An assistant hotel manager opens his own restaurant shortly after his employment contract was terminated with a settlement agreement. The employer feels it has been misled and nullifies the settlement agreement out of court for fraud or error. The new restaurant owner claims performance. How does the court rule in summary proceedings?
Plea of error
The court stated first that the purpose of a settlement agreement is to settle an uncertainty or dispute definitively. Therefore, the employer's reliance on error should be judged with restraint, but it is not excluded.
Breach of duty of disclosure?
The employer argues that the assistant hotel manager (hereinafter manager) breached his duty of disclosure. At the time of signing the settlement agreement, the manager had concrete prospects of operating his own business. A newspaper article about the opening dates from just one week after the settlement agreement was signed. By then, the lease on the premises had already been signed, the permit had already been applied for, the registration with the Chamber of Commerce had been completed and the renovation was already underway. The employer feels that the manager should have informed him of this. The employer would never have entered into a settlement agreement with the manager on the same terms if it had known that the manager would be able to start working in his own restaurant the next day, so to speak.
The subdistrict court considered as follows. In general, it is assumed in case law that an independent duty of disclosure on the part of the employee only arises if he has been made a concrete and detailed offer to enter into an employment contract. This involves concrete prospect of other income. In this case, there was no evidence that, at the time the settlement agreement was signed, the manager was already working in his restaurant and generating substantial income from it. While he had already taken several steps towards starting his own business, at that time he had no definite view of actually opening his restaurant. He was still awaiting the necessary licence. Under those circumstances, the manager did not have to communicate on his own accord that he had (elaborate) plans to start working as an entrepreneur. After all, there was no concrete prospect of (substantial) income from that venture yet.
Employer did not ask about plans
The parties explicitly agreed in the settlement agreement that they had raised all the issues relevant to them when they reached that agreement. It is established that the employer did not ask about the manager's future plans during the (months-long) negotiations. If, for the employer, information about any prospect of other work was as essential in the context of the settlement agreement as it now claims, it would have been in its power to point this out to the manager at some point during the negotiations and ask about it. The employer's claim that it saw no reason to do so because of the manager's incapacity to work cannot help him. After all, the parties recorded in the settlement agreement that the manager was no longer ill at that time. As the parties were aiming for a termination of the employment relationship, the employer cannot be surprised that the manager started orientating himself on the labour market and making plans for the future. For that reason too, the subdistrict court preliminarily held that the manager had no duty of disclosure because, in the circumstances, he did not have to suspect that his plans to open a restaurant would be an essential part of the compensation negotiations.
Conclusion judge
The conclusion from the above is that the manager had no duty to make (spontaneous) announcements to the employer about his intended plans. In the preliminary opinion of the subdistrict court, there was therefore no question of fraud and/or error. The settlement agreement is not voidable on that ground.
The foregoing leads to the (preliminary) conclusion that it is likely that the court will rule in proceedings on the merits that the annulment of the settlement agreement was not justifiably done and it had no legal effect. The settlement agreement therefore remained unchanged for the time being. The manager's claim to order the employer to honour the agreement will be upheld.
Note: The court is clear. If information about the prospect of other work was essential to the employer in the context of the settlement agreement, it should have asked the manager about it. The manager himself did not have to say anything about this because he had no concrete prospect of substantial income from the new company at the time.
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