Denying Transition Fee to Old-Age Pensioners Prohibited Age Discrimination?

The law provides that an employee is not entitled to a transition fee when the termination of the employment agreement occurs in connection with or after reaching the state pension and/or retirement age. It is doubtful whether this provision constitutes a prohibited discrimination on grounds of age. The Subdistrict Court of Utrecht will ask preliminary questions in this regard to the Supreme Court. Earlier, the Court of Appeal of Den Bosch intended to ask preliminary questions about this subject matter. These questions were not asked due to the withdrawal of the appeal.

 

The Facts

The CAO Ziekenhuizen (collective agreement for hospital staff) applies to the employment agreement of the employee, in which it is stipulated that the employment agreement ends on the day prior to the day on which the employee reaches state pension age. The employment agreement with the employee ended in 2016 after having reached state pension age. The employer did not pay a transition fee. According to the employee, this constitutes age discrimination.

 

The Subdistrict Court

The Subdistrict Court considered that it follows from the judgments of the Court of Justice of the European Union that national provisions that are in conflict with Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation should be declared inapplicable, if required. According to the Directive, age discrimination is prohibited, unless the difference of treatment is objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.

The question that must be answered is whether denying an employee who is eligible for a state pension the transition fee is objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.

In the opinion of the Subdistrict Court, there is a legitimate aim. According to legislative history, the aim of excluding old-age pensioners from the right to a transition fee is to reserve the transition fee to persons who pertain to the labour market and who depend on performing work for their livelihood. In this respect it is also deemed important that employers must be able to terminate the employment agreement with older employees in a natural way, without a substantive test and without costs.

Furthermore, the question is whether the categorical exclusion from the entitlement to a transition fee of all persons who have reached state pension age (independent of the ground for termination) and all persons who have reached the (pensionable) age agreed upon with the employer (independent of the entitlement to a state pension) is an appropriate and necessary means. Not everyone whose employment agreement is terminated after reaching this age can make a living without working.

The answers to the questions of whether there is a conflict with the Directive and whether an individual test is required or possible is relevant to all cases in which an employer ends or has ended the employment agreement with an employee after reaching the state pension and/or retirement age and has not paid a transition fee.

 

The Questions

The Subdistrict Court has asked the Supreme Court ten questions (see judgment of the Subdistrict Court). In brief, the question at issue is whether the statutory provision (Section 7:673 subsection 7 under b of the Dutch Civil Code), on the basis of which the employer does not owe a transition fee in the event of termination in connection with or after reaching the state pension and/or retirement age, is in conflict with Directive 2000/78/EC.

In addition, the Subdistrict Court asks whether the answer to the previous question may differ per individual case and, if so, to what extent and in which way the employee’s income and pension provisions, if any, may play a role here.

The question of whether a distinction must be made between employees whose employment agreements are ended because of reaching their state pension or retirement age and employees (of the age referred to but) whose termination is based on another reason is also discussed.

 

Conclusion

Currently, under the law the employee is not entitled to a transition fee in the event of the termination of the employment agreement because of or after reaching the state pension and/or retirement age. If it appears, however, that this statutory basis is in conflict with the European Directive, the statutory provision will possibly be declared inapplicable in whole or in part. We now have to await the Supreme Court’s answers to the above-mentioned questions.