Employees
Absenteeism due to illness
When an employee calls in sick, you as an entrepreneur must be alert and show an active attitude. Does the employee need support? Is it short-term or long-term absenteeism? And how is reintegration handled? Perhaps outside your own company? The employment law specialists at LVH Advocaten will be happy to answer these kinds of questions.
Absenteeism policy
Every entrepreneur strives for sustainable employability of his employees and wants a vital team and low absenteeism, but not every entrepreneur knows how to achieve this optimally. The employment law specialists at LVH Advocaten know that achieving low absenteeism starts with developing and implementing a good absenteeism policy. We are also happy to help you with this.
Reintegration
Is your employee on long-term sick leave? If so, you would do well to take action as soon as possible by starting with reintegration. You can start with this by calling in a company doctor/artists service. Together with the employee and, for example, the company doctor, you can determine what the employee can and cannot do during absenteeism.
Labour conflict and illness
Illness can also be accompanied by an industrial dispute. For example, an employee reports sick because of a conflict situation at work while there is no work disability. Or the employee has become ill as a result of the industrial dispute (burn-out). In these situations it is important that you take timely action. A lawyer can give you good advice on how to manage the case.
Do you have questions or would you like to know more about what we can do for you? If so, please contact one of the employment law specialists at LVH Advocaten.
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The wage guarantee scheme: continued payment of wages in the event of the employer’s bankruptcy
The wage guarantee scheme: continued payment of wages in the event of the employer’s bankruptcy
The Unemployment Insurance Act includes a scheme that entitles employees to payment in the event of payment problems on the part of the employer. The regulation is also called the wage guarantee regulation. It also regulates which benefits an employee can claim in case of bankruptcy of the employer. In this article I will discuss the main provisions of the wage guarantee scheme that apply in the event of bankruptcy and I will go into a recent judgment of the Supreme Court on this subject.
Bankruptcy of the employer
If an employer has gone bankrupt, the bankruptcy trustee will, in principle, proceed as soon as possible to terminate the employment contracts on the basis of Section 40 of the Bankruptcy Act. In any case, the trustee does not have to apply a longer term than six weeks. The law stipulates that the salary and premium debts related to the employment contract are estate debts. Estate debts refer to the costs of the bankruptcy. Estate debts have a very high rank and the trustee can be expected not to allow them to arise and accrue unnecessarily.
The wage guarantee scheme in the event of an employer’s bankruptcy
Pursuant to sections 61 and 64 of the Unemployment Act, the UWV takes over the wage payment obligation of the bankrupt employer. The period for which the wages are covered by the wage guarantee scheme is limited. Wages do fall under the wage guarantee scheme:
- wages for a period of 13 weeks prior to the liquidator’s termination of the employment contract;
- the wages for the notice period, up to a maximum of six weeks;
- the vacation pay, the vacation allowance and the amounts, which the employer owes to third parties in connection with the employment relationship with the employee, for the year preceding the end of the six-week notice period (this is somewhat simplified).
The amounts are also capped by law. However, most people’s wages are less than the maximum amounts.
Wage claims that fall outside the wage guarantee scheme
It is clear from the above that not all conceivable claims arising from the employment contract are covered by the wage guarantee scheme. Depending on the situation, the employee then has an estate claim, a preferential claim on the basis of Section 3:288 opening words and under c to e of the BW (claim with privilege) or an unsecured claim (claim without privilege) or a combination of these.
UWV’s position in the wage guarantee scheme
The claims of the employee and third parties against the employer are transferred to the UWV, in so far as these claims are settled by the UWV. This means that the UWV acquires direct claims against the insolvent employer.
It may be beneficial to the estate if a restart takes place, whereby the employees are employed by the re-launched company. The relauncher becomes the new employer and therefore the bankrupt employer saves on wage costs. The Supreme Court recently issued a judgment on such a situation. This judgment is briefly discussed below.
Supreme Court ruling on wage guarantee scheme
The following facts emerge from the judgment. An employer, employing 84 people, goes bankrupt. A few days later, the trustee terminates the employment contracts with due observance of a six-week notice period. A few days after the declaration of bankruptcy, the company is restarted as a going concern. This means that the re-starter takes over the ongoing business activities of the bankrupt. The re-starter takes over the assets and employs the employees under the same conditions as they were previously employed by the bankrupt employer. The UWV will soon be informed about this by the insolvency administrator. The UWV will make payments to the employees on the basis of the wage guarantee scheme. These payments relate to the six-week notice period. This involves an amount of € 353,067. Subsequently the UWV submits a claim against the estate for this amount to the trustee. The trustee disputes this claim. The trustee believes that the employees were no longer entitled to wages from the bankrupt employer from the moment they started working for the re-starter.
No work, no pay?
The statutory regulation concerning the right to wages in the event of failure to perform work was amended on January 1, 2020. The Supreme Court notes that in this case, where the facts played out in 2016, the old regulation still applies. However, the Supreme Court notes that the new Article 7:628 (1) of the Dutch Civil Code does not intend to change the allocation of risks between the employer and employee. The new regulation implies that the employer is obliged to pay the salary determined according to the time frame if the employee has not performed the agreed work wholly or partially. This does not apply if the total or partial non-performance of the agreed work should reasonably be at the expense of the employee. Since the amendment of the law, it is therefore formulated as: no work, pay, unless…
Employee no longer willing to perform work?
The Supreme Court considered that if an employee, after his employer has been declared bankrupt, is reinstated in the employ of the acquirer on equal terms of employment for all or part of his business, the trustee in bankruptcy may deduce that the employee is no longer willing to perform work for the bankrupt employer. In such a case, the cause of the ceasing to perform the work should not lie with the bankrupt. From the moment of entering into service with the transferee, the employee is therefore no longer entitled to salary. The UWV was therefore not obliged to pay on the basis of the wage guarantee scheme. The trustee was therefore found to be in the right.
Strategy of employee in case of payment problems with employer
The wage guarantee scheme has only been discussed to a limited extent in this article. For employees who are employed by an employer who is unable to pay salaries, it is important to take action quickly, otherwise there is a chance that claims for benefits under the wage guarantee scheme will be lost. One strategy may be to file a report with the UWV and, in addition, to file for the employer’s bankruptcy.
Lawyers insolvency law and labour law Rotterdam
At LVH Advocaten we have specialists in the field of labour law and insolvency law. Please contact Peter de Graaf if you have any questions about the wage guarantee scheme, a bankruptcy petition and/or a restart. The judgment discussed can be found here.
Peter Verheijden
(Written) assignment agreement: in good faith or well regulated?
Entrepreneurs like to work together “in good faith.” In other words, agreements are made verbally and the parties immediately start working together. That’s great, after all we want to get to work quickly and deal with legal matters as little as possible. However, it only has to go wrong once and regrets surface. If only I had put that in writing in a commission contract with the contractor / client.
