17 January 2024
It is well-known: ‘Europe’ considers the right to four weeks’ paid holiday to be a fundamental right. For many years, the EU Court of Justice has emphasised this ‘essential principle of social law’ in case law.
On King’s Day, the Court added a ruling that may have implications for the relationship between the exemption from work and taking holidays as part of a settlement agreement (vaststellingsovereenkomst). More on this at the end of the blog: firstly a brief overview of what this European holiday entitlement also entails in terms of consequences and obligations for the employer.
Article 31 of the EU Charter (Handvest van de EU) contains the ‘fundamental right’ to paid holidays, which is further elaborated in article 7 of the European Working Time Directive (Arbeidstijdenrichtlijn). Dutch law is obliged to comply with this. For example, 10 years ago Dutch law had to be amended to give employees the right to accrue holidays during illness. On the other hand, in principle an employee who is ill and wants to go on holiday must also take days’ holiday. An employee who is unfit for work is entitled to 100% of their salary during holidays.
An employee can only lose their entitlement to statutory days’ leave after a certain period of time: in the Netherlands, this expiry period is six months after the end of the calendar year in which the statutory days’ leave were accrued. That is, as of 1 July of a year. But this only applies if the employer has actually allowed the employee to take their statutory days’ leave and informed the employee of the expiry period.
Tip for employers: remind employees individually and specifically each spring that they must take their statutory days’ leave before 1 July of the following year or they will lose them, and also enable the employee to take these statutory days’ leave.
If the employer fails to do this, the employee retains the right to the unused statutory days’ leave from the previous calendar year. The employee will also be entitled to keep these days even longer than five years, so they will no longer be subject to a time limit. At least this is what The Hague Court of Appeal ruled on 16 November 2021. According to his conclusion in early 2023, the Advocate General of the Supreme Court agrees with this ruling. This autumn, it will become clear whether the Supreme Court will also rule that if the employer breaches its duty of care and information obligation, the employee can then keep their statutory days’ leave for many years.
An employee is entitled to four weeks’ paid holiday if they work full-time. Almost all employees in the Netherlands are entitled to extra holidays, known as days’ leave over and above the statutory minimum. European legislation does not apply to days’ leave over and above the statutory minimum: within the limits of Dutch law, an employer may therefore make arrangements that may be disadvantageous to the employee. For example, days’ leave over and above the statutory minimum may be cashed in, provided this is agreed in writing. Obviously, this entails costs. Days’ leave over and above the statutory minimum expire after five years and not after six months. The employer may also agree with the employee that days’ leave over and above the statutory minimum only accrue to a limited extent during illness or can only be carried over to a subsequent year to a limited extent.
When cashing in days’ leave over and above the statutory minimum and paying out holidays after the end of employment, the employer should remember that the value of a days’ holiday is more than just the basic salary. In fact, the value of a days’ holiday often includes holiday pay, average bonus, structural overtime pay and other allowances. Moreover, it is the employer’s responsibility to keep proper records of holidays to determine how many days of holiday the employee is entitled to.
In addition to these obligations for employers concerning holidays, the EU Court of Justice apparently considers in its BMW ruling on 27 April 2023 that exemption from work and the compulsory take-up of holidays do not coincide. This European ruling was quite specific and concerned an employee who was unfit for work and with whom an early retirement plan had been agreed upon. Taking into account the above broad application of the fundamental right to four weeks’ paid holiday, this ruling could mean that if an employer and employee make the standard arrangement in a settlement agreement that the employee will take their accrued holidays during an exemption from work, the employee can still claim payment of the days’ holiday afterwards.
Tip: The Supreme Court already ruled in January 2000 that such an agreement is valid if it is part of a package deal in the form of a settlement agreement. Nevertheless, in view of this European ruling, it seems wise to include in a settlement agreement that the employee will first take their accrued and future days’ holiday and then exempt them from work afterwards.
If you have any legal questions or would like more information, please do not hesitate to contact us.
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