A dismissal procedure is rarely straightforward. When terms such as fair compensation (billijke vergoeding) are mentioned, alarm bells often start ringing for employers and HR professionals. Unlike the statutory transition payment, which is calculated according to a fixed formula, fair compensation is a variable and potentially costly remedy. It is the legal response to seriously culpable conduct by the employer. But when is that threshold crossed? And what does such a mistake really cost in practice?
In this expert blog, we guide you through the statutory framework, analyse recent case law, and provide practical guidance to help limit risks. This way, you know what to watch out for and how to prevent a dismissal file from ending in an expensive legal dispute.
The legal framework: the foundation of fair compensation
Under Dutch employment law, fair compensation is an exception rather than the rule. While employees are in principle entitled to a transition payment upon dismissal, fair compensation is awarded only if the employer has acted in a seriously culpable manner.
The Dutch Civil Code (Burgerlijk Wetboek) provides for fair compensation in three specific situations:
- Article 7:681 DCC: The court may award fair compensation if the employer has terminated the employment contract in breach of statutory rules (for example, without UWV approval) or if the dismissal results from seriously culpable conduct or omission by the employer.
- Article 7:682 DCC: Upon dissolution by the subdistrict court, fair compensation may be awarded if the dissolution results from seriously culpable conduct or omission by the employer.
- Article 7:671c DCC: If the employee requests dissolution of the employment contract due to circumstances attributable to the employer (seriously culpable conduct), the court may also award fair compensation.
It is important to note that fair compensation is awarded in addition to the transition payment. Its purpose is to compensate the damage resulting from the employer’s culpable conduct.
When is conduct considered “seriously culpable”?
The concept of seriously culpable conduct is not exhaustively defined by law and is primarily shaped by case law. Judgments of the Dutch Supreme Court and lower courts show that the threshold is high. It concerns situations in which the employer violates fundamental employee rights or fails to behave as a good employer within the meaning of Article 7:611 DCC.
Situations in which serious culpability is often assumed include:
- Violation of the right to be heard: Taking decisions without giving the employee an opportunity to present their side of the story.
- False pretences: Deliberately creating a disturbed employment relationship to force dismissal.
- Failure to explore alternatives: Not offering redeployment or reintegration, or failing to communicate transparently about these options.
- Intimidation and discrimination: Acting contrary to good employment practices by allowing an unsafe working environment to persist.
- Reputational damage: Making unfounded accusations (such as fraud or theft) that seriously hinder the employee’s chances of finding new employment.
Strong arguments for awarding high compensation
In litigation, much revolves around the burden of proof. Which arguments carry the most weight when courts consider awarding substantial compensation?
1. Violation of the principle of the right to be heard
Courts treat violations of the right to be heard very seriously. If an employer takes far-reaching measures—such as transfer, suspension, or dismissal—without hearing the employee in advance, this is often immediately considered seriously culpable conduct. It deprives the employee of the opportunity to defend themselves and constitutes a breach of good employment practices.
2. Insufficient redeployment efforts
Employers have an obligation to make reasonable efforts to redeploy employees, potentially with training. If the file shows that the employer did not seriously pursue redeployment options or failed to communicate transparently about vacancies, this may justify a high compensation award.
3. Demonstrable reputational damage
If the manner of dismissal damages the employee’s reputation, this may increase the compensation. A summary dismissal based on unproven allegations of theft is a clear example. If such allegations become known within the industry, the employee’s future earning capacity may be significantly affected. Courts will take this into account, provided there is a causal link between the employer’s conduct and the damage.
How does the court determine the amount of compensation?
Unlike the transition payment, there is no fixed formula for fair compensation. In the New Hairstyle judgment, the Dutch Supreme Court ruled that the amount must be determined based on all circumstances of the case.
Key factors include:
- Loss of earnings (hypothetical duration of employment): How long would the employment contract likely have continued if the employer had not acted in a seriously culpable manner?
- Income from other work or unemployment benefits: What future income can the employee reasonably expect?
- Pension damage: Loss of pension accrual during the hypothetical remaining duration of employment.
- Degree of culpability: Although the compensation is not punitive, the seriousness of the employer’s conduct may affect what is considered fair.
- Non-material damage: Such as psychological harm or reputational damage.