So too with the commission contract. Our advice to entrepreneurs is therefore: good faith is nice, but well organized is better! Discuss the conditions with each other and have them put on paper by a lawyer. An important message here is that a commission contract does not have to be pages long. You put the basic agreements on paper (can also be done by e-mail) and the law will fill in the rest.
In this article, we would like to provide some points that can be covered in the assignment agreement.
Duration and termination of assignment agreement
An important agreement that you should lay down is the duration of the contract. Will a specific assignment be completed or will the parties continue to work together for a longer period of time? This information is important, not only for the future perspective, but also for the possibilities of terminating the assignment.
For example, a contractor may, in principle, only terminate the open-ended contract and the fixed-term contract may only be terminated for important reasons. A client may cancel the assignment contract (indefinite and definite term), unless it concerns a professional client and deviating arrangements have been made. For example, the parties can agree that both parties can cancel the contract (possibly under certain conditions) with due regard for a notice period.
Compensation contractor
Of course, as a professional contractor, you also want to be paid. It is therefore wise to agree on that remuneration in writing. Are you going to work on the basis of an hourly rate, a piece rate or a fixed amount for the assignment. Also think about the expenses. Are they included in the fee or will they be for the account of the client or contractor.
If you do not agree on a fee, the contractor can still claim a reasonable fee. Of course, this is not a desirable situation and it is wise to put the agreed remuneration in writing.
Intellectual Property Contractor
As a contractor and client, you will have to deal with intellectual property rights. The main rule is that the creator (the one who delivers a creative performance) is the owner of the intellectual property rights, even if the client has commissioned the creation of a text, design or invention. It is possible to deviate from this main rule. After all, the client wants to use the intellectual property. So agree for what purpose the client may use the work delivered (user license) or arrange a transfer of copyright.
Please note that if the performance was created under the direction and supervision of the principal, then the copyright could lie with the principal. This depends on the instructions given and the freedom the contractor had.
Non-competition and relationship clause in assignment contract
We are all familiar with non-competition and non-solicitation clauses from employment contracts, but they can also be used in assignment contracts. Case law provides a similar test for assessing the legal validity of a non-competition clause. A non-competition clause is not automatically valid. It must be in writing and may not violate the fundamental right of free choice of employment (Article 19 of the Constitution). This may be the case if the duration of the clause is unnecessarily long or otherwise too broadly formulated.
The rule for the contractor is therefore: do not just sign a non-competition clause. And for the employer the following applies: a non-competition clause may be used to protect the business interests, but do not formulate the clause too broadly so that it does not infringe on the contractor’s freedom to choose his work.
Need help drafting assignment agreement?
We would be happy to help you draw up a contract of assignment so that you can focus on your business. Would you like more information or a free consultation about the possibilities? Please contact Lisa Kloot of LVH Advocaten. She can tell you everything about working relationships, such as the commission contract.
Assessment of employment relationships and the DBA Act: Employee or self-employed person?
A widely used employment relationship is the ZZP construction. This employment relationship has a number of advantages for entrepreneurs and it is a good alternative to temporary work and (temporary) employment contracts. It is therefore a subject that has been the subject of much debate in recent years, more specifically, when is there an agreement for services or an employment contract? That qualification determines the applicable regime and whether payroll taxes must be paid to the Tax Office. This article looks at a number of important aspects, including: (1) the replacement of the DBA Act and (2) the fiscal and civil assessment of an employment relationship.
Replacement of the DBA Act
Since 1 May 2016, the Deregulation of Employment Relationships Act (Wet DBA) has been in force. This law has replaced the system with the VAR declarations. Based on the DBA Act, certainty is provided to clients through model and example agreements approved by the Tax and Customs Administration. Clients may also submit their own model agreement to the Tax and Customs Administration for approval. If an approved agreement is used, the client and contractor are indemnified against retrospective levies.
The DBA Act will be replaced in 2021. The reason for this is to combat false self-employment and competition on employment conditions. Clients do not pay employer’s premiums for the self-employed, which makes them attractive. Also, no salary is paid during illness and there is no protection against dismissal.
Enforcement of the DBA Act
From 1 May 2016 until at least 1 January 2021 no enforcement will take place. Since 1 July 2018 the Tax Authorities only enforce in cases of malicious intent. This means that the client knows or should have known that there is an employment relationship and he deliberately allows this false self-employment to arise or continue.
Web module: employee or self-employed
Since January 2021, a web module has been made available for six months. After the end of this web module pilot, enforcement will be started (October 2021 at the earliest). Until then, the current enforcement policy remains in place.
The web module must provide advance clarity to clients as to whether work is within the scope of employment (employee) or outside employment (self-employed) and whether income tax and social security contributions must be paid. The web module provides certainty (exemption from payroll taxes) as long as it is filled in truthfully. During the pilot project, filling in the web module has no legal status, so that those involved cannot derive any rights from the outcome of the web module.
Assessment of employment relationship
The DBA Act and the upcoming amendments do not change anything about the substantive assessment of an employment relationship. It only provides certainty as to whether there is an obligation to withhold payroll taxes. Below is discussed how relationships are qualified from a tax law and civil law perspective.
Tax qualification (employment) relationship
If a company wishes to engage a contractor, it must assess whether payroll taxes are due on payments made to the contractor. This is the case if the relationship qualifies as an “employment relationship” within the meaning of payroll taxes. Clients are responsible for this assessment. If this assessment is wrong, an additional assessment can be imposed retroactively (up to five years), with or without an increase in a fine and/or interest.
The Payroll Tax Act does not have its own definition, so the civil term employment contract has been used. The essential core characteristics of an employment contract are: (1) the presence of a relationship of authority, (2) obligation to pay wages, and (3) obligation to perform personal labor.
Relevant indicators of an employment contract
The Tax Administration has drawn up policy rules that describe relevant indicators. The relevant indicators that must be assessed – in conjunction with each other – are:
- Duration of the agreement: a long duration of a contract or a fixed contract is an indication of an employment relationship.
- Scope of the work: if the contractor only works a few hours per week for the principal, this is an indication that there is no employment relationship.
- Nature of the work: if the contractor’s work is part of the principal’s core activities, this is an indication of an employment relationship.
- Level of remuneration: a remuneration that is clearly higher than the market rate is an indication that there is no employment.
- Organizational integration: if the contractor is part of the organization of the employer, this is an indication of an employment relationship.
- Liability of contractor: if the contractor is liable for damages arising from the work, this is an indication that there is no employment relationship.
- Execution of work: if the contractor can determine how the assignment will be executed, this indicates that there is no employment relationship.
Civil qualification (employment) relationship
The DBA Act does not apply to the civil qualification. The use of a model agreement of the Tax Authorities (and web module) does not provide certainty as to whether or not an employment contract exists in the civil law sense.
