Employee who terminated his first employment contract himself, gets the worst of the bargain

If an employment contract is terminated on the initiative of the employer, the employee is in principle entitled to receive a transition payment. In order to calculate this amount, it must first be determined exactly how long the employee's employment history has lasted. A recent ruling, however, shows that not always the entire employment history ought to be taken into account when calculating the transition payment

The Dutch Civil Code states in Section 7:673 (4) that one or more previous employment contracts between the same parties, which have succeeded each other with intervals of not more than six months, are added together for the calculation of the term of the employment contract. The question is: does this rule also apply if a previous employment contract was terminated at the employee's explicit initiative?

This question was recently answered in the negative by the District Court Midden-Nederland. The case concerned an employee working as a sales manager for employer from 1 October 2013 to 1 July 2019. On 1 July 2019, the employee gave notice of termination of his employment contract and went to work elsewhere. However, in September 2019, employee contacted his old employer again. The parties entered into discussions, the result of which was that as of 14 October 2019, the employee started working for the employer again, this time as an order manager on the basis of a permanent contract.

Unfortunately, the new employment relationship was not long-lasting: on 2 November 2020, the subdistrict court dissolved the employment contract as of 1 January 2021. The employer paid a transition payment of € 2,311.55 gross to the employee, based on the date of commencement of employment on 14 October 2019. However, according to the employee, this was incorrect: he had previously worked for this employer from 1 October 2013, and the interval was shorter than six months.

The Court ruled as follows. The legislative history of Section 7:673 subsection 1 in conjunction with subsection 4 of the Dutch Civil Code does not explicitly indicate how this situation should be judged. However, the Court agreed with the employer in this case that a strict application of this statutory provision 'according to standards of reasonableness and fairness' may be unacceptable.

In that context, it is relevant that the starting point for the obligation to pay a transition payment, is that the employment relationship was terminated on the initiative of the employer. In addition, the underlying idea of maintaining seniority (in continued employment relationships) seems to be: protecting employees against arbitrariness, abuse and unlawful discrimination, establishing a full and stable employment relationship with the employer, compensation for loyal service in the event of dismissal and a fair distribution of risks in the event of dismissal in proportion to the employee's specific investment in the relationship.

In this light, the Court ruled that it was crucial that the first employment contract (1 October 2013 - 1 July 2019) had ended at the employee's own initiative. Therefore, in October 2019, the employer was not obliged to re-employ the employee. According to the Court, awarding a transitional allowance for the period 1 October 2013 - 1 July 2019 does not seem to have been the intention of the legislator.

In addition, the Court indicated that the purpose of the transition payment is to compensate employees for dismissal and to make the transition to a new job easier. However, if in this case the employee were to receive transitional compensation for the period of his first employment contract, he would - despite his own termination - be rewarded by returning to his old employer within six months, while his employer would be punished by rehiring the employee. This is at odds with the essence of the legal provision on transition payments.

In short: the Court ruled that the employee was not entitled to receive a transition payment for the period of his first employment contract, as the employee had terminated that contract himself.

You can read the entire judgment here.

Do you also have questions about the transition payments, seniority or other employment law topics? The employment lawyers at SPEE advocaten & mediation are ready to help you.