The role of unemployment benefits and additional income
A common misconception is that fair compensation is simply an “extra bonus.” Courts assess the actual damage suffered. If the employee receives unemployment benefits, these amounts are deducted from the calculated loss of earnings.
Example:
An employee is unfairly dismissed, and the court estimates that the employment would otherwise have continued for 12 months.
- Lost salary (12 months): €60,000
- Unemployment benefits received (12 months): – €42,000
- Net loss of earnings: €18,000
The basis for fair compensation is therefore €18,000, potentially increased by pension damage and non-material compensation. Income from secondary employment or freelance work may also be deducted insofar as it can reasonably be attributed to the period following dismissal.
Examples from recent case law
Theory is one thing, but how does this play out in court?
Case 1: Abrupt transfer without consultation (€75,000)
District Court Zeeland-West-Brabant (ECLI:NL:RBZWB:2025:5717)
An employee was suddenly transferred without prior consultation and was taken completely by surprise. The court was unequivocal: the lack of transparency and violation of the right to be heard amounted to seriously culpable conduct. Fair compensation of €75,000 was awarded, based on the duration of employment, significant personal impact, and severe communication failures.
Case 2: Serious failure to pay wages
Court of Appeal The Hague (ECLI:NL:GHDHA:2024:655)
The court awarded substantial compensation because the employer had structurally failed to meet its obligations. Wages were not paid, and the employee was denied access to work. Even though the employee was not without fault, the court emphasised that failure to pay wages is a fundamental breach that constitutes serious culpability.
Case 3: Reputational damage and mitigation
District Court Midden-Nederland (ECLI:NL:RBMNE:2025:6708)
The employee claimed more than €400,000 in damages, including pension loss and reputational damage. While the court acknowledged culpability, it reduced the compensation to €75,000. Not all damage was causally attributable to the employer, and the court expected the employee to find new work sooner than claimed. This illustrates the courts’ critical approach to damage substantiation.
Practical tips for employers
To avoid situations in which fair compensation becomes an issue, careful handling is essential.
- Documentation is crucial: Ensure that performance reviews, warnings, and improvement plans are properly documented.
- Always apply the right to be heard: Never make unilateral decisions without inviting the employee to respond and recording their position.
- Investigate redeployment: Document efforts to identify alternative roles, even if you believe none are available.
- Seek legal advice in time: Preventive legal guidance is far less costly than litigation after the fact.
Frequently Asked Questions (FAQ)
1. What impact does violating the right to be heard have on compensation?
Significant. Courts often consider this seriously culpable conduct and are more inclined to award higher compensation, especially if a proper process could have led to a less damaging outcome.
2. How exactly does the court calculate the amount?
There is no formula. Courts estimate the hypothetical duration of employment, calculate net income loss (accounting for benefits and new income), assess pension loss, and may include non-material damage.
3. Can reputational damage increase compensation?
Yes, provided it is substantiated with concrete evidence such as reduced job opportunities, rejected applications, or negative references.
4. How do unemployment benefits affect the calculation?
They are deducted as income. Fair compensation bridges the gap between hypothetical salary and actual income, plus other attributable damage.
5. Does the employee’s conduct matter?
Yes. If the employee substantially contributed to the situation (e.g. serious misconduct or refusal to cooperate with reintegration), compensation may be reduced or even denied.
6. How does the court estimate the expected duration of employment?
Based on all circumstances, including age, performance, reorganisation plans, contract type, and the likelihood of lawful termination.
7. Can secondary or freelance income be offset?
Yes, insofar as it can reasonably be attributed to the unemployment period following dismissal.
8. May employers request privacy-sensitive information?
Only if relevant to damage assessment and subject to safeguards such as limited disclosure and confidentiality.
9. How do the transition payment and fair compensation relate?
The transition payment is fixed and compensates for transition to new employment; fair compensation is variable and addresses seriously culpable conduct. They may be awarded cumulatively.
10. Is settlement advisable?
Often yes. A settlement agreement with clear terms (neutral reference, outplacement, confidentiality) can limit reputational damage and reduce litigation risks for both parties.
Conclusion
Fair compensation represents a substantial financial risk for employers who handle dismissal processes carelessly. Case law shows that the financial impact can easily amount to tens of thousands of euros on top of the transition payment. Prevention is key: ensure a careful process, document thoroughly, and respect the employee’s fundamental rights.