Furthermore, the use of a model agreement does not remove the possibility that a contractor may take the position that he/she is an employee. Whether or not there is an employment contract is assessed on the basis of Article 7:610 of the Dutch Civil Code:
- Work: employee is obliged to perform work personally and may not be replaced without permission.
- Wages: the amount is not important and board and lodging and wages in kind can also be considered wages. Only an “expense allowance” is not pay.
- For a certain period of time: there is no legal minimum.
- Relationship of authority: employee follows instructions from employer. It is not required that employer actually gives instructions, but that he can give them. There is no authority if, for example, there is freedom in terms of working hours, work arrangement, method of execution and if the employee is allowed to perform other work in addition to the agreed work.
In assessing these elements, all the circumstances are important and they are weighed holistically, i.e. viewed in sense as a whole. In particular, the existence or absence of a relationship of authority is important.
It was recently held that the intentions of the parties are not relevant to the qualification question (HR 6 November 2020). It is not important whether it was actually the intention of the parties to conclude an employment contract. What matters is whether the rights and obligations agreed upon meet the legal description. That is the qualification. The question prior to that is, what rights and obligations have been agreed upon. That question is answered on the basis of the so-called Haviltex criterion. In short, this means that not only a purely linguistic interpretation of an agreement is considered, but that it comes down to the meaning that the parties in the given circumstances could reasonably attribute to the provisions of the agreement and what they could reasonably expect from each other.
Questions about the DBA Act or qualifying employment relationships?
Do you have questions about the Wet DBA, the changes to the Wet DBA or the qualification of employment relationships? Please feel free to contact our specialists: Lisa Kloot (Attorney at Law Employment Law) and David Harreman (Attorney at Law Tax Law).
Amend model employment contract in 2022? Implementation of EU Directive on transparent and predictable terms of employment
In June 2019, the European Parliament adopted a Directive on transparent and predictable working conditions. The Directive grants new rights to employees and this thus affects employees’ employment contracts, as well as any employment conditions regulations. This may lead to employers having to change their (model) employment contracts and employment conditions regulations in 2022.
In this article we discuss the changes contained in the bill and consider the changes employers must make to their (model) employment contracts.
Implementation of Directive 2019/1152
The directive must be implemented in Dutch law. The government published a bill on 12 November 2021. The intended entry into force of the law is 1 August 2022. Thus, we recommend to review the employment contract of your employees and applicable regulations before that time.
Legislative amendments from Directive on transparent and predictable employment conditions (2019/1152)
Training costs clause
Employers already had a training obligation, but it is expanded by the Directive. Employers can no longer agree on a study costs clause for training that is necessary for the performance of the job. The employer must offer this training free of charge and the time an employee spends on the training is working time.
The question is therefore, what constitutes training that is necessary for the job? In any case, this concerns a training which the employer is obliged to offer based on the law or collective bargaining agreement.
Side-activities clause
An ancillary activities clause in the employment contract is possible from August 2022 only if the employer can justify it on the basis of an objective reason. If there is no such justification, the clause is null and void. Note: The justification does not have to be given at the conclusion of the employment contract or be included in the employment contract. The justification may already be included in the employment contract, but may also be given at a later date. So does an employee request permission to perform ancillary work? Then the employer can still provide the justification at that time.
The rationale behind this change is that an employee is free outside of working hours to work for another employer or to work for himself. Thus, an employee may have multiple jobs unless the employer can justify a prohibition. A justification could be, for example, the threat of a violation of the Working Hours Act, the protection of confidential business information or the health of the employee.
Employer information obligation
The information obligation of employers is expanded. Employers must, in addition to the information in Section 7:655(1) of the Civil Code, also provide information about:
- Working hours;
- Work place(s);
- Wage components (bonus and allowances);
- Procedural aspects in the event of termination of the employment contract;
- Right to training;
- Leave arrangements(s).
The employer can include this information in the employment contract, terms of employment regulations and/or personnel handbook.
On-call agreement
Employees are only obliged to work unpredictable working hours if the employer has made these working hours known at the start of employment. The employer is therefore given a more extensive information obligation in this area. An on-call worker must therefore know at what times he is obliged to work. This can be included in the employment contract.
Request for predictable work
Furthermore, after 26 weeks a call employee can submit a request for predictable work. Employers do not have to agree to this and the work must be available. Employers must respond to the request within 1 month (or within 3 months for small employers) with a written motivation. If the response is lacking, the employee’s request must be acted upon.
Prohibitions on giving notice
There is a new prohibition on giving notice. An employee who invokes the above new rights cannot be dismissed for that reason.
Posted workers in the EU
If an employer wants to post an employee from the Netherlands within the European Union, certain information must be provided. The employer must inform the employee about the wages, allowances and reimbursement of expenses to which he is entitled. This can be included in the employment contract or terms of employment.
Need help updating your employment contracts?
It is always wise to have your model employment contract checked regularly by an employment lawyer. Labour law is constantly changing and this year too there are changes, namely the implementation of the EU Directive on transparent and predictable terms of employment. Lisa Kloot of LVH Advocaten in Rotterdam will be happy to help you evaluate and adjust your employment contracts. She can also tell you more about the upcoming changes in employment law.
Bonus employees: how to create a good bonus scheme as an employer?
Bonus employees: how to create a good bonus scheme as an employer?
The bonus is a nice incentive for employees that you can use as an employer. But you have to be careful. The bonus scheme can be risky if it is not put down on paper correctly. As an employer, you then face the question: is the employee entitled to the bonus and how high is it? Obviously, you do not want to have that discussion with your employees.
In this article, we discuss how you, as an employer, can draw up a good bonus scheme. We also discuss a number of important pitfalls that often occur in bonus schemes.
How to create a good bonus scheme?
Determine the performance of the bonus scheme
A bonus is a variable reward linked to certain performances. This can be the performance of the organisation, the performance of an individual employee or a combination of both. So don’t use a standard bonus scheme, but attune the bonus scheme to the organisation and the function of the employees. Describe as clearly as possible the performances that must be achieved, leave no room for other interpretations and ensure that afterwards it can be verified whether those performances have been achieved.
Bonus scheme and subjective criteria
When determining performance, beware of subjective criteria, such as linking a positive assessment to the award of a bonus. If you do opt for this, make sure that you have a fixed assessment moment every year. Not giving an assessment and then not awarding a bonus is contrary to good employment practice as set out in Section 7:611 of the Dutch Civil Code judgment of the District Court of Amsterdam 6 September 2016.
