Termination of the labour contract

One could place the termination of the labour contract under the banner of internal sanctions. It is however, an internal sanction which effectively puts an end to the labour relationship between employer and employee (which is why some respondents do not feel it is an ‘internal’ sanction). There are multiple ways to terminate a labour contract. The employer may ask a civil court to dissolve the contract (see section 2 of this chapter), there may be a termination of the labour contract under mutual agreement (see section

3), the employer might want to dismiss someone on the spot, the employee may be the one initiating the separation and in some cases a contract might automatically cease to exist after a certain period in time. Some of these have been discussed above. In this section the remaining relevant ways to terminate a labour contract are discussed. It is interesting to note that apart from case study 17 and 19 (in which no involved person was identified) and case study 2 (in which there was not enough evidence to dismiss the involved person) termination of the labour contract in one way or another was part of every case study.79

Within the possible ways to terminate a labour contract, a scale of severity can be discerned. A summary dismissal (‘on the spot’), with possible repayment of damages, would then be the type of termination of the labour contract with the most severe consequences for the involved employee. Compared to the settlement agreement discussed in section 3, there is less room to take the interests of the involved employee into account in these other types of termination. For example, a severance payment may be paid here. When the employer initiates the termination but the employee consents to the termination, it is not necessary to involve a court (article 7:671 under 1 BW; Ministry of Social Affairs and Employment, 2015a; 2015b). This leaves some room for negotiation and influence by the employee. By not granting consent to the termination, the employee forces the employer to go to court. An agreement may then still be inserted with regard to a severance payment or other arrangements. This does not necessarily have to be in favour of the employee though: in case study 16 for example an involved person was dismissed and a payment plan for damages was also agreed to. Interestingly, consent from the employee is not necessary under certain circumstances, notably when it involves a director of a legal entity (article 7:671 under 1 e BW).

Another condition under which involvement of a court is not necessary is in cases of ‘urgent circumstances’ (article 7:677 BW). If urgent circumstances may be argued, an employee may be dismissed on the spot without court involvement (however the employee may appeal to the court in case he does not agree). ‘Urgent circumstances’ include criminal behaviour or non-compliance with (internal) rules and regulations. This termination is initiated by the employer and the employee will lose his right to unemployment benefits. There is no period of notice to take into account and the labour contract will cease to exist immediately (‘on the spot’). The employee cannot claim a severance payment and will have to compensate the employer. An important condition for a summary dismissal is ‘immediacy’. This means that the organisation

79 Since there are multiple employees involved in some of the case studies, this does not mean that the labour contract of every employee who was identified as being involved in the case has been terminated. In case study 5 it is unclear what kind of settlement was used as this was not in the report and the investigator did not remember specifically (however, the report does give the advice to use internal sanctions – which may include dismissal as well).

may take some time to investigate the matter, but will have to act as soon as it ‘has the facts’ about a norm violation in order to comply with the condition of immediacy. The condition is breached, for example, if too much time passes between the discovery of the norm violation and the initiation of an investigation and if only after that action is taken against the employee (Ministry of Social Affairs and Employment, 2015c). Often, respondents suggest, the employee is suspended from active duty to comply with this condition. As this HR manager indicates, it is not always easy to dismiss someone on the spot:

I have become less cautious, if you follow the advice of the attorneys too much you’re too careful. All they see is road blocks, they would rather be too careful than to take a shot. But experience shows that employees hardly ever use the condition of immediacy against you. Sometimes you’re just going to have to take a shot and dismiss someone on the spot and see whether he will fight you on it. Sometimes it’s not possible, your case is too weak. Investigators find that very frustrating because to them it is obvious. I often agree and I understand where they are coming from but we have to make sure it sticks in a legal sense. [Respondent 47 - client]

The more stringent demands related to a summary dismissal may mean that management or HR chooses the easier solution of a settlement agreement. Some corporate investigators express they have an issue with this practice as the feel it is overly cautious: “I mean, if there is much evidence, everything is there except a confession, they will still go for the written warning so to speak instead of a summary dismissal. How ridiculous is that?” [Respondent 48 – corporate investigator]. On the other hand, other investigators feel that a summary dismissal unnecessarily complicates matters. If the employee resists the summary dismissal and appeals to civil court, that means more work for the investigators.

Summary dismissal, I am not a fan. To be honest, I think that with a summary dismissal you get into a different trajectory – the person may fight it, get a lawyer, you go to trial and all of that takes time and manpower because we will have to generate more reports to help the lawyers in trial. It’s just a far-reaching decision and it’s hard to take it back. [Respondent 18 – corporate investigator]

A summary dismissal is often used as a sort of punishment, respondents imply. When the employer feels the norm violation is too serious to settle the matter by consent, a summary dismissal is preferred. Case studies 6, 11, 12, 15 and 20 involved a summary dismissal of the involved person. The above quoted respondent goes on to say:

It also depends on how strongly you feel about the matter. When your evidence is not very strong but you’re certain about the involvement of this person and you’re not willing to compromise, you can choose dismissal on the spot and wait and see whether it sticks. Sometimes we’re sticking to our guns and the employee disagrees, well he will have to appeal to the court. The thing is, our internal systems are very complex and employees may be able to hide behind them. That makes the whole thing a bit difficult in legal terms sometimes. When someone does not say in a statement that he did it, that makes things more difficult. [Respondent 47 – client]

