In summary proceedings, on 28 March 2019 the district court in The Hague passed a judgment on a dormant employment contract which looks likely to usher in significant changes.
What was involved in this case?
This case involved an employee who had worked for a foundation (or its legal predecessor) since 1 December 2005 and was appointed the foundation's statutory director on 1 January 2014. In 2013, she was given a cancer diagnosis and, since 8 February 2016, had been unable to work due to her illness. In September 2018, the doctor treating her informed her that all medical treatment options had been exhausted, meaning she was terminally ill.
On 14 February 2017, she was dismissed from her role as statutory director, and was not given any reasons. The employment contract between the employee and the foundation remained in place but, because she was no longer statutory director, became an empty shell. The foundation effectively rendered the employment contract dormant. This prompted the employee to demand the termination of her employment contract, along with payment of the statutory transition allowance.
The dormant employment contract
Let's start by briefly clarifying what a ‘dormant employment relationship’ is. This has been a subject of debate for quite some time. A ‘dormant employment contract’ arises when, after two years of illness, an employment contract is not terminated by the employer. The employment relationship continues, but is dormant, because the employee is not performing any work (due to being unfit for work) and the employer therefore no longer has to pay a wage. More often than not, employers allow employment contracts to become dormant in order to avoid paying a transition allowance to the ill employee, as the employment contract has not been terminated. However, dormant employment contracts are not without complications. (Link)
In the past, various employees have taken court action against their dormant employment contract, seeking termination with a transition allowance. Yet, for the most part, these applications have been rejected by the courts, on the grounds that non-termination of an employment contract with the aim of avoiding paying an allowance does not constitute a seriously culpable act by the employer.
The ruling in the proceedings for interim measures
However, the judge in the proceedings for interim measures before the court in The Hague reached a different decision. In his view, it can no longer be argued that maintaining a dormant employment contract is not inconsistent with the principle of being a reasonable and fair employer (Book 7, Article 611 of the Dutch Civil Code). The main reason for this, according to the judge, is the ‘Wet compensatie transitievergoeding’ (Dutch transition payment (compensation) act) which, he argues, was created to encourage employers not to maintain dormant employment contracts. Moreover, it is the legislator's express intention to combat dormant employment contracts.
Therefore, in this case, the employer had to terminate the employment relationship with the employee who had been unfit for work for more than two years, without observing the notice period, and pay her the allowance.
This is quite a big change compared with previous rulings of the courts in such cases! However, it remains to be seen whether other judges will follow suit.
If your employment contract is dormant, or you would like more information, get in touch with one of our employment lawyers!