Discretionary power in bonus schemes
In many bonus schemes we also see a discretionary power (freedom to make a decision at one’s own discretion) on the basis of which the employer may decide not to award a bonus or to award a lower bonus to the employee. It is good to include this, but the employer must take into account that this discretionary power to mitigate the bonus cannot be used just like that. It is established case law that this power to determine the bonus is subject to good employment practice. It follows from case law, Amsterdam Court of Appeal 18 January 2022, that good employment practices require the employer to make clear how the discretionary power is exercised. If this is not clear, the employer may not mitigate. Therefore, explain under what circumstances moderation is possible.
Termination of employment and bonus scheme
Another important point of attention with regard to the bonus scheme is that the employer can stipulate that the employee must be employed in order to be entitled to the bonus. If an employee leaves employment halfway through the year, he is not entitled to a bonus. It is also possible to opt for a pro rata claim to the bonus if the employee leaves employment halfway through the year. It is sensible to agree this in writing, all the more so if the bonus depends on a turnover which is only determined at the end of the year.
Beware of acquired rights in bonus schemes
Has an employee received a bonus year after year and does the employer at any time decide not to award a bonus? The employee may argue that this is an acquired right. Namely, that the bonus was granted every year and therefore became part of the fixed salary. This risk arises particularly if there are no clear agreements on the granting of the bonus. The advice for employers is therefore to clearly indicate with every bonus payment that it concerns a variable reward and not an acquired right.
Bonus scheme for sick employees
During illness, an employee is entitled to at least 70% of his or her salary for 104 weeks. But what about the bonus? After all, this is a variable bonus which (sometimes) depends on the performance of the employee. An employee may also be entitled to the bonus during illness if it depends on performance, as long as it is plausible that the employee would have achieved the performance if he had not been ill. An agreement in the bonus scheme that the employee will not receive a bonus if he is sick, is not possible. The obligation to continue to pay wages during illness is compulsory law (it cannot be contractually deviated from).
Need a lawyer in Rotterdam for drawing up a bonus scheme?
In short, do not use a standard bonus scheme. Tailor the bonus scheme for your employees to the organisation and the position of the employee. Choose for clear achievements and give yourself, as an employer, a clearly defined discretionary power.
Do you need help with drawing up a bonus scheme or do you have a conflict about the granting of a bonus? Please contact Lisa Kloot of LVH Advocaten. She is an employment lawyer and will be pleased to help you with all matters relating to employment law.
Lisa Kloot
Can a cash payment made after the bankruptcy date be reclaimed?
Can a cash payment made after the bankruptcy date be reclaimed?
Recently, the Supreme Court issued an interesting judgment involving two important principles of bankruptcy law, namely the principle of fixation and the principle of paritas creditorum. The case concerned a situation in which, after the bankruptcy date, a cash payment was made from the bankrupt’s bank account to a creditor. The central question was whether the trustee could recover the payment from the creditor. This article discusses the case, the relevant principles and the Supreme Court’s opinion.
Giro payment by bankrupt to creditor after date of bankruptcy
The case that gave rise to the judgment is straightforward. Bleiswijk Boeketservice B.V. (hereinafter ‘BB’) has been declared bankrupt. A day later, on the basis of a direct debit, a debit is made from BB’s bank account in favor of a creditor, Flora Holland. At the time of the bankruptcy declaration, the balance on BB’s bank account was already negative. There was no possibility of a reversal.
The bankruptcy trustee claimed the payment back from the creditor on the grounds of undue payment. The creditor takes the position that it is not obliged to repay.
The fixation principle in bankruptcy law
Article 23 Bankruptcy Act provides that the debtor loses by operation of law the disposal and management of his assets belonging to the bankruptcy as of the day (counting from 00:00 hours) on which the bankruptcy is declared. This is an elaboration of the fixation principle. In addition to the loss of the debtor’s power of management and disposal, the principle entails that the legal position of all those involved in the estate becomes unchangeable as a result of the bankruptcy. Article 20 of the Bankruptcy Act provides that the bankruptcy includes the debtor’s entire assets at the time of the bankruptcy declaration, as well as what he acquires during the bankruptcy. This article of law also expresses the fixation principle.
When can a cash payment made after the bankruptcy date be reclaimed?
In the 2015 JPR/Gunning q.q. judgment, the Supreme Court ruled with respect to non-cash payments that the trustee can always recover the payment that was credited to the creditor’s account only after the bankruptcy situation occurred.
In the case discussed, the trustee argued on the basis of Article 23 Bankruptcy Act that BB could no longer perform legal acts affecting its assets as of the declaration of bankruptcy. Therefore, according to the trustee, the payment to the creditor was unjustified and the creditor must repay.
Proceedings concerning recovery by trustee of non-cash payments
The Subdistrict Court rejected the claim of the trustee. On appeal, however, the trustee was proven right. The Court of Appeal referred to the JPR/Gunning q.q. judgment of the Supreme Court and observed that this judgment does not state that the trustee’s authority to recover amounts is limited to non-cash payments to the credit balance of a bank account. According to the Court, such a limitation would also be in conflict with the fixation principle, the purpose of which is that the legal position of a creditor may no longer be changed in its favor (as regards amount and priority of the claim) after the bankruptcy has occurred. At the Supreme Court, the creditor is proven right again: the judgment of the Court of Appeal is set aside and the ruling of the subdistrict court is upheld.
Why can’t payments made after the bankruptcy date be reclaimed?
The Supreme Court’s opinion seems surprising: if a payment is received from a bankrupt, why does it not have to be repaid to the trustee? This has to do with Article 24 Bankruptcy Law, which states:
“For the obligations of the debtor, arising after the declaration of bankruptcy, the estate is not liable except to the extent that it has benefited as a result thereof.”
When executing a giro payment through a bank account, this leads to a lower balance on the same bank account. If there was already a negative balance, the negative balance becomes even lower.
No obligation to repay if the payment does not lead to a reduction of estate assets or an increase of estate liabilities
The Supreme Court considered that the payment in the case at hand did not lead to a reduction of the estate assets, because the bank account already had a debit balance when the bankruptcy commenced. Nor did that payment result in an increase of the estate’s liabilities, according to the Supreme Court. Although the debt to the bank has increased as a result of the payment to the creditor, the estate is not liable for that pursuant to article 24 Bankruptcy Act. After all, the estate has not benefited from the payment. The fact that the estate is not liable means that the bank will not be able to submit a claim in the bankruptcy for compensation of the amount transferred to the creditor.
The fixation principle and Article 23 of the Bankruptcy Act therefore provide no basis for granting the trustee’s claim.
The principle of paritas creditorum in bankruptcy law
The principle of paritas creditorum entails that debtors of equal rank should be treated equally in the satisfaction of their claims from the proceeds of property of the debtor. According to BB’s trustee, this principle is breached because one creditor gets paid and the other creditors do not.
A reliance on this principle cannot help the trustee either. The Supreme Court considered that the payment did not take place from an asset of the estate and that therefore no claim against the estate arose. According to the Supreme Court, there is therefore no question of an impermissible breach of the paritas creditorum.
