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5 Oct 2022 Even dismissal of statutory director is subject to rules!

Fair compensation of €125,000 awarded to director

This week a case from our own firm: Monique Spee and Martine van Krieken-Boersma assisted a director under the articles of association whose employment contract had been terminated by the employer without reasonable grounds. For our client, we went to court and achieved a satisfactory result.

What were the facts?

Employee had worked for employer, a foundation working in the field of renewable energy, since 6 January 2020. On 10 December 2020, the employee was appointed as a statutory director. Unfortunately, there appeared to be various problems within the employer's organisation. The director had therefore - not surprisingly - already had a number of predecessors within a short period of time.

Completely out of the blue, the director was told that the company no longer wanted to continue working with him. In the shareholders' meeting of 18 January 2022, the director was dismissed. Highly peculiar, since no (known and documented) performance or assessment interviews had ever taken place during the employment.

Based on established case law, the dismissal of a director under the articles of association by the shareholders' meeting also immediately constitutes dismissal under employment law. This employer therefore did not need to submit a request to the subdistrict court to dissolve the employment contract; after observing the applicable notice period, the employment contract ends without intervention of a judge.

Our firm therefore went to court on behalf of the director, requesting an award of fair compensation (in Dutch: “billijke vergoeding”) on the grounds of serious culpability on the part of the employer. After all: a reasonable ground for termination of the employment contract was completely lacking.

Judgment of the court

The court referred to case law from which it follows that a director under the articles of association enjoys the same protection as an 'ordinary' employee when it comes to the question whether he/she is entitled to fair compensation in case of termination without reasonable grounds. It is therefore not the case, as the employer incorrectly argues, that the employer's dismissal by the shareholders under corporate law immediately constitutes a sufficient h-ground (the so-called 'residual ground')!

According to the court, there is no reasonable ground for dismissal. Even in the case of a statutory director, an employer does have to make it known in case it is dissatisfied with the director's performance. In the words of the court: even a director under the articles of association must "see the oncoming train coming".

The court also considered that the requirements may be slightly less demanding (compared to an 'ordinary' employee), but in this case there was no performance improvement plan whatsoever. The intention to dismiss the director was made raucously, and that is heavily to blame on the employer, the court said.

Final Remarks

The foregoing leads to the conclusion that this employer terminated the employment contract without reasonable grounds and that constitutes seriously culpable conduct. Referring to well-known case law on fair compensation, the court awarded €125,000. A great result for our client.

You can read the entire judgment here.

Are you a director under the articles of association and are you in a similar situation? Or are you an employer or employee and do you have questions about dismissal, underperformance, serious culpability or other employment law issues? At SPEE advocaten & mediation, you are at the right place.

SPEE advocaten & mediation Maastricht

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