Arbitration award orders employer to terminate employment contract with employee suffering long-term illness, leaving the employee entitled to a transition payment of over €145,000.

On 27 December 2018, the Scheidsgerecht Gezondheidszorg (Dutch healthcare arbitration tribunal) judged in a ruling in interlocutory arbitration proceedings that, in accordance with the principle of acting as a ‘reasonable and fair’ employer and on penalty of a fine, an employer can be ordered to start the procedure at the employee insurance agency UWV to terminate the contract of an employee suffering long-term illness. For the tribunal’s purposes, the fact that the law providing for compensation for the transition payment has not yet formally entered into force (see our blog of 28 August 2019) is immaterial; the arbitrator who delivered the judgment deems the likelihood of this law not entering into force to be ‘vanishingly small’.

Circumstances of the case

The arbitrator in this case deemed that the circumstances were such that the employer could be ordered to start the procedure. Those circumstances were that:

• the employee was seriously ill, and only had a few months left to live;
• the employee had been awarded a payment under the IVA (Regeling inkomensvoorziening volledig arbeidsongeschikten, a Dutch income support provision for fully disabled people), confirming his permanent, full disability, and that he would never be able to return to work for the employer;
• the employer had no interest whatsoever in continuing the employment contract (other than to avoid having to pay the transition payment);
• such an attempt to avoid the transition payment – even if it had been in the employer’s interests – is futile, as the law providing for compensation for the transition payment in the case of long-term disability has been adopted.

Unique ruling

This ruling is unique in that it orders the employer to start a procedure at the UWV and terminate the contract: normally, an employer would have the freedom to choose whether or not to start such a procedure. Terminating an employment contract is also a unilateral legal act. To date, very few employers have been ordered to do this, particularly when one considers that the aim and the consequence of such an order is to burden the employer with a payment obligation. In this case, that obligation runs to more than €145,000, this being the transition payment that the employer owed the employee upon termination of the contract.

If the employer does not comply with the order, under the ruling it will owe the employee a fine of €5,000 per day, up to a maximum of €150,000. Whether or not the employer complies with the order, it will be lumbered with the hefty payment obligation.

Basis: acting as a ‘reasonable and fair’ employer

The arbitrator based the decision on Book 7 Article 611 of the Burgerlijk Wetboek (Dutch Civil Code), which states that an employer must behave as befits a ‘reasonable and fair’ employer towards the employee. This is an expression of the general rule that contracting parties must behave towards each other in a reasonable and fair manner, and that, should anything turn out to be unreasonable and/or unfair, the other party may be required to perform the contract in a particular manner. In this instance, the arbitrator found that this could entail the employer being ordered to terminate the employment contract on those grounds.

At the end of his ruling, the arbitrator in this case stated that, were this case to be made part of proceedings as to the substance, the arbitrator in that case might, of course, reach a different conclusion.

At the time of writing this blog – January 2019 – we know of no other ruling by a Dutch court that came to a similar conclusion. The arbitrator who issued the arbitration award at the healthcare tribunal has a ‘day job’ as a judge at Gelderland District Court. Therefore, there is no reason to expect that – had this case been brought before Gelderland District Court, in front of the same judge – the ruling would have turned out any differently. Expect more developments in the jurisprudence in this area.