Would the outcome have been different if the balance of the bank account was positive?
The outcome would have been different for the trustee if the payment had been charged to a positive balance on the bank account. After all, in that case an asset of the estate would have been reduced.
Looking for a lawyer in bankruptcy law in Rotterdam?
If you need legal assistance in disputes with a bankruptcy trustee or would like to obtain advice in the field of bankruptcy law, please contact Peter de Graaf. We will be happy to tell you more about the principle of fixation, the principle of paritas creditorum and the regulations concerning the recovery of giro payments by a bankruptcy trustee.
The judgment discussed can be found here.
Employee leaving sick: what about premium differentiation?
Employee leaving sick: what about premium differentiation?
Are you familiar with the financial consequences of an employee leaving your company sick? The Sickness Benefits Act and WGA premiums are differentiated. This means that the premiums depend on the inflow of employees who became ill on the last day of their employment or within 4 weeks after the dismissal date. In this article we discuss the premium differentiation and the calculation of this premium.
Premium Differentiation
Since the introduction of the Sickness Absence and Disability of Employees Act, the ZW benefit and WGA benefit are attributed to the last employer. This is done via a differentiated premium. If an employee leaves sick or becomes sick within 4 weeks after the end date and can claim a ZW or WGA benefit, this may have consequences for the premiums to be paid by the employer.
Note: An employee who leaves employment, receives unemployment benefits and then becomes ill, is not attributed to the employer. The UWV is then regarded as the “last employer”.
Calculation of premiums Sickness Benefits Act and WGA
Each year the UWV calculates the premiums based on the data from two years earlier. As an employer, you are informed by the tax authorities of the level of these premiums in the autumn of each calendar year in the so-called ‘Besluit gedifferentieerde premie Whk’ (Differentiated Contribution Decision).
Distinction between small, medium-sized and large employers
When calculating the differentiated ZW and WGA premiums, a distinction is made between small, medium-sized and large employers. For small employers, a sector-based premium applies. For medium-sized employers, the weighted average of the sectoral premium and individual premium applies. For large employers, the premium is based on an average premium level with a surcharge or discount depending on the individual and average employer risk.
From a financial point of view, it is therefore in the interest of medium-sized and large employers that an employee does not leave sick or falls ill within four weeks of the date of dismissal.
Average wage due for contributions
To determine the contribution rate in a particular year, the average compulsory wage in the preceding two years is always taken into account. For 2022 the year 2020 has been taken into account.
Report employee’s recovery to UWV?
For an employer it may therefore be advantageous that the employee does not leave sick. However, a sick employee cannot simply be reported back to work. After all, the employee is not available for the labor market and there is a chance that the ex-employee will still report sick after leaving employment, with all its consequences.
If recovery is expected in the short term, it may be advantageous to retain the employee in service until recovery has taken place. This prevents the employee from leaving the company sick. In the latter case, a termination agreement may already be agreed upon. After recovery and leaving the company, the employee can apply for unemployment benefits and the employer will not be affected by the premium differentiation.
Become self-insurer for the ZW or WGA?
For some employers, it may be attractive to become self-insurer for the ZW or WGA. In the case of the ZW, an own-risk carrier pays a lower differentiated premium, because no premium needs to be paid for the ZW flex. In the case of the WGA, the excess carrier only pays the basic premium.
Note: as an excess carrier you do have other costs. You pay the benefits and in addition, as an excess carrier, you are responsible for the reintegration of the (ex-)worker. As an own-risk carrier, you must therefore have sufficient knowledge of the ZW and/or WIA.
Employment Lawyers Rotterdam
Do you have any questions about the sick leave of employees, premium differentiation or self-risk bearing? Please feel free to contact our employment lawyers Peter Verheijden and Lisa Kloot of LVH Advocaten.
Managing director and works council: how to achieve effective cooperation?
Managing director and works council: how to achieve effective cooperation?
The works council is an important body within the organisation. They represent their members and have the necessary powers to do so, such as the right to consent and the right of advice. Effective cooperation makes it easier to implement important decisions within your organisation and ensures that those decisions are also supported within your organisation. So there is every reason to work on the cooperation with the works council, but how do you achieve that? The interests of the works council and the director are sometimes opposed, and the works council is therefore often seen as an opponent of the director. In this article we will tell you how to get closer to an effective cooperation.
Inform yourself in time about the rights of the Works Council
If you are aware of the rights and obligations of the works council, it will be easier for you to cooperate with the works council. After all, there need be no (or at least less) discussion about the content of those rights and duties. Do you have doubts about these rights and how far they extend? Please contact an employment lawyer to have this checked before communicating with the works council. Also give the works council the opportunity to turn to an employment law specialist.
Works council rights
Right to information: This means that the works council is entitled to information to enable it to perform its duties. The works council can request information itself (active information right) and the employer is obliged to provide information about the financial and economic position of the company and the social policy pursued (passive information right).
Consultation right: The managing director and works council are obliged to meet in a consultation meeting within two weeks after a reasoned request by one of them. Compliance can be requested from the subdistrict court.
Right of initiative: The works council has the right to make proposals. The works council cannot force the director to accept these proposals.
Right to advice: The Works Council has a right to advise on certain intended decisions. Section 25 of the Works Councils Act contains a list of decisions about which advice must be requested.
Right of consent: The Works Council has a right of consent to certain proposed decisions. Section 27 of the Works Councils Act contains a list of decisions for which consent must be requested.
Facilities: the works council has the right to call in experts, the right to training, the right to retention of salary while working for the works council and the right to conduct legal proceedings free of charge.
Regularly involve the works council in decision-making
Sparring informally
In addition to the rights under the Works Councils Act that have just been discussed, a director can also involve the Works Council in issues other than those on which it has the right to advise and consent. After all, the Works Council has a stimulating task with regard to subjects that affect the staff, such as terms of employment, working conditions, equal treatment and more. The more regular the consultation with the works council, the better. The works council should not feel like an afterthought; that creates the idea that the works council has no influence on decision-making. Regular and timely involvement of the Works Council creates trust. This can be done simply by planning a fixed moment to consult.
Works council involvement without right to advice or consent
Please note: is the works council involved without the right to advice or assent? As a director, it must be made clear that no advice or assent is requested, but that the director merely wants the works council to think along on a certain subject. Therefore, always assess first whether the subject requires advice or consent. Uncertainty? Lisa Kloot of LVH Advocaten will be glad to help you.
Works council agreement
The powers of the Works Council can also be extended through a Works Agreement. The involvement of the Works Council can thus increase and this can be positive for your organisation. Primary employment conditions, for instance, are not a subject on which the Works Council has the right to advice or consent. However, the managing director could agree with the works council that the terms of employment are submitted to the works council for approval. This could make it easier for the staff to accept.
