Dormant employment

Employers are not allowed to dismiss sick employees during the first two years and must continue to pay wages. After that, the obligation to pay wages stops and the employee may be dismissed. In practice, however, employers often do not want to do this, because they are then obliged to pay transitional compensation. This is how dormant employment contracts come into being.

There has been much discussion about dormant employment contracts. The Transition Compensation Act was passed some time ago. Based on this compensation scheme, employers are compensated by the Employee Insurance Agency (UWV) for paying the statutory transitional compensation to an employee with long-term incapacity for work, upon termination of the employment contract. This compensation scheme means that employers are no longer burdened by the prospect of high costs.

Recently, on 8 November 2019, the Supreme Court issued a precedential ruling on the permissibility of these dormant employment contracts. It follows that an employer may not keep an employee in dormant employment. The basic principle is that an employer is obliged, on the grounds of good employment practice within the meaning of Section 7:611 of the Dutch Civil Code, to agree to a proposal by the employee to terminate the employment contract by mutual consent, subject to the award of compensation to the employee in the amount of the statutory transitional allowance.

The Supreme Court has ruled that the compensation does not have to amount to more than the amount of transitional compensation that the employer owed on the day after his obligation to continue paying wages ended.

VHP2 advises people with a dormant employment contract to contact us to see if we can open a discussion with the employer on contract termination together with payment of transitional compensation.