Since 2015 (with the introduction of the Work and Security Act), we have known the concept of fair compensation.
Determining the amount of the fair compensation – unlike the amount of the general transitional compensation – has been left entirely to the courts by the legislator. In 2017, the well-known New Hairstyle ruling by the Supreme Court appeared (see our earlier article on this ruling here) with points of view regarding the determination of the amount of fair compensation. This was followed by several more Supreme Court rulings formulating points of view, and numerous rulings on fair compensation can also be found in lower courts. Meanwhile, much research has been done on case law on awarding and the amount of fair compensation. From this, an unambiguous picture still does not emerge. In this article, we will outline fair compensation and the colouring of its amount.
The fair compensation in case of dismissal is separate from the transitional compensation that follows directly from the law. Fair compensation is awarded by a judge only in exceptional cases. The amount of the fair compensation does not follow from the law. It must be proportionate to the seriously culpable act or omission. It is ultimately up to the judge to determine what amount is ‘fair’ in a concrete case.
WHEN IS FAIR COMPENSATION AN ISSUE?
The court can award fair compensation in a number of situations, namely in the event of seriously culpable acts or omissions by the employer, as an alternative to reinstatement of the employment contract or in the event of a breach of a formal requirement.
Seriously culpable acts by the employer may include a disrupted employment relationship that is largely due to the employer’s behaviour. For example, because the employer did not do enough to resolve it or, on the contrary, deliberately strained relations to bring about a termination. An example of a breach of form rule is following an employer’s termination of the employment contract in violation of a legal standard (wrongful/unfair dismissal). For example, in the case of an unfair summary dismissal or a termination in violation of a notice prohibition.
SERIOUSLY CULPABLE ACTS OR OMISSIONS
The legislator has emphasised that fair compensation is only awarded if the dismissal is attributable to an employer’s seriously culpable act or omission. These must be exceptional cases and this criterion must be applied with restraint, the so-called “mouse hole”. Thus, for serious culpability, the bar is high. The legislative history and case law cite the following examples:
- the employer escalates the situation and pushes for termination;
- the employer does not pay wages;
- serious breach of reintegration obligations;
- the employer acts in violation of the redeployment condition;
- termination in violation of a notice prohibition;
- wrongful instant dismissal; and
- discrimination or harassment.
THE AMOUNT OF FAIR COMPENSATION
As discussed above, there is no tool to determine the amount of fair compensation. However, the Supreme Court has formulated a number of ‘points of view’ in several judgments, based on which the amount of fair compensation can be determined. Below are a number of circumstances that may be important in determining the amount. This is not a complete overview.
- The degree of culpability of the employer. But the employee’s degree of culpability also plays a role.
- Missed wages and the expected duration of the employment contract if the employer had not acted seriously culpable, or if the employer would not have given a wrongful (invalid) dismissal.
- Could the employer have also lawfully terminated the employment contract, and at what period of time this could have been done.
- Other income of the employee, such as unemployment benefit or wages from other employment.
- The employee’s labour market position may also play a role.
- Any transitional compensation awarded to employee.
- It follows from the New-Hairstyle decision that specific ‘punitive nature’ should not be taken into account when determining fair compensation. Meanwhile, it follows from later rulings that fair compensation does have a ‘preventive character’. As such, fair compensation also serves as a means of alerting the employer to the need to adjust its behaviour in any subsequent cases.
- The duration of the employee’s employment. For example, long service may be a reason to set the fair compensation at a higher amount.
- The employer’s possibly poor financial situation may be a circumstance that could have a dampening effect on the fair compensation.
WHAT DEVELOPMENTS DO WE SEE IN THE AMOUNT OF FAIR COMPENSATION?
Research was conducted in 2021 on the average level of fair compensation. From this, it follows that the average level of fair compensation from 2020 onwards dropped significantly compared to the previous year. Whereas the average fair compensation in 2019 was still EUR 61,358 gross, in 2020 it dropped to EUR 28,133 gross. The corona crisis could play a role in this development (financial situation of employers). However, the entry into force of the WAB (i-ground) and the requirement to clearly budget fair compensation (justification instruction) could also play a role in this.
It is clear that determining/predicting the amount of fair compensation is not easy. If the employee wants to claim fair compensation in proceedings, it is important to substantiate the amount well and take into account the above circumstances. On the contrary, an employer should substantiate in detail why the fair compensation should not be awarded and otherwise that the amount of the fair compensation should be limited.
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