Formation of a tacit business agreement
Please note: a company agreement can be created tacitly. If the directors repeatedly request consent or advice, in writing, unambiguously and without reservation, on a subject that falls outside the right to consent and advice, a corporate agreement may be created. Therefore, always make a reservation if you, as a director, wish to informally spar with the works council and state that no consent or advice is requested.
Need a lawyer in Rotterdam in the field of works councils and employee participation?
Co-determination is a promising tool for every manager if it is used correctly. Lisa Kloot of LVH Advocaten in Rotterdam is happy to help you set up works councils in the right way within your organisation. Lisa Kloot can help you with the establishment of the works council, the conclusion of a works agreement, as well as she can guide you in the process of advice and consent.
Compulsory education and study-cost clause: all points of attention for employers
Compulsory education and study-cost clause: all points of attention for employers
As an employer, you like to keep your employees’ knowledge up to date. This is important for the sustainable employability of your personnel and it can create more productivity within the organisation. Thus, a win-win situation.
But staff training requires investment. If the employer invests in an employee, the wish is of course that the employee will remain in service for a long time. But what if that employee leaves anyway? Who pays for the training if the employee leaves the company during or after the training?
Labour law has the necessary rules to deal with this. In this article we discuss all the points of interest for employers regarding the training of employees, namely the legal training obligation, training costs and the study costs clause.
Training obligation of employees
The law (Article 7:611a BW) stipulates that the employer must enable its employees to follow (1) the training necessary for the performance of their duties and (2) the training necessary for the continuation of the employment contract when the employee’s position is no longer held, if this can reasonably be expected of the employer (training in connection with redeployment). This implies an obligation for the employer to invest in employees by means of training. An employee is expected to make efforts as a good employee to accept the training and to complete it successfully.
Attention: see also heading “Change to training obligation and study costs clause as per 1 August 2022”.
Training necessary for the performance of a function
We will now zoom in on the first part, the necessary training for the execution of the position. It concerns necessary training. This includes training that is compulsory by law or by an external party (collective labour agreement or governing body). In addition to offering the training, the employer must also enable the employee to follow the training. The employer must make regular working hours available for the training activities.
Does the organisation have a CAO? Check it for the specific rights and obligations with regard to training.
Training in case of malfunctioning
The aforementioned training obligation is also important in a situation where the employee does not function. If there is dysfunction and this can be resolved through coaching or courses, it is up to the employer to offer support in the form of training. Are you, as an employer, not making enough effort? This can lead to serious culpability and the associated fair compensation.
Training costs to be borne by employer or employee?
In principle, the employer has to finance the necessary training mentioned above and training in the context of redeployment. Is the training not necessary? Then the employer does not have to finance it. If the employer does pay for the training, this can, under certain conditions, be deducted from the transitional allowance.
Study Costs Clause
As mentioned, a training course is an investment. An investment that the employer would like to recoup. This is not possible if the employee leaves shortly after completing the training. To prevent this becoming an empty investment, a study costs clause can be agreed. The education costs clause provides that an employee, if he or she resigns (or if the employer’s resignation is at the employee’s risk), must repay the training costs to the employee. Please note: in principle, an employer cannot invoke the training costs clause if the initiative for dismissal or non-renewal of the employment contract lies with the employer, unless other agreements have been made. For example, it may be agreed that the employee must repay the study costs if he is summarily dismissed or in the event of serious culpability on the part of the employee.
This study costs clause is not (yet) regulated by law, but case law has laid down a number of requirements:
1. The financial consequences (concrete amounts) of the clause and when it comes into effect must be properly explained, preferably in writing;
2. The period during which the employer will benefit from the study (and the resulting knowledge and skills) must be established;
3. The repayment obligation must decrease proportionally on the basis of the established period mentioned under 2 (sliding scale).
Even if the foregoing has been arranged well, it may be that the employer cannot invoke the study costs clause. This is the case if after the study costs have been deducted, the employee’s salary falls below the statutory minimum wage. Furthermore, invoking the study costs clause may be unacceptable according to the standards of reasonableness and fairness.
Change to training obligation study costs clause as of 1 August 2022
On 1 August 2022, new rules will be introduced in Dutch law regarding the training obligation and the study-costs clause. Based on the European Employment Conditions Directive (click here for more information about this directive), the employer is obliged to offer a study free of charge if (1) the study is compulsory on the grounds of the law, the CAO or regulation of a competent administrative body and (2) the study is necessary for the performance of the duties. If a study costs clause is nevertheless agreed for this compulsory or necessary training, the clause will be null and void. These are clauses whereby the costs of training are recovered or set off against monetary income arising from the employee’s employment.
Please note: training or education that employees are obliged to take in order to obtain, maintain or renew a professional qualification, does, in principle, not fall under mandatory training as referred to under 1. Therefore, a study-costs clause would be agreed upon with regard to such training. The question is how this will work out exactly in the Netherlands if a course of study is not compulsory, but necessary for the performance of the duties.
Do you need a lawyer in Rotterdam to advise you on the obligation to study and the study costs clause?
The above shows that agreeing and invoking a study costs clause is not self-evident. So think carefully about the exact wording of the education costs clause and consult an employment lawyer. If you want to invoke the clause, first get advice on your chances. If you would like to know more, please contact Lisa Kloot of LVH Advocaten.
Sick employee does not cooperate in reintegration: employer actions
Sick employee does not cooperate in reintegration: employer actions
A reintegration process starts when the employer reports sick. Previously, we wrote an article about the steps that should be taken in a reintegration process. But what if the sick employee does not cooperate? Which actions can you take as an employer to get the reintegration process back on track or can the employer fire the sick employee if he does not cooperate?
In this article we discuss the actions or measures an employer can or should take if a sick employee does not comply with the obligations arising from the reintegration process.
Actions of the employer in case of non-compliance with the reintegration obligations
First of all, the employer must determine what exactly the reintegration obligations are that are not fulfilled. This determines to a large extent the action to be taken.
Warning not to comply with reintegration obligations
Sending a warning letter is a good first step when the employee does not comply with the reintegration. The employer is well advised to make clear which obligations the employee has, such as appearing at the company doctor, cooperating in drawing up the plan of approach and performing suitable work. Subsequently, the employer can schedule a meeting to discuss the obligations during reintegration.
If the employee disagrees with the advice of the company doctor, it is good that the employer points out in the letter that the employee can request an expert opinion from the UWV on the disability and reintegration.
Announcement of wage suspension or wage cut
If there is already a reason for a wage freeze or wage suspension (see below), it can be announced immediately that a wage freeze or wage suspension will be implemented in the event of non-compliance within a certain period.
