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When the company's top manager has waived his/her job protection against severance pay, the rules of the game that apply on the day the employer wants a change of manager are crucial. In HR-2026-221-A, the Supreme Court clarifies the minimum requirements that apply to case management and the basis for decision-making before a severance pay agreement can be utilised.
Briefly about the case
According to the Working Environment Act, the company's top manager can waive his or her job protection in return for severance pay. This means that the employer has the opportunity to dismiss the person in question without just cause.
In the case in question, a municipal director had entered into such an agreement with her employer. When the employer later dismissed the director, she claimed that the dismissal was invalid, as she believed that there was a non-statutory requirement for objectivity when dismissing a senior manager.
The question for the Supreme Court was whether there is such a requirement for objectivity and minimum procedural requirements for the termination of employment pursuant to a severance pay agreement.
The Supreme Court's assessments and conclusion
The Supreme Court initially notes that the employer's decision to resign is an alternative to a dismissal, and that the employer is not obliged to justify the implementation of a resignation agreement or follow the procedural rules for dismissals. Furthermore, the Supreme Court considers that the resignation is not an individual decision, with the consequence that the employer is not obliged to follow the procedural rules of the Public Administration Act.
The Supreme Court states that the employer is nevertheless subject to certain minimum requirements for case processing, but that the threshold for rejecting a decision to resign is high.
According to the Supreme Court, the employee should be notified that the employer is considering utilising the resignation agreement. However, this is not an obligation, but a rule of behaviour.
Furthermore, the Supreme Court concludes that the court can verify whether the decision to resign in return for severance pay is an abuse of the right of management. In such an assessment, consideration must be given to whether the decision is arbitrary or based on extraneous considerations, and whether the decision is based on a materially incorrect fact.
In the specific case, the Supreme Court found that the municipality had not abused its right to govern. The former municipal director had been made aware of the overall assessments, was given the opportunity to counter them with the assistance of a lawyer, and the municipal council did not rely on significantly incorrect factual assumptions or extraneous considerations. The decision to resign was therefore valid.
What does the judgement mean in practice?
- The judgement illustrates the seriousness of waiving job protection in return for severance pay.
- Once such an agreement has been entered into, it will be difficult to challenge the employer's decision afterwards.
- It is therefore particularly important that the terms for severance pay and the process surrounding resignation are clearly regulated.
- For senior executives, the judgement implies a very narrow job protection - only serious errors can result in a resignation decision being invalid.
Advokatfirmaet Halvorsen has extensive experience in labour law. We assist in the drafting of severance pay agreements, as well as assistance in disputes concerning resignation in return for severance pay and the employer's management rights.
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