Another option is that the employee is the one terminating the contract. The downside to this for the employee is that he cannot apply for unemployment benefits (which is not specific to resignation by the employee, several other types of termination also mean forfeiture of the right to unemployment benefits). On the other hand, resignation may serve the employee as it looks better on a resume than to have been dismissed. For the employer, there is the benefit of not having to go to much trouble regarding dismissal procedures and not having to pay a severance payment. In the negotiations which may follow corporate investigations, these things may be taken into account. When the involved person is a temporary worker or has a fixed-term contract, it is easier to dismiss the person than when the labour contract is for an indefinite period, respondents suggest. One could for example choose not to renew the contract without having to dismiss the person. In this case the employee retains the rights to unemployment benefits, no involvement of a court is necessary and no severance payment has to be paid. However, when the employer wants to terminate the contract before that time, the same rules apply as set out above. As fixed-term contracts may be entered for multiple years, the employer might have to act prior to the end date of the contract. If the remaining period is not too lengthy, respondents suggest that the employee may be suspended from active duty in the meantime (such as was the case in case study 21).

An employee with an indefinite contract has a stronger position than temporary workers or employees with a fixed-term contract. Dismissal of a permanent employee requires a dossier, explicating reasons for dismissal (which may be formed by the corporate investigations report). Especially when it comes to summary dismissals, standards for this dossier are high as this type of dismissal does not include a notice period or court involvement. “Before you can fire a permanent employee you need a solid dossier, for the dismissal of a temporary employee this is not necessary. When they [temporary workers] transgress, saying goodbye is pretty easy, that’s just a matter of immediately terminating the collaboration with this person” [Respondent 47 – client]. A temporary worker is employed by the temp agency, not by the organisation that uses this agency. The employer may simply not renew the contract (in the case of an employee with a fixed-term contract) or the services of that person

will no longer be used (in the case of a temporary worker). Case studies 13 and 14 involved temporary workers who were terminated.

When a transgression is serious enough, respondents state that organisations want to dismiss the person and not to keep him or her inside the organisation. Some feel that this is a pretty severe punishment in itself. “When you fire someone on the spot, he doesn’t have any rights you know. No right to social security, no right to a severance payment” [Respondent 47 – client]. Of course, it depends on the type of separation chosen but the loss of employment is seen as punishment in itself. However, when trust is broken, it is hard to retain someone in the organisation.

If we catch someone with a theft or fraud, they’ll immediately get the worst punishment. That’s the end of your job here. Prosecution works differently, you might get a probationary sentence or a fine and get another chance. Our policy is once you start doing that kind of stuff, we’re going to say goodbye. That can be pretty heavy. Someone working for years and years with us and slipping once... But the trust is gone, you know. There’s no coming back from that. [Respondent 15 – corporate investigator]

Discussion

This chapter has explored different types of ‘follow-ups’ for corporate investigations. In the case that the norm violation may be defined as criminal, organisations might decide (mostly after the investigations have been finalised) to report the case to involve the criminal justice system. There are multiple considerations compelling organisations to either report or choose not to do so. Both strategic and normative considerations may underpin the decision to report. At the same time, strategic and normative considerations also influence the decision not to report. There are various reasons for organisations to prefer to handle matters privately. Most of these motivations revolve around the concepts of the framing of (economic) crime; secrecy discretion and control; and legal flexibility and responsiveness (Williams, 2005). In cases where no criminal behaviour is involved, a report to law enforcement authorities is not even an option. Some respondents suggest that they do not report in certain cases to protect the employee who is involved. Some moral considerations may therefore be discerned here as well.

The decision whether or not to report is an important choice. Once this choice is made and the organisation has decided not to report to law enforcement authorities, other, private options remain open, as discussed in this chapter. In general terms, there are corporate settlements that involve a civil court, those that are based on

negotiations and mutual agreement between the organisation and the involved person, and those that are concluded by what is often called ‘private justice’: forms of internal sanctioning. In this chapter, the different solutions provided by different legal venues are termed ‘corporate settlements’. More generally they can be argued to provide a system of corporate justice. Within this system of corporate justice, corporate investigators and clients may be flexible, forum shopping in a way to get to the solution which is considered best suited in a certain case. This may mean that a report to the authorities is made out of strategic (for example because powers of investigation are necessary or because there is a threat of prosecution in another (harsher) jurisdiction) or normative considerations (for example an experienced need for retribution), it may mean that civil court is used to for example reclaim damages, that the private law system more generally is used to reach a mutual agreement of termination through a settlement agreement, or that internal sanctioning systems are used to either punish but retain some in the organisation, or to dismiss the involved person. All of these possibilities may be used separately but combinations between them often occur as well. A report to law enforcement authorities is for example usually combined with another corporate settlement as the report in itself does not solve the problem of the organisation. A report to law enforcement authorities seems to be regarded as an additional measure by most respondents instead of an end in itself. Other types of corporate settlements may also be combined, for example a dismissal might be accompanied by a civil suit to reclaim damages. The case studies used in this research are dominated by a form of dismissal, combined with another type or corporate settlement.

While a driving force behind the choice for a certain settlement is ‘fixing the problem at hand’, certain other considerations also seem to influence the decisions taken. The desire to punish someone might compel an employer to either report the person to law enforcement authorities or dismiss him on the spot, even when a case might not be strong enough to do so. In other instances the necessity to repair the damage done and move on might make a settlement agreement the more likely option. It is difficult to discern a fixed decision-making process. Just as is the case with many other matters in the field of corporate investigations, deciding how to handle the matter is a decision which is done ad hoc. This chapter has however discerned some considerations that may steer these decisions. The next chapter focuses on those instances in which law enforcement agencies have become involved in the corporate investigations in one way or another.

Chapter 5

Coexistence