Suspension of wages after violation of control regulations
A company is obliged to draw up a sick leave policy. For more information see our article on this subject. This policy contains control regulations concerning work disability, such as the procedure for reporting sick, the obligation to pass on accommodation details and the obligation to attend the company doctor’s surgery. If these control regulations are violated without a valid reason, the employer is allowed to suspend the salary.
If the employee complies with the control regulations again, he is entitled to continued payment of wages with retroactive effect. The wages that were not paid during the suspension must still be paid. No statutory increase or interest is owed on those wages.
Note: the wage suspension must be announced. Therefore, if the employer intends to implement a wage suspension, the employee must first be warned that he has violated the control regulations and that the employer has reasons to suspend wages. This gives the employee the opportunity to comply with the regulations after all.
Wage freeze after breach of reintegration rules
In the context of reintegration, the employee must among other things cooperate in drawing up an action plan and must perform suitable work if the company doctor advises this. If the employee does not cooperate without a valid reason, a wage freeze can be imposed. It is important that the employer uses this measure in time. If the employee has not or not sufficiently fulfilled the reintegration obligations and the employer has been inactive, the UWV may extend the obligation to continue paying wages after the end of the waiting period (in principle 104 weeks after reporting sick).
Please note: here too, the wage freeze must be announced.
Dissolution of the employment agreement of a sick employee
Failure to comply with the reintegration obligations may ultimately also lead to dissolution of the employment contract. The subdistrict court may grant the dissolution in the event of (seriously) culpable act or omission. This is the case if the employee repeatedly violates the reintegration obligations despite the written reminders from the employer and the applied wage freeze. The prohibition on giving notice during illness does not apply. Note: employer must have a UWV expert statement.
Summarily dismissing a sick employee
In extreme cases, summary dismissal is sometimes even possible if the employee does not fulfil the reintegration obligations. In this case, there must be additional circumstances. These could include, for example, the employee going on holiday abroad for an extended period of time without the employer’s permission during the reintegration process (Court of Appeal ‘s-Hertogenbosch ruling).
Want to know more about actions of the employer in case of non-compliance with reintegration?
It follows from the above that the employer must timely intervene during the reintegration process, so a UWV wage penalty can be prevented. For this, sufficient means are available. Want to know more about the possible actions? Lisa Kloot of LVH Advocaten in Rotterdam will be pleased to help you determine the right strategy. She can help you, for example, in drawing up a sick leave policy, drafting warning letters and conducting employment law proceedings.
Surveillance in the (home) workplace: what is an employer allowed?
Surveillance in the (home) workplace: what is an employer allowed?
Previously we wrote an article about the rules for camera surveillance in the workplace. The need for employer monitoring exceeds – partly in view of the corona pandemic – the mere checking of the workplace with cameras. Employers also have a need to monitor employees’ browsing habits, as well as the emails they send. And, of course, they want to prevent employees from spending hours Internet shopping and watching TV at the home workplace during working hours. But isn’t monitoring this a violation of the employee’s privacy, especially at the home workplace?
In this article, we address that question. Is an employer allowed to use monitoring tools and what rules must the employer abide by during a monitoring. To form a clear picture, we will also discuss case law.
When may an employer conduct structural workplace monitoring?
The employer must comply with privacy legislation, including the General Data Protection Regulation (AVG). Does the employer want to monitor the (home) workplace? If so, this must be announced in company regulations or the personnel handbook. In addition, the Works Council (if any) must grant permission for this monitoring. Finally, a legitimate interest is always required. And that legitimate interest is not always present, as case law shows.
Is an employer allowed to check an employee’s e-mails?
The District Court of Amsterdam awarded an employee compensation of € 10,000.00 after the employer had violated the privacy of the employee. The court ruled that the employer searched the employee’s mailbox without concrete suspicion, prior notice or consent. This was allegedly done to gather information about ongoing projects. However, the years 2016, 2017 and 2018 were also searched. According to the court, this violated Article 8 ECHR, especially since nothing shocking came to light. Also, the employer should have hired an external agency for the investigation, according to the court.
Is camera surveillance in the workplace permitted?
In determining the amount of the fair compensation, the North Netherlands District Court took into account the events surrounding the placement of cameras on the work floor. The employer had placed hidden cameras without notice to the employees and without the consent of the Works Council without having a legitimate interest in doing so. The hidden camera surveillance should also have been reported to the Personal Data Authority. Partly because of this, the court ruled that the employer was seriously culpable. Learn more about camera surveillance, read: rules for camera surveillance in the workplace.
Is an employer allowed to monitor the home workplace?
When deploying surveillance equipment, it does not matter whether the employee works in the office or at home. Working from home is not a reason for the employer to monitor more strictly. An employee is not obliged to agree to a home visit. An employer cannot impose sanctions for refusal. The same applies if the employer asks for a photo or video of the home office. Checking e-mails, telephone traffic, surfing behavior and behavior on social media is in principle not possible since this is private. However, when the employer complies with the requirements, control is possible.
Looking for an employment lawyer in Rotterdam?
In short, as an employer you cannot simply monitor your employees. The privacy of your employees must always be taken into account. Therefore, always contact an employment law specialist. They can check whether you meet the requirements.
Would you like to know more about the means of control you can use as an employer and how you can do this correctly? Please contact Lisa Kloot of LVH Advocaten in Rotterdam. She will be happy to help you implement these means of control, including drafting an internet and e-mail policy and/or a personnel handbook.
Director and works council: how to achieve effective cooperation?
Director and works council: how to achieve effective cooperation?
The works council is an important body within the organisation. They represent their members and have the necessary powers to do so, such as the right to consent and the right of advice. Effective cooperation makes it easier to implement important decisions within your organisation and ensures that those decisions are also supported within your organisation. So there is every reason to work on the cooperation with the works council, but how do you achieve that? The interests of the works council and the director are sometimes opposed, and the works council is therefore often seen as an opponent of the director. In this article we will tell you how to get closer to an effective cooperation.
Inform yourself in time about the rights of the Works Council
If you are aware of the rights and obligations of the works council, it will be easier for you to cooperate with the works council. After all, there need be no (or at least less) discussion about the content of those rights and duties. Do you have doubts about these rights and how far they extend? Please contact an employment lawyer to have this checked before communicating with the works council. Also give the works council the opportunity to turn to an employment law specialist.
Works council rights
Right to information: This means that the works council is entitled to information to enable it to perform its duties. The works council can request information itself (active information right) and the employer is obliged to provide information about the financial and economic position of the company and the social policy pursued (passive information right).
Consultation right: The managing director and works council are obliged to meet in a consultation meeting within two weeks after a reasoned request by one of them. Compliance can be requested from the subdistrict court.
Right of initiative: The works council has the right to make proposals. The works council cannot force the director to accept these proposals.
Right to advice: The Works Council has a right to advise on certain intended decisions. Section 25 of the Works Councils Act contains a list of decisions about which advice must be requested.
