10.3 Termination of employment contracts

In the chapter on the termination of employment contracts of employees of an insolvent employer (chapter 4), it has been established that various aspects relating to the termination of employment contracts are subject to labour law and regulations, of which the underlying idea is that the employer, as the ‘weaker’ party, deserves extra protection. This protection can be found, for example, in rules that restrict employers from the freedom to terminate contracts (prohibition of termination, general and special), as well as – if termination of the contract is actually allowed – the obligation to observe a notice period, of which the length depends on the duration of the relevant employment. Statutory rules have also been developed for the termination of fixed-term employment contracts, which aim to protect the employee’s position, such as the obligation to give timely notice of whether or not an employment contract will be renewed (which can be sanctioned with a so called compensation in lieu of notification (in Dutch 'aanzegvergoeding')).

In the event of an employer’s insolvency, the question arises whether these rights can remain unchanged and, if not, why not, and what is left of the protection for the benefit of the employee. This research shows that those involved in the development of the relevant laws and regulations have not thought about this or did not think it through sufficiently. An example of this is the fact that ever since July 1^st, 2015, when the Extraordinary Labour Relations Decree (‘Buitengewoon Besluit Arbeidsverhoudingen (BBA) 1945’) was repealed for the most part, including article 6, it has not been laid down in law that the trustee in bankruptcy does not need prior permission for termination from the UWV. Also consider the fact that only in respect of the prohibition of termination due to a transfer of undertaking (article 7:670 paragraph 8 of the Civil Code) the law stipulates that this prohibition of termination does not apply during bankruptcy of the employer (however it does during suspension of payment). This raises the legitimate question whether this justifies the conclusion that all other prohibitions of termination do apply. The widely shared opinion on this matter is that these prohibitions do not apply and therefore the answer to this question is ‘no’. However the law does not state that.

Say – for pragmatic and efficiency reasons – the fact that there is a lack of clear/just legislation left out, there is still a second question that has to be answered, namely whether the views mentioned in the previous paragraph (“in case of bankruptcy, there is no need for a preventive dismissal assessment through the UWV” and “the prohibitions of termination do not apply to a trustee in bankruptcy”) are correct and acceptable.

In this chapter I found that these views are not always easily arguable, since the main argument for this is always that the trustee in bankruptcy must be able to operate with a minimum of delay in the interests of the joint creditors, without being obstructed too much by time-consuming rules of labour law. However it is particularly hard to argue that all protection due to employees outside of bankruptcy is lost to them if a trustee in bankruptcy continues with the company for a longer time. In case of dismissal, why can’t compliance with the relevant rules in the field of termination law, applicable to every employer, be required from a trustee in bankruptcy (including selection criteria in choosing between employees proposed for dismissal)? And why should shortening of the notice period as provided for in article 40 paragraph 1 of the Bankruptcy Act be maintained if the company is continued, based on the idea that the trustee in bankruptcy must be able to act quickly in light of liquidating the company, including limiting the estate debts (i.e. the wages as from the bankruptcy order)? In this research I came to the conclusion that derogations of the regular employment termination law in case of bankruptcy of an employer can be justified for a short period of time, not least in connection with the (substantial) interests of other parties involved, such as creditors (including tax authorities and UWV). However, at a given moment even the trustee in bankruptcy, after having made a few emergency calls and taking a number of far-reaching decisions (also in the field of labour law), has to conform to labour law. A ‘revival’ of regular labour law after a certain amount of time seems indicated. In that context, a clear period of two months from the date of bankruptcy would be efficient, transparent and acceptable. The six-week notice period, which the trustee in bankruptcy is bound by, will certainly have expired by that time. The mere lapse of time, in this case two months, undeniably means the trustee in bankruptcy has continued the bankrupt company in full or partly with a number of employees.

Furthermore, it has been established that there is no justification for not allowing a transitional payment to be due in the event of bankruptcy and suspension of payment by the employer. The arguments put forward by the minister in the parliamentary debate (paraphrased: “that would lead to an extra financial burden on the UWV”) are evidently incorrect, because a transition payment is not a part of the wage guarantee scheme. It is unclear why the employee would not be able to share in case there are adequate assets, just like other unsecured creditors.

This led to recommendations for amending the legislation, that meet both aforementioned objections to the current state of affairs, which can be summarized in: 1) the lack of clear and congruent legislation; and 2) the existing legislation, including the opinions reflected by literature and case law, leads to undesirable outcomes with regard to employee protection. Summarized:

These recommendations, which have to be read in conjunction with the other conclusions and recommendations in this research, ensure that the law is clear and that this leads to acceptable consequences for all involved parties.