Director under the articles of association expressing objections to new management model not seriously culpable. Director entitled to transitional allowance of €704,295.03. Variable bonus (€500,000 or more per year) is part of salary and is included in the calculation of transitional compensation.
Statutory director and dismissal
Employee has been employed by CBRE B.V. since 1994. CBRE is part of a global real estate company. As of 1 November 2012 employee is a member of the five-member statutory board of directors of CBRE. On 22 April 2020, employee was granted a bonus of € 850,000 gross. The payment was to be made in two equal parts. The first 50% was paid in April of that year and the remaining 50% would be paid after the calculated profit was actually realized, provided employee was still employed at that time. Beginning in early 2020, discussions took place within CBRE’s board regarding the renewal of the board model, which would consist of a two-member executive board and a nine-member general board. In mid-June 2020, CBRE notified employee that there would be no role for him on the board. From that point on, employee voiced his objections to the new model. On July 3, 2020, the majority of the board agreed to the new governance model. On September 23, 2020, employee was removed as a statutory director at a shareholder meeting. Employee is now requesting the award of statutory transitional compensation and a remaining bonus amount of €258,500 gross.
Entitlement to transitional allowance
As the employment contract had lasted longer than 24 months and had been terminated by the employer, the employee was in principle entitled to transitional compensation. CBRE argued that this compensation is not due because of serious culpability on the part of the employee. The court did not agree. The case involves a director who, during the period when the decision-making on a new management structure had not yet been finalised, made his objections known, partly because this affected his personal position. It is hard to see how such action could meet the high requirement of ‘an exceptional case of unlawful conduct’. CBRE itself did not take this action so seriously either. After all, it did not oppose it initially, only to do so at the end of the decision-making process, but also to indicate that it considered the matter closed and therefore did not see any obstacle to further cooperation. This does not square with the accusation that the employee had overstepped his bounds. The same applies to the fact that the mediation process that was initiated was terminated at an early stage. The parties point fingers at each other in this regard. This too does not justify the qualification of acting seriously culpable. CBRE’s defence failed and the employee was entitled to transitional compensation.
Level of Transition Fee/ Compensation
The parties then disputed the amount of the transitional compensation. In dispute was whether the salary should also include the bonuses paid to the employee. In the opinion of the court, the bonus in this case should be regarded as an agreed variable wage component within the meaning of the Pay Definition Decree (Besluit loonbegrip vergoeding aanzegzegijnterm en transitievergoeding) and the Regulation on Wage Components and Working Hours. After all, the bonuses were paid to him every year and had been for 25 years. The bonus amounted to €500,000 to €600,000 or more, certainly in the last ten years. In addition, it appeared that the bonus award depended, among other things, on the turnover achieved and on some discretionary invoices, including the performance of the individual employee. Thus, the bonus is part of the salary, so that it must be included in the calculation of the transitional allowance. Based on a monthly salary (including bonus) of € 81,068.33, the transitional allowance works out at € 704,295.03. CBRE was ordered to pay that amount.
Including remaining bonus
Finally, the court ruled – in brief – that part of the remaining bonus was apparently ready for payment prior to the shareholders’ meeting of 23 September 2020, but was subsequently removed from the payment list. Thus, this revenue had apparently already been realized and collected. The conditions for awarding the bonus have therefore been met as far as that part of the bonus is concerned. CBRE was ordered to pay Employee the amount of € 148,000 (gross) in remaining bonus, plus statutory increase and interest.
Questions about non solicitation, non competition, secrecy or penalty claus or dismissal please contact Eva Jongepier, lawyer at Fennek.