For many years, a director under the articles of association of a private limited company and public limited company has enjoyed little protection against dismissal. About three years ago, the position of the directors of an association and foundation was brought into line with that of the BV and NV. The notorious Dutch preventive dismissal test no longer applies to all directors in all legal forms. The fact that the dismissal of a director under the articles of association, just like in the case of an ‘ordinary’ employee, is assessed against the grounds of Article 7:669 of the Dutch Civil Code, does not alter the fact that the dismissal in itself is an established fact. The director can only ask for compensation in the form of fair compensation (pursuant to Article 7:682(7) of the Dutch Civil Code). Whichever way you look at it, a director under the articles of association depends on the trust he enjoys from the body that appointed him. If the relationship between a director and the supervisor comes under pressure, the conclusion is quickly drawn that in the event of a deterioration in relations, the employment relationship would in all likelihood have not lasted much longer. An ‘ordinary’ employee can still claim that the employment contract would last for years when assessing damages, even if the conduct that contributed to the wrongful termination is thought away. A managing director can’t get away with that.

The level of his remuneration in the non-profit sector is generally lower than that of a director in a commercial company. A director, whatever his remuneration, belongs to the very highest echelon of the workforce and is then quickly confronted with the fact that the risk of harm must be increased by the director in the bargain. For the managing director with a relatively low remuneration package, it breaks down badly. The District Court of Utrecht (ECLI:NL:RBMNE:2024:1694) has implied that the director of an association (non‑profit organisation) is treated less generous than the director of a commercial enterprise in which there is no supported legal basis for dismissal. After all, the court reasoned, the association must pay the salary and remuneration of the director from the contributions of its members.

This case concerned a chairman and director of a trade union who was initially employed on the basis of a fixed-term employment contract. The association’s Members’ Council acted as the employer. The union has about thirty employees and ten of them have expressed their concerns about the survival of the union, the lack of participation and the existence of a culture of fear. The reporters in question did not want to talk to the Members’ Council. That is why the Members’ Council has carried out a self-evaluation under the guidance of an external agency. On that occasion, the Members’ Council explicitly expressed confidence in the director. Shortly afterwards, the Members’ Council received an anonymous letter of complaint about the director and yet a few weeks later the written continuation of the employment contract for an indefinite period was signed by the Members’ Council. In response to the anonymous letter, the Members’ Council again approached an external agency with the request to submit a tender for an intervention. The director objected to the set-up and approach in the tender. The Members’ Council wanted to approve the offer but turned out to be unauthorized. Only the director could give the order, but she did not agree to the offer. In a scheduled consultation between the Members’ Council and the director, a letter is handed over with a proposed decision to dismiss the director due to a breach of trust. In the subsequent Members’ Council meeting, the director is dismissed and removed from her position with immediate effect.

The court found that the relationship between the parties had ended as a result of the dismissal decision. The court came to the conclusion that the explanation of the Members’ Council could not be placed in a ‘supported ground for dismissal’. The dismissal was simply “too abrupt”. This normally means that a fair remuneration for the director is in place. In this sense, the court made an estimate of the probable duration of the employment contract if it had not been terminated by the Members’ Council. The court ruled that, although there was no sufficiently reasonable ground for dismissal, it was clear that the director’s actions met with resistance from the Members’ Council and that there was resistance to her within the organisation. Both parties are to blame here, according to the court, which took into account the fact that the director had stipulated and received a very favourable severance payment in the salary negotiations with the Members’ Council. The director was already entitled to a contractual severance payment (equal to one year’s salary) plus the transition payment. According to the court, with the continued payment of the salary for the notice period, during which she was exempted from work, the transition payment and the termination payment, the director is sufficiently compensated for the way in which the employment contract was terminated. In addition, according to the court, the association is not a commercial enterprise but a trade union, which must pay the director’s salary and remuneration from the contributions of its members. This statement is easy to understand from a lenient socio-economic point of view, but from a strict dogmatic point of view it is frowned upon.

For questions or advice on this subject, please contact Michiel van Haelst (+31-6-553 944 87).

This article was published in the Newsletter Vestius of April 2024