Supreme Court Gives Green Light to All–in Severance Packages – Belgium

In a recent decision, the Belgian Supreme Court has given its green light for employers to dismiss an employee and to simultaneously agree on an all-in termination package with this employee. Thus, the Supreme Court enables the employer to dismiss an employee in an efficient way that is satisfactory for both the employer and the employee.

I. Dismissal regulations in Belgium and the issue in the case presented to the Supreme Court

In Belgium, an employer has two options to terminate his employees, apart from the dismissal for serious cause. It can (i) either give notice to the employee with a notice period, (ii) or terminate him with immediate effect. The first option consists in the employee continuing to work during the notice period. During this period, he is remunerated by the employer. The second option means that the employee is entitled to a severance pay equal to the remuneration for the number of months’ notice he would have been entitled to, in case of a dismissal with a notice period.

Belgian statutory law only provides for certain minimum notice periods that must be observed by the employer. For higher paid employees, i.e. the employees whose annual gross income is situated between 29,729 € and 59,460 € (resp. 30,322 € and 60,645 € as from January 1, 2010), the notice period is determined by both the employer and the employee by virtue of a mutual agreement.

In order to avoid employer pressure on the employee, the law prescribes that this agreement can be signed at the moment that the dismissal is given, at the earliest. At that time, the employee is deemed to be no longer subject to the employer’s authority. In the event that the employer and the employee cannot come to an agreement, it will be up to the court to determine the notice period. For employees whose annual gross income exceeds 59,460 € (60,645 € as from January 1, 2010), this agreement can be signed, no later than the moment that the employee is hired. We do not further elaborate this possibility in the present contribution. Since the severance pay in case of a termination with immediate effect will be equal to remuneration for the notice period that would have been due in case of a dismissal with a notice period, for higher paid employees, the severance pay can equally be determined at the earliest at the moment that the dismissal is given.

The question automatically rises what is meant by “the moment that the dismissal is given”. The answer to this question will not necessarily be the same in case of a dismissal with a notice period or with immediate effect. Indeed, the dismissal with a notice period requires the notification of a termination letter by bailiff or by registered mail that is deemed to have effect only three days after it was sent. The dismissal with immediate effect, on the other hand can be executed without any formalities, even orally. Thus, when the employee is dismissed with a notice period by registered letter, the agreement regarding the notice period can be concluded at the earliest three days after the letter is sent by the employer. In case of a termination with immediate effect, the agreement can be concluded without any delay. The present contribution only elaborates on the case of the dismissal with immediate effect.

II. Focus on the decision of the Supreme Court

It is common practice that the employer will immediately propose the employee to sign an agreement regarding severance pay from the moment of the dismissal. According to some, such as the Labour Court of Appeal in Antwerp, this practice was not authorized because it rendered it impossible to ensure that the employee was able to evaluate the agreement that was presented to him at a time that he was indeed no longer under his employer’s authority. According to this opinion, the agreement regarding the severance pay can only be signed after the dismissal is given, and not simultaneously with the dismissal.

Others, such as the Labour Court of Appeal in Brussels did not concur with this opinion. According to this Court of Appeal, in the event of a dismissal with an immediate effect, the employee fully regains his freedom at the moment of his dismissal. As a consequence, the employer and the dismissed employee can determine the severance pay by mutual consent at that moment. It is remarkable that, in a previous decision, the Labour Court of Appeal of Antwerp had accepted that an agreement was concluded between the employer and the employee at the moment that the employer informed the employee orally that he was going to dismiss him, thus even before the actual dismissal had been notified.

In a recent decision of October 5, 2009 the Supreme Court ruled that the agreement regarding severance pay can be signed at the same time the dismissal is handed out to the employee. By this ruling, the Supreme Court has given its green light for the employer terminating its employees while offering all-in severance packages, containing the dismissal as well as the agreement regarding severance pay.

III. Focus on the agreement regarding the notice period cq the severance pay.

The law does not further elaborate the formal requirements of the agreement regarding the notice period cq the severance pay. It does state that an acknowledgment by the employee that he has well received a severance pay on his bank account cannot be interpreted as such an agreement. The term “agreement”, clearly indicates that it must be an agreement with mutual consent. It cannot be a unilateral decision from the employer.