[author: Merel Keijzer]*
The Dutch Supreme Court issued a decision in November 2019 on whether “dormant employment” arrangements were permissible. Employment becomes dormant when the employee is unfit for work for more than 104 weeks. The obligation to continue paying wages then lapses but the employment contract remains in force. The employee is entitled to a transition payment as soon as the employer terminates the contract. This is often a good enough reason for employers, who will just have finished paying salary for two years, to retain the employee on a “dormant” status basis.
The Supreme Court put a stop to this practice. The Court determined that the employer has to cooperate with an employee’s application to terminate the employment relationship and must make the statutory transition payment. This action is in keeping with the employer’s statutory obligation to act as a good employer.
While the Supreme Court resolved a lot of uncertainty with its decision, some questions remained surrounding the practice. The Rotterdam District Court recently issued a ruling on whether a “good employer” has to actively tell its employee about this Supreme Court ruling.
What was this case about?
In December 2019 the employee had been off work due to illness for 104 weeks. In January 2020, the employer suggested termination of the employment contract with an award of the transition payment. The employer wanted to use the lower transition payment pursuant to the Dutch Balanced Labour Market Act (Wet arbeidsmarkt in balans (Wab)) that came into effect on January 1, 2020.
The employee argued that he was entitled to the transition payment that ought to have been paid for termination in December 2019. He applied to the Sub-District Court for an order against the employer to pay that amount. The employee argued that the employer should have actively informed him about his legal position and options back in December 2019, after 104 weeks of his being off work. The employee asserted that the employer’s failure to notify him about the decision and its implications was a breach of the employer’s obligation to provide information.
The employee relied on European case law, to the effect that employers could not avoid their obligations simply because the employee had not made an application. After all, the employee argued, an employer’s silence should not be rewarded.
No duty to provide information
The Sub-District Court disagreed with the employee’s arguments, reading into the Supreme Court’s judgment that the employee was under a duty to speak up. The employer was under no obligation to take any action until and unless the employee made an application to terminate the contract, i.e., “spoke up.” The Sub-District Court saw no reason for assuming any obligation on the employer to pass on information.
… but rewarded for silence?
The employee’s reliance on European case law also foundered. The reduced payment was the result of a statutory amendment that was beyond the employer’s influence. The Sub-District Court also felt it was significant that there was a compensation scheme in place for transition payments that were paid out after the end of a dormant employment relationship. The higher transition payment that the employer would have owed if the contract had been terminated in December 2019 would have been fully compensated, so that the situation that had arisen was of no financial benefit to the employer. It was not, therefore, rewarded for its silence.
The Rotterdam District Court has left unanswered what happens when neither the employer nor the employee takes the initiative to terminate a dormant employment relationship. In that instance, the employer is not obligated to pay any transition payment for a long time. Does that silence reward the employer? No doubt, the case law on this point will be developed further. For the time being, we may assume that an employer in a dormant employment relationship has no duty to provide information.
*Professional Support Lawyer at CLINT / Littler.
