The billijke vergoeding in Dutch dismissal law
Fair compensation (billijke vergoeding) is a form of additional compensation in Dutch dismissal law that a court may award to an employee on top of the statutory transition payment. It is provided for in Articles 7:681, 7:682, and 7:683 of the Dutch Civil Code. The billijke vergoeding is distinct from the transition payment: it is awarded as a sanction for seriously culpable employer conduct (ernstig verwijtbaar handelen van de werkgever) and is not capped by statute.
The billijke vergoeding may be awarded by the kantonrechter in dissolution proceedings, by the court reviewing a UWV dismissal that the employee contests as unlawful, or in cases where an employee resigns due to seriously culpable employer conduct. It may also be granted where an employer dismisses an employee in violation of a dismissal prohibition (for example, during sick leave or pregnancy).
Calculation of the billijke vergoeding: the New Hairstyle criteria
In its landmark New Hairstyle ruling (ECLI:NL:HR:2017:1187, 30 June 2017), the Dutch Supreme Court specified that the billijke vergoeding must genuinely compensate for the consequences of the employer's ernstig verwijtbaar conduct. The court must consider: (1) what the employee's financial situation would have been had the employer acted properly; (2) how long the employment would likely have continued; (3) what the employee would have earned; (4) what the employee's future employment prospects are; and (5) any tax effects of the compensation. Courts are not bound to follow a formula - the assessment is case-specific and may result in awards ranging from a few thousand euros to several years' salary.
Billijke vergoeding and settlement agreements under Dutch law
In practice, the threat of a billijke vergoeding claim significantly strengthens an employee's negotiating position in settlement agreement (vaststellingsovereenkomst) negotiations. Where the employer's conduct has been seriously culpable, employees are advised to include an enhanced compensation element in the settlement that reflects the billijke vergoeding they could obtain in court proceedings. Employers should assess their exposure carefully before initiating dismissal procedures in cases involving potential misconduct on their own part.
The billijke vergoeding is also available where the employer dismisses an employee in violation of a dismissal prohibition - for example, during sick leave, pregnancy, or membership of the works council - under Article 7:681 of the Dutch Civil Code. In such cases the employee may alternatively ask the court to nullify the dismissal and restore the employment contract under Article 7:682(1) of the Dutch Civil Code. Where the court of appeal concludes that the employer's request to dissolve the contract was wrongly granted, it may order restoration of the employment, and if the employer does not comply or restoration is impractical, award a billijke vergoeding that serves as a replacement for continued employment (Article 7:683(3) of the Dutch Civil Code). Decisions of the District Court in dismissal dissolution cases are not automatically suspended pending appeal under Article 7:683(1).