May an Employer Offset Excess Taken Holiday against the Final Settlement?
Holiday entitlement, including the accrual and use of leave, forms an essential component of the employment relationship. Upon termination of employment, it may occur that an employee has taken more holiday than they have accrued. This raises the question: may an employer deduct such a negative holiday balance from the final settlement? The Amsterdam Court of Appeal recently ruled on this issue. This article explains the implications of that judgment.
Facts
A secondary school teacher retired early with effect from 1 September 2022. In the weeks prior to his retirement, he took holiday leave during the summer holidays, which, for the Northern region in 2022, were scheduled from 16 July to 28 August. The teacher’s employment contract was governed by the Dutch Collective Labour Agreement (CLA) for Secondary Education. Under Article 14.1 of this CLA, teachers who are not employed for the full academic year (from 1 August to 1 August) accrue holiday leave on a pro-rata basis corresponding to the number of months employed within the relevant school year. Since the teacher was only employed for one month in the 2022/2023 school year, his holiday taken in August resulted in a negative holiday balance.
The employer deducted the negative holiday balance – valued at €3,980.44 gross – from the final settlement of the employment relationship. The teacher contested this deduction and initiated legal proceedings. The case ultimately proceeded to the Court of Appeal.
Judgment of the Court
The Court held that the employer was entitled to offset the negative holiday balance against the final settlement. Given that the teacher had taken more holiday than he had accrued, the situation effectively constituted an advance on his August salary. As this advance was paid without entitlement by the end of the employment relationship, the employer was permitted to recover the amount through deduction from the final payment.
The Court further ruled that this deduction did not contravene the principle of good employment practice as laid down in Article 7:611 of the Dutch Civil Code (DCC), nor did it violate the principles of reasonableness and fairness under Article 6:248 DCC. This was the case even though the employer had not informed the teacher of the consequences of his resignation effective 1 September 2022 on his holiday entitlement. The Court also found that the circumstances did not fall within the scope of Article 7:628 DCC (i.e., no work performed due to a cause for which the employer is reasonably responsible). Accordingly, the teacher’s claims were dismissed.
Read the full judgement here.
Implications for practice
This ruling highlights the importance of clear agreements between employers and employees regarding holiday accrual and usage, and the implications of early termination of employment. For employers in secondary education, the decision confirms that – based on the CLA for Secondary Education and the Dutch Civil Code – they are entitled to deduct negative holiday balances, provided such deductions are correctly calculated and lawfully executed in accordance with the applicable CLA and statutory provisions. Employees are advised to closely review their holiday accrual upon termination and remain aware of potential deductions.
Conclusion
The judgment of the Amsterdam Court of Appeal confirms that offsetting a negative holiday balance upon termination of employment is lawful, provided it complies with relevant statutory and contractual regulations. This provides employers with greater legal certainty when recovering overpaid salary and gives employees clarity regarding their rights and obligations concerning holiday entitlements. Clear communication and a sound understanding of CLA provisions and employment law remain vital to avoid disputes.
Do you have questions regarding the deduction of holiday entitlements upon termination of employment or other employment law matters? The team at SPEE advocaten & mediation is ready to provide you with expert legal advice.