The Rotterdam District Court recently ruled that the dismissal of the managing director of the Nederlands Fotomuseum was invalid. The ruling shows that serious allegations, such as creating a culture of fear or a socially unsafe working environment, can only justify dismissal if they have been thoroughly investigated and can be sufficiently substantiated by objective facts. This also applies in the case of a director appointed under the articles of association.

The background
The managing director was informed of her dismissal during a meeting of the Supervisory Board. According to the Supervisory Board, there was a lack of social safety within the organisation, a culture of fear, insufficient provision of information to the Supervisory Board and a permanently disrupted working relationship. On that basis, it was decided to terminate her employment contract.

However, the court concluded that there were no reasonable grounds for terminating the employment contract.

The legal assessment
Although, under company law, a statutory director may be dismissed by the Supervisory Board, this does not automatically mean that the employment contract can also be lawfully terminated. The closed dismissal regime set out in Article 7:669 of the Dutch Civil Code also applies to the termination of an employment contract for a statutory director. The employer will therefore have to demonstrate that there are reasonable grounds for dismissal.

The court found that it had not been sufficiently established that the director was responsible for a culture of fear or a socially unsafe working environment. Nor has it been established that she provided the Supervisory Board with insufficient or incorrect information regarding signs of social insecurity or staff turnover, as a result of which the Board would have been unable to perform its supervisory duties properly.

The ruling thus confirms that concepts such as ‘culture of fear’ and ‘social insecurity’ do not in themselves constitute grounds for dismissal. The decisive factor remains whether the facts on which these allegations are based can actually support the conclusions drawn. Precisely because such allegations have far-reaching consequences for a director’s reputation, high standards must be applied to them.

The argument that the employment relationship had broken down also failed. For termination on the ‘g’ ground, there must be a serious and lasting breakdown of the employment relationship, where restoration is no longer reasonably possible. The court considered that the Supervisory Board’s loss of confidence in the director was insufficient for this purpose. After all, a subjective loss of confidence cannot automatically be equated with a legally valid ground for dismissal.

Seriously culpable conduct
As there were no reasonable grounds for dismissal, the court classified the conduct of the Nederlands Fotomuseum as seriously culpable.

That ruling led to an award of fair compensation of €400,000. In addition, the museum was ordered to publish a correction.

In doing so, the court emphasised that an employer who confronts a director with serious allegations without a sufficient factual basis runs a considerable legal and financial risk.

Implications for practice
This ruling is significant not only for statutory directors and supervisory boards, but for employers in general. In recent years, after all, there has been increasing discussion in the context of employment law regarding social safety, inappropriate behaviour or a culture of fear.

Although such indications must, of course, be taken seriously, this ruling shows that they do not automatically justify dismissal.

An employer may be expected to conduct a thorough investigation, to ensure that both sides are heard, and to ensure that the final conclusions are supported by objective and verifiable facts.

The ruling thus reaffirms that the court sets high standards for the compilation of the case file and the grounds for dismissal. Serious allegations require a body of evidence that is both thorough and convincing. If this is lacking, an employer may face far-reaching financial consequences.

Read the ruling here.

Do you have any questions regarding poor performance, a strained working relationship, integrity issues or the dismissal of an employee or a director? The employment lawyers at SPEE advocaten & mediation provide advice and conduct litigation in the field of employment law on a daily basis.

We would be happy to discuss your situation with you.

Monique Spee LLM, lawyer and MfN-registered mediator