The Netherlands: Be Careful Hitting the “Pause Button” on an Employee’s Work

It is apparent from a recent judgment issued by the North Holland District Court that employers should exercise due care when completely excluding employees from business operations related to their job, especially if both sides have not yet been heard. The judgment also illustrates when seriously culpable conduct by the employer can result in substantial fair compensation awarded to the employee.

North Holland District Court

The employee in question had been general counsel for an international group, and there had been some conflict among the shareholders within that group. The employer believed that the employee had sided with the minority shareholder when he should have acted solely in the best interests of the group. 

The employer therefore requested termination of the employment contract on the grounds of culpable conduct. The employee disputed this and argued that, on the contrary, it was the employer who had acted in a seriously culpable manner, for instance by excluding him from his work.

No culpable conduct by the employee

The Subdistrict Court did not agree with the employer. However, it did find that the employee could have performed his role as general counsel more effectively. He could, for example, have acted more independently and transparently and could have pushed back more clearly.

That was not, however, sufficient to justify termination on the grounds of culpable conduct. The employee had been operating in a complex situation where, until a short time before, the minority shareholder had, in fact, wielded considerable influence within the group. That context was a factor.

No “pause” without due process

The employer faced the most criticism. Following a change in management, it had excluded the employee from relevant aspects of the company's operations. It had also informed internal colleagues and external partners that they should no longer work with him.

According to the Subdistrict Court, this was particularly damaging for someone in a high-level, independent position. The employer should have discussed its suspicions with the employee first, possibly suspended him, and then carried out an investigation. That didn't happen. Instead, the employer, in its own words, hit the pause button.

That approach backfired. The employee had not been given a real opportunity to respond. The employer had also refused mediation. Furthermore, during the proceedings, it emerged that the employer had already wanted to segment the role the employee held even though the employment contract was still in effect.

Fair compensation

The employment contract was nevertheless terminated because the employment relationship had been seriously and permanently disrupted. According to the Subdistrict Court, that disruption had actually almost entirely been caused by the employer. For this reason, in addition to the transition payment, the employee also received fair compensation.

The Subdistrict Court ultimately awarded a very high amount in fair compensation totaling EUR 750,000 gross. Factors taken into account included, among other things, the high salary, the bonus, the damage to the employee's reputation, and the severity of the employer’s actions.

Take away

An employer may take action if there are serious concerns about an employee. But due care, hearing both sides, and a thorough investigation remain essential. Anyone who suspends an employee without an explanation may end up paying the price themselves.