a result of the actions of the employee, for which the employee could be blamed. Therefore, accumulating elements from the ‘culpable behaviour’ and the ‘damaged working relationship’ dismissal grounds, the court dissolved the employment agreement, granting the employee the maximum statutory severance of 1.5 times the transition payment.
Although the case law on the cumulative dismissal ground is clearly still under development, a few patterns have emerged in the first nine months of its application.
In the first place, if the employer fails to separately substantiate the cumulative dismissal ground, a court will not consider it. The employer must explain which combination of elements from other dismissal grounds justify the conclusion that it cannot be expected from the employer to continue the employment agreement. The employer cannot suffice by simply referring to the dismissal grounds it primarily based a termination request on, and ask the court to combine them into one dismissal ground. Without additional supporting arguments, a claim for dissolution on the cumulative dismissal ground will be denied. Secondly, in the above-mentioned cases the courts emphasised that, to grant a termination based on combined grounds, one of the underlying ‘individual’ termination grounds invoked needs to be nearly fulfilled. If a court rules that there is no or very little ground for the other alleged dismissal grounds, it is unlikely that elements from those insufficient dismissal grounds will add up to a sufficiently substantiated cumulative dismissal ground.
In practice, although the abovementioned rulings seem to suggest something different, this means that an employer should think twice before relying on the cumulative dismissal ground. Only if it truly feels that at least one of the ‘individual’ dismissal grounds is nearly fulfilled, but only lacks a tiny bit, it could successfully invoke the cumulative ground by combining the nearly fulfilled dismissal ground with one or more other dismissal grounds that are less developed. In other words, when an employer feels that it is ‘only’ half way there with two or more individual dismissal grounds, it can better decide to refrain from filing a request to the court until it has further developed its case. Finally, it is worthwhile for employers to realise that the single dismissal ground of a ‘damaged working relationship’ –and not the new cumulative ground –is still the most successful ground for dismissal. Statistics show that 75% of the requests for dissolution based on the ground of a damaged working relationship have been granted in 2019.