Right to accrue holidays after two years of illness? Answers coming soon!

The case concerns the settlement of an employment contract with an employee who has been incapacitated for work since July 2023. The employer’s obligation to continue paying wages ended after 104 weeks, on 27 July 2025. About a month later, on 21 August 2025, the employer informed the employee that the employment contract would be terminated. Between 27 July 2025 – when the employee had been ill for two years – and 21 August 2025, there was a dormant employment relationship. The employee is requesting payment of holidays that she claims were accrued during this dormant period.

A dormant employment relationship refers to a period in which the employment contract has not yet formally ended, but the incapacitated employee is no longer entitled to wages and has no reintegration obligations. Under Article 7:634 of the Dutch Civil Code, holidays are only accrued over the working hours for which an employee receives wages. The right to vacation is therefore linked to the right to wages. Since the employer’s wage payment obligation ends after the second year of sickness, one could argue under Article 7:634 that the employee no longer accrues holidays. From there, two lines of reasoning emerge.

European law

On the one hand, support can be found in European law. Unlike the Dutch system, where the right to vacation is linked to the right to wages, Directive 2003/88/EC links the right to annual leave to the performance of work. However, there is an exception: sickness. For the purpose of vacation accrual, no distinction is made between employees who are unable to work due to sickness and employees who have actually worked.

Member States may not impose additional conditions on the creation of the right to annual leave. The Dutch provision in Article 7:634 BW effectively does impose such a condition, which under this interpretation would not be permitted. Although Dutch courts must interpret national law in line with EU directives where possible, that approach offers no solution here. Interpreting the provision in line with the directive would be ‘contra legem’ (i.e., contrary to the wording of the statute), which courts are not allowed to do.

However, Article 31(2) of the Charter of Fundamental Rights of the European Union may provide a solution. In the Max Planck judgment, the Court of Justice of the European Union clarified that national courts must set aside national rules that conflict with Article 31(2) of the Charter. This would mean that Article 7:634 BW should be disapplied and that vacation accrual would simply continue after the second year of sickness.

Specific circumstances

On the other hand, there may be specific circumstances that justify a deviation from the right to annual leave. Such circumstances could exist in the case of a dormant employment relationship.

A defining characteristic of a dormant employment relationship is that the core obligations of the employment contract — work and pay — no longer have to be fulfilled. The employment relationship has essentially become empty in substance. As a result, the right to vacation loses its purpose. Holidays are intended to allow employees to rest and recover from work and to enjoy a period of relaxation and leisure. Since there is no work to recover from during a dormant employment relationship, these objectives can no longer be achieved.

In addition, after the second year of sickness, employees often rely on a social security benefit, which generally continues during vacation periods. In that way, the employee can already take leave while retaining their benefit. If the employee were also to accrue paid holidays during the same period, this would effectively amount to double compensation. For that reason, it might be more logical that employees in a dormant employment relationship after the second year of sickness no longer accrue holidays.

What happens next?

In the autumn of 2025, parliamentary questions were already raised about this issue. According to the Dutch government, the Dutch vacation legislation does not conflict with European law, and the government therefore saw no reason to amend the legislation. Nevertheless, legal scholarship and case law remain divided.

To put an end to this uncertainty, the District Court of Rotterdam intends to ask the Dutch Supreme Court to provide a definitive ruling.

Even then, the matter may not yet be fully settled. It is possible that the Supreme Court will in turn submit preliminary questions to the Court of Justice of the European Union. It may therefore take some time before the legal uncertainty is definitively resolved.

In the meantime, employers would be wise, as a precaution, to terminate the employment contract as soon as possible after the second year of sickness if there are no remaining work possibilities for the employee. This helps prevent the potential accrual and later payout of additional holidays.

We will keep you informed about developments on this topic. If you already have questions, please feel free to contact the Employment Law Team — we are happy to help. Not yet a subscriber? Then sign up here for our newsletter.