Right of consent: The Works Council has a right of consent to certain proposed decisions. Section 27 of the Works Councils Act contains a list of decisions for which consent must be requested.
Facilities: the works council has the right to call in experts, the right to training, the right to retention of salary while working for the works council and the right to conduct legal proceedings free of charge.
Regularly involve the works council in decision-making
Sparring informally
In addition to the rights under the Works Councils Act that have just been discussed, a director can also involve the Works Council in issues other than those on which it has the right to advise and consent. After all, the Works Council has a stimulating task with regard to subjects that affect the staff, such as terms of employment, working conditions, equal treatment and more. The more regular the consultation with the works council, the better. The works council should not feel like an afterthought; that creates the idea that the works council has no influence on decision-making. Regular and timely involvement of the Works Council creates trust. This can be done simply by planning a fixed moment to consult.
Works council involvement without right to advice or consent
Please note: is the works council involved without the right to advice or assent? As a director, it must be made clear that no advice or assent is requested, but that the director merely wants the works council to think along on a certain subject. Therefore, always assess first whether the subject requires advice or consent. Uncertainty? Lisa Kloot of LVH Advocaten will be glad to help you.
Works council agreement
The powers of the Works Council can also be extended through a Works Agreement. The involvement of the Works Council can thus increase and this can be positive for your organisation. Primary employment conditions, for instance, are not a subject on which the Works Council has the right to advice or consent. However, the managing director could agree with the works council that the terms of employment are submitted to the works council for approval. This could make it easier for the staff to accept.
Formation of a tacit business agreement
Please note: a company agreement can be created tacitly. If the directors repeatedly request consent or advice in writing, unambiguously and without reservation on a subject that falls outside the right to consent and advice, a works agreement can be created. Therefore, always make a reservation if you, as a director, wish to informally spar with the works council and state that no consent or advice is requested.
Need a lawyer in Rotterdam in the field of works councils and employee participation?
Co-determination is a promising tool for every manager if it is used correctly. Lisa Kloot of LVH Advocaten in Rotterdam is happy to help you set up works councils in the right way within your organisation. Lisa Kloot can help you with the establishment of the works council, the conclusion of a works agreement, as well as she can guide you in the process of advice and consent.
Reduction of amount for which the director is liable
Reduction of amount for which the director is liable
A director is liable under article 2:248 paragraph 1 of the Dutch Civil Code (BW) to make good the deficit in the bankruptcy if the board has manifestly mismanaged its duties and it is plausible that this was a major cause of the bankruptcy. Based on paragraph 4 of this article of law, the court can mitigate the amount for which the director is liable under certain circumstances. The Supreme Court recently issued a judgment on the possibilities of mitigation. In this article I will briefly discuss the legal regulation concerning directors’ liability in bankruptcy and I will discuss the judgment of the Supreme Court.
Directors’ liability in bankruptcy due to improper management
Article 2:248 of the Dutch Civil Code concerning improper management is relevant in the event of bankruptcy of a private limited liability company (Article 2:138 of the Dutch Civil Code in the case of an NV). On the basis of this article, each director is jointly and severally liable towards the estate to settle the estate deficit, if the board has manifestly mismanaged its duties and it is plausible that this was a major cause of the bankruptcy. Only the bankruptcy trustee can make such a claim.
Legal presumption of directors’ liability
On the basis of paragraph 2 of article 2:248 of the Dutch Civil Code, the trustee’s position is strengthened if the annual accounts have been filed too late or if the administration does not provide the required insight. In such cases, improper management is established and the legal presumption applies that the bankruptcy was caused by improper management. Read more about the distribution of the burden of proof in the article Disproving the legal presumption concerning directors’ liability in bankruptcy.
Mitigation of director’s liability
If the director’s liability is established, it may be relevant whether there is a reason to moderate the amount for which the director is liable. In principle, the director is liable to settle the estate deficit. This means the debts of the company, minus any available income. Paragraph 4 of article 2:248 of the Dutch Civil Code states about the possibility of mitigation:
“The court may reduce the amount for which the directors are liable if it considers it excessive in view of the nature and seriousness of the improper performance of duties by the management, the other causes of the bankruptcy, and the manner in which this has been disposed of. The court may also reduce the amount of liability of an individual director if it considers this excessive in view of the time during which that director held office as such in the period in which the improper performance of duties took place.”
The first sentence applies to the board as a whole (i.e. this is a collective mitigation variant). The second sentence applies only to an individual director (i.e. this is an individual mitigation variant).
Process of directors’ liability
The judgment of the Supreme Court on the possibility of mitigation was preceded by the following. A bankruptcy trustee took legal action against two directors of a bankrupt B.V. It was claimed that the directors had improperly fulfilled their duties and were liable for settlement of the estate deficit, as well as an order to pay the deficit. The court allowed the claims. The Court of Appeal upheld the judgment.
Appeal to reduce amount of directors’ liability
The Court of Appeal also dealt with an appeal by the directors to reduce the amount for which the directors are liable. The Court of Appeal was of the opinion that there are no grounds for moderation, because it has not become plausible that there were other important causes of the bankruptcy, nor is there any indication that the estate was incorrectly settled by the trustee.
The grounds for mitigation are exhaustive
The directors go to the Supreme Court. They argued that the grounds for mitigation in article 2:248 BW were not exhaustive. They argue that they have also pointed out other circumstances and that the Court of Appeal should have discussed these in substantiated terms. One of the circumstances is that the companies of the group are the largest victims of the bankruptcy.
The Supreme Court does not follow this view and dismisses the appeal. It considered that both the text and the parliamentary history of Section 2:248 (4), first sentence, of the DCC show that the grounds for reducing the amount for which the directors are liable are exhaustively enumerated in this provision. Therefore, the Court of Appeal did not have to examine the arguments of the directors that relate to grounds for mitigation that are not included in this provision.
Lawyers in corporate law and insolvency law
Should you have any questions about directors’ liability please feel free to contact Peter de Graaf.
More about employees
Qualification of the employment relationship: management agreement or employment contract?
The qualification of an employment relationship is of great importance. It determines which rights and obligations the parties have towards each other. The relationship between employer and employee is very different from the relationship between client and contractor. If possible, it is wise to make as clear as possible an agreement about the relationship. This prevents problems in the future. But what if the parties have a different opinion about the qualification of the employment relationship?
Non-competition clause for commissioned workers and the prohibition on obstructing competition
In the assignment contract between the client and the contractor, a non-competition clause can be agreed - just as with employers and employees - so that the client can protect its business interests when the relationship with the contractor ends.
No-risk policy: points of attention for employers
In this article we discuss the so-called 'no-risk policy' and points of attention for employers who employ personnel with a no-risk policy. We discuss what the policy entails and what this means for the reintegration obligations when the employee becomes disabled.
