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Dismissal of sick statutory director

Publication date: 18 June 2021
A sick employee may not be dismissed. However, an employee who knows of imminent dismissal, cannot avoid this by reporting sick. But when does the employee know that this is the case? This question was central to the court case concerning the dismissal of a CFO of Volksbank.

slapend dienstverband zieke werknemer

Statutory director also protected as employee?

Before the  Arnhem-Leeuwarden Court of Appeal could assess whether the CFO had reported sick in time, it first had to answer another question. Was the CFO an employee? If not, employment protection does not apply.

Contract of assignment or employment contract?

The CFO’s agreement with Volksbank was titled “Contract of assignment of statutory director”. Therefore, no employment contract and no employment protection as a statutory director. The Court of Appeal did not agree.

Since 6 November 2020, the court must primarily look at the content of the agreement and the way in which the parties perform it. Not at the intentions they had when they concluded the agreement. The content of the contract of assignment had the three characteristics of an employment contract. The CFO performed (1) work (2) under the management of Volksbank in return for (3) payment. Therefore, there is an employment contract. This means that there would be an additional charge for wage tax and social security contributions. The judgment also raises the question of whether existing management agreements still count as contracts of assignment.

No employment protection for statutory directors of listed companies

As statutory directors of listed companies have a strong position, they cannot invoke protection as employees. Volksbank felt that this should also apply to its CFO, even though the company was not listed. After all, the bank was bigger than many listed companies.

The District Court of Midden-Nederland accepted the bank’s reasoning. The Court of Appeal did not. The statutory regulation explicitly only applies to listed companies. There are various regulations in the law that apply both to listed companies and similar large companies. Such a construction was not chosen here, although it would have been possible.

Exception to prohibition of dismissal in the event of illness: anti-abuse provision

So there is no employment contract. The CFO could therefore try to invoke prohibition of termination during illness. However, there is an exception to this: the anti-abuse provision. The prohibition of termination does not apply when the employee reports sick after the UWV has received the request for a dismissal permit. “Fleeing into illness” does not help.

A dismissal permit from the UWV is not required for directors under the articles of association. If they are dismissed as a director of the company, the employment contract is also terminated. However, the agreed notice period must be observed. Therefore, in their case, the date on which they received the invitation to the meeting in which their dismissal was placed on the agenda shall apply.

In this case, the CFO had reported sick on 12 August 2020. He received the invitation on 13 August. But he knew before he reported sick that Volksbank wanted to terminate the management agreement. On 10 August, the Supervisory Board informed him orally that Volksbank wanted to take leave of him. One day later, he had received a draft of the settlement agreement. According to the District Court, the CFO therefore could not invoke the prohibition of termination.

However, the Court of Appeal strictly adhered to the established rule: the date on which the invitation was received. After all, also in the case of ordinary employees, only the date of receipt by the UWV is taken into account. The fact that the employee knew earlier that dismissal was imminent is irrelevant. Consequence: the dismissal is invalid. For the time being, Volksbank must continue to pay the monthly salary of € 23,000.

A lesson by the Court of Appeal

Could this have been done differently? Yes. According to the Court of Appeal, Volksbank could have prevented the prohibition of termination from applying. It could have set up the dismissal procedure in such a way that the CFO would not have been able to report sick in the meantime. Also, the bank could not prove that the director was really sick. It had forbidden the company doctor to assist him and had itself reported the CFO better.

Lawyer for employment law and dismissal

Do you have any questions about the dismissal or the appointment of a statutory director? Or of any other employee? We will be happy to advise you and can also assist you in dismissal procedures or in drawing up a settlement agreement. You can also contact us for other employment law issues. Please contact us:

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