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The next ruling on sleeping employments: are we wide awake?

28 Nov '22

This article is co-written by our student intern Aimée Ishimwe.

It has been the subject of many cases since the Work and Security Act (in Dutch: Wet Werk en Zekerheid or WWZ) entered into force on July 1, 2015: the so called ‘dormant employment agreements’. On November 11, 2022, the Dutch Supreme Court ruled once again on the obligation for an employer to terminate a dormant employment agreement on request of the employee. In this article, we inform you on what the Dutch Supreme Court has ruled in its latest decision and what this means for employers.

The Xella decision

First, a recap: three years ago, the Dutch Supreme Court decided in the Xella case that the employer must concur with the employee’s request to terminate a dormant employment agreement. The agreement is deemed to be dormant when the employee is unable to work due to illness, the reintegration and salary obligations of the parties have ended, but the employee remains employed.

Usually, this is the result of the employer’s unwillingness to pay the statutory severance payment (in Dutch: transitievergoeding) of one-third of a monthly salary for each year of employment. Employers are usually unwilling to terminate the employment agreement, because they have already continued to pay wages during illness for a period of two years. It might feel unjust to have to pay a severance on top of that.

There is one exception to the rule mentioned in Xella: employers may refuse a request for termination if they have a legitimate interest in maintaining the employment agreement. For example, this is the case when an employer can reasonably expect the dormant employee to reintegrate in their role.

Compensation of the statutory severance payment

Although the Xella decision provided for an exception, employees who had been unable to work due to illness were usually entitled to the statutory severance payment when dismissed after two years. To cater to the argument that this was unfair, a compensation arrangement was introduced as of April 1, 2020, with retroactive effect until July 1, 2015. This permitted employers to apply for reimbursement of the statutory severance payment at the governmental organization UWV (in Dutch: Uitvoeringsinstituut Werknemersverzekeringen).

Nevertheless, UWV did not reimburse the employers for which the obligation to continue payment of salary (also known as the ‘waiting period’) had ended before July 1, 2015. As a result, the employers kept the employees for which this was the case employed, and their employment agreement became dormant.

However, last summer the Central Appeals Tribunal (in Dutch: De Centrale Raad van Beroep) ruled that UWV needed to reimburse these employers as well. This means a reimbursement of the statutory severance paid to employees, for whom the waiting period ended before July 1, 2015 and whose employment agreement was terminated after July 1, 2015.

The Supreme Court

On November 11, 2022, it was finally up to the Dutch Supreme Court to rule on the scope of the Xella decision and decide when the employer is obligated to agree to a dormant employee’s request. It was decided that the employer must agree if the statutory right to terminate was established before July 1, 2015 and the proposal is made on or after July 20, 2018. On this date, the Statutory Severance Payment Act (in Dutch: Wet Compensatie Transitievergoeding) was published and from then on, employers could have been aware that the severance payment was compensated. This eliminates the employer’s interests in keeping a dormant employee employed, as stated by the Dutch Supreme Court in Xella.

It is unimportant whether the statutory right to terminate the agreement originated from before July 1, 2015 (the employee is a 'deep sleeper') or after (the employee is a 'semi-deep sleeper'). An employer who terminates the agreement with a dormant employee after July 1, 2015 is simply entitled to compensation for the severance payment. Even if the agreement became dormant before July 1, 2015 (the date on which the WWZ has entered into force), otherwise there would be no incentive to terminate the agreement.

An employer who did not accept an employee's proposal to terminate a dormant employment agreement before July 20, 2018, cannot be held liable for this. After all, the employer could have only been aware of the entitlement to compensation for the statutory severance payment after this date, due to the government’s publication.

In conclusion

Now, what does this mean if you are an employer? If you have a dormant employment agreement with an employee and they make a proposal to terminate this agreement, you must, in principle, agree to this. In that case, you are also obliged to pay the statutory severance payment, as calculated up on to the end of the waiting period. However, you are entitled to compensation for this by UWV, if requested within six months after payment of the statutory severance payment.

Want to know more about a dismissal, sickness, or other employment law issues? Please contact one of our employment law attorneys.

Contact

Attorney at law

Floortje Sodenkamp

Expertises:  Employment law, Employee participation,

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