On 8 November 2019, the Supreme Court ruled on the pros and cons of dormant employment, ending the existing uncertainty.
Dormant employment defined
Firstly, the Supreme Court has now defined what dormant employment is:
“That is an employment contract that an employer has not cancelled after two years of an employee’s incapacity for work, although he is authorised to do so, and whereby he no longer pays the employee wages. Because the employment contract has not been terminated, the employer does not owe any transitional compensation. ”
Obligation to terminate dormant employment?
The Supreme Court also answered the question of whether an employer is obliged by virtue of the standard of being a good employer (following Article 7: 611 of the Dutch Civil Code) to agree to a proposal by the incapacitated employee to terminate the ‘dormant employment’, whereby the employee is entitled to a severance payment.
The Supreme Court decided that this is the case and argued this by pointing to the intention of the legislator to put an end to the phenomenon of dormant employment. To this end, the legislator created the Compensation for Transition Payment Act.
Based on this compensation scheme, the Supreme Court ruled that it is a standard of being a good employer within the meaning of Article 7: 611 of the Dutch Civil Code that, in principle, a dormant employment must be terminated if the employee so requests and the employer has no reasonable interest in continuing the employment contract. This standard also means that the employee is entitled to compensation.
Compensation for employee
The Supreme Court has also determined how high the compensation should be. The amount of compensation that is awarded to the employee should not be in line with the amount that the employer could be compensated for on the basis of the UWV compensation scheme. Under certain circumstances, that compensation may be lower than the amount to which the employee is entitled based on the statutory transitional allowance.
The employer must pay the employee the statutory transitional allowance that is calculated on the day on which the employer could terminate the employment contract due to the employee’s incapacity for work. This applies regardless of the amount of any compensation that may be received by the employer.
Employers may therefore not limit the reimbursement to the compensation that they could (possibly) receive from the UWV. On the other hand, they do not have to pay the higher transitional allowance, which was a consequence of the longer duration of the employment.
Practically speaking, the statement comes down to the following:
- When the requirements of article 7: 699 paragraph 3 opening words and under the Dutch Civil Code are met, namely:
- Employee is unable to work for 104 weeks;
- There is no prospect of recovery within 26 weeks;
- The employee cannot be reassigned to a suitable position within 26 weeks.
- The employee may then make a proposal to terminate the employment contract by mutual consent;
- In that case the employer is obliged to accept that proposal on the grounds of being a good employer (7: 611 of the Dutch Civil Code);
- Where the employer pays the employee the statutory transition allowance, calculated on the day of 104 weeks of disability + 1 day.
The Supreme Court stated one exception to this rule, and finds that the obligation to provide evidence and the burden of proof of this exception lies with the employer. The standard does not apply if the employer has a legitimate interest in maintaining the employment contract. The example of the Supreme Court are real reintegration possibilities for employees.
The Supreme Court also gives two negative examples. If an employee makes a proposal shortly before he reaches retirement age, there is no question of a legitimate interest on the part of the employer to continue the employment (until that date). A poor financial position on the part of the employer and / or the inability to pre-finance the transition payment are also not seen as a legitimate interest, since the Compensation for Transition Payment Act forces pre-financing of the due payment.
Is the exception a dead letter?
I am curious how this statement, and in particular the exception to the rule, will work out in practice. The ruling may be a solution for the distressing cases. I do suspect that the last word on this subject has not yet been written. I cannot think of an example of the real reintegration possibilities based on which the employer has an interest in maintaining the employment contract, while the aforementioned requirements of 7: 669 paragraph 3 sub b BW are met. Meeting these is in turn the condition for being able to speak of dormant employment. The aforementioned exception therefore appears to be a dead letter.
Do you have a question about this subject? Please contact me.