An employee whose employment agreement is terminated by the employer giving notice is entitled to a transition fee. Does this entitlement also exist if the employer opts for a partial instead of a full termination? This may happen if an employee remains partly incapacitated after the obligation to continue paying wages during illness has expired, or if a job becomes partly redundant for commercial reasons. The Dutch Supreme Court has recently shed light on this problem.
A partly incapacitated employee had been awarded WGA benefits1 by the UWV on the basis of an incapacity percentage of approximately 45%. So, this employee was still 55% fit for work, and the employer was able to redeploy him in a suitable position (of 0.55 FTE) after the obligation to continue paying wages had ended. The employer acted in accordance with the collective labour agreement for the education sector, and gave the employee both an instrument of dismissal and an instrument of appointment in a 0.55 FTE job. The employee claimed a transition fee for the termination of 45% of his employment.
The Supreme Court
Both the Court of Appeal and the Supreme Court considered that this was not a real termination. The employment was merely converted into a lower part-time factor, by which the parties did not intend to end the employment, but to continue the employment agreement in a modified form. However, in fact this continuation came down to a partial termination of the employment agreement. The Supreme Court has ruled that a transition fee proportional to the scope of the termination was due.
Partial Termination; Part-Time Dismissal
Pursuant to Section 7:673 subsection 1 of the Dutch Civil Code, a transition fee is only payable when an employment agreement is terminated. The law does not provide for a partial termination. The Supreme Court has now ruled that the employee is indeed entitled to a partial transition fee in the event of a partial termination due to commercial circumstances, or due to the permanent partial incapacity of the employee. In practice, the term ‘part-time dismissal’ is used.
Purpose of Transition Fee
The transition fee is intended to compensate for the consequences of a dismissal and to ease the employee's transition to another job. The Supreme Court considered that, if the claim to a partial transition fee would not be accepted, the partly dismissed employee would miss out on a part of the transition fee that he would be entitled to under a full termination. However, the Supreme Court held that the employee should not have to pay for the above-mentioned reasons for a part-time dismissal (partial incapacity or partial job redundancy). Therefore, in those specific cases a partial transition fee is appropriate.
Substantial and Structural Reduction of Working Time
Entitlement to a partial transition fee can only exist in the special case that the employer is forced by circumstances to reduce the employee's working time substantially and structurally. The Supreme Court has offered an explanation of these two terms so that they can be used in practice. A ‘substantial reduction’ exists if the working time is reduced by at least twenty percent. A 'structural reduction’ is a reduction of working time that is reasonably expected to be permanent.
Tips for Practice
In this judgment, the Supreme Court has explicitly identified that ‘partial termination’ means not only the partial termination and at the same time partial continuation of an employment agreement. This term also refers to a full dismissal, followed by a new employment agreement, or a modification of that agreement. Employers should therefore be careful when adjusting the working time of an employee on long-term sick leave; this employee may be entitled to a partial transition
Do you want to know more about transsitional fees? Please contact Attorney at Law Marjolein Bouman.
