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No transition payment for those who are AOW-entitled; possible age discrimination?

No transition payment for those who are AOW-entitled; possible age discrimination?

On termination of an employment relationship having lasted longer than 24 months, the employee is in principle entitled to a transition payment. If the employee has reached state pension age (AOW-entitled), he or she is in principle not entitled to the transition payment on termination. The question is whether this exception can be viewed as age discrimination.

Exceptions to the transition payment
On the basis of Section 7:673 Dutch Civil Code it applies that if an employment contract has lasted as least 24 months and is terminated by or on behalf of the employer, the employee is entitled to a transition payment. The objective of the transition payment is twofold:

  1. compensation for the dismissal and
  2. facilitating transfer to other paid work.

The exception to the right to transition payment is set out in Section 7:673 paragraph 7 Dutch Civil Code. The transition payment is not payable if the termination or non-continuation of the employment contract:

  • (under a) takes place before the day on which the employee has reached the age of eighteen and the average extent of the employment contract was maximum twelve hours per week (in short: part-time job of a younger employee);
  • (under b) takes place in connection with or after reaching an age set by or pursuant to the law or agreed between the parties on which the employment contract ends, or, if no other age applies, the age referred to in Section 7, part a of the General Old Age Pensions Act (AOW) (in short: on reaching the AOW-entitled age) or;
  • (under c) is the result of serious culpable acts or omissions by the employee.

Age discrimination?
When determining these exceptions, the question as to whether there is age discrimination in respect of the AOW-entitled age, was extensively discussed during the parliamentary debate. The government came to the conclusion that there was no age discrimination. The difference in treatment on the basis of age is objectively and reasonably justified by a legitimate purpose, so considered the government. The purpose is to prevent a transition payment benefitting people who no longer have to rely on carrying out work to provide for their living expenses now that they receive a replacement income in the form of old-age pension. This means that there is no issue of facilitating the transition to different paid work. The first objective of the transition payment (compensation for dismissal) is not addressed in the context of age discrimination.

The Court of Appeal in s-Hertogenbosch recently announced questions for preliminary rulings on this issue. The Court of Appeal also refers to the compensation for dismissal, which is an objective of the transition payment. It is unclear as to whether this objective would not apply to an AOW-entitled person as he/she is after all not compensated. In this case, it concerned an AOW-entitled person who had chosen to stay in work to be able to provide for his living expenses. This meant that this employee was still relying on carrying out work. The Court of Appeal is wondering whether a different decision should/must be made in an individual case. In addition, the Court of Appeal considers whether Section 7:673 under b is contrary to Directive 2000/78 EC (which also deals with age discrimination).

Conclusion
The questions for preliminary rulings are still to be officially submitted to the Supreme Court, after which the wait for answers will begin. In respect of individual tests, I am of the view that Section 7:673 paragraph 8 Dutch Civil Code offers an answer. This section states that if the non-granting of a transition payment must be deemed unacceptable in accordance with the principles of reasonableness and fairness, the court can as yet award the payment. This provides a solution for individual cases, including the case set out above. In my view, the exception for the younger employee with employment of less than 12 hours (on the basis of Section 7:673 paragraph 7 under a Dutch Civil Code) must also be tested against directive 2000/78 EC. After all, this exception also distinguishes on the basis of age so there could be age discrimination here as well. For now, it is a case of wait and see when the questions for preliminary rulings are submitted to the Supreme Court and what the exact content of those questions will be. To be continued…

By Annelinde Janssen

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