The WNT and the pro forma termination of employment

On 1 January 2013 the Senior Officials in the Public and Semi-Public Sector (Standards for Remuneration) Act came into effect (Wet normering bezoldiging topfunctionarissen publieke en semipublieke sector); below: WNT. This Act forbids severance payments for senior officials in excess of one annual salary, with a maximum of € 75,000; transitional provisions apply. Any payment exceeding this sum will be seen as ‘undue payment’ unless this payment is made under a court order. The question then arises if the pro forma termination procedure may possibly lead to higher severance payments than those allowed under the WNT now that judges are not bond by this rule. A recent decision of the cantonal court in Leeuwarden seems to indicate that the WNT may have certain consequential effects.

The facts

Employee is employed by a home care organization as a member of the Board of Directors. Parties agree that the employment contract should be terminated because of a permanently impaired employment relation. Furthermore, parties agree that the arrangements made by them in 2006 with respect to possible termination of the contract should be complied with. The contract stipulates that employee is entitled to redundancy pay to the age of 65. The WNT transition arrangements require that redundancy payments to this employee should be stopped after 1 January 2017: on that date the € 75,000 limit will be reached. Employee requests the cantonal judge to apply the WNT article that provides for the exception, i.e. a higher severance payment is allowed if determined by court order.

The court’s motivation

The cantonal judge finds that the cantonal judge may award a severance payment as considered fair given the circumstances of the case. Should fairness require this, the judge may therefore award compensation exceeding the maximum amount laid down in the WTN. However, parties had agreed not to comment on the circumstances of the case. Therefore, the judge cannot rule on the substance of the case and determine whether fairness allows for the compensation claimed by employee. The cantonal judge argues that he is not bound by the WNT, but that the WNT does have a certain consequential effects. The severance payment offered by employer cannot be reviewed on the basis of reasonableness and fairness and will therefore not be awarded to employee.

Conclusion

Parties have tried in this case to obtain a higher severance payment than allowed under the WNT for reasons that the WNT would not apply where the cantonal court orders compensation exceeding the maximum WNT severance payment. However, parties failed to provide the cantonal judge with the information required for the judge himself to determine which amount of compensation would be fair. Therefore, the judge does not honour the employee’s request. It is not clear how other cantonal judges will deal with similar cases. Claiming a higher severance payment than allowed under the WNT in pro forma proceedings does not automatically succeed. Prudent parties should consider explaining the circumstances of the case and present arguments as to why the severance payment is fair and should be awarded.