An issue that began to arise since the entry into force of the WWZ in 2015 was that of the so-called dormant employment.
This situation occurs when an employee has completed the two-year period of incapacity for work, after which the employer’s obligation to continue to pay wages comes to an end. The law then did allow for the possibility of terminating the employment contract (after all, the prohibition on giving notice due to illness had ended) but with the introduction of the WWZ, this also meant that the employer (who, after all, took the initiative to terminate the employment contract) had to pay the employee the statutory transitional compensation.
In practice, in many cases the employer did not take the initiative to terminate the employment contract, so that it continued and the employer, without having to continue paying wages, could also avoid paying the transitional allowance. The employment contract thus became “dormant”
In September 2019, the Supreme Court received an opinion from the Advocate General (AG) on dormant employment, after an employee started proceedings about this. With this, the prelude to the judgment was already given.
On Friday, November 8, 2019, the Supreme Court issued the long-awaited ruling in the preliminary ruling on the employee’s right to termination of the dormant employment contract because of the right to transitional compensation: an employer may not, in principle, keep an employee in employment ‘dormant’ against his will, in order to avoid payment of the transitional compensation.
The essence of the ruling is that an employer does not meet ‘the requirement of being a good employer’ to keep a long-term disabled employee in dormant employment when this employee requests the termination of his employment contract, with payment of compensation equal to the transitional compensation.
The Supreme Court based its decision that an employer should terminate a dormant employment contract if he has no reasonable interest in continuing the employment contract and that, in principle, he must pay compensation for this on the Transition Compensation Act. This act regulates as of 1 April 2020 a compensation of the payments employers have made since 1 July 2015 in case of dismissal due to long-term disability. With this law, the government wants to put an end to dormant employment contracts.
In concrete terms, this law means that the employer does not have to pay more than the amount of transition pay that the employee would receive at the time of dismissal after two years of illness.
The ruling is expected to result in many employees reapplying to their employer to terminate employment and pay compensation in the process. If there is no exceptional situation justifying dormant employment, the employer will have to comply with his employee’s request. It requires little imagination that this decision is going to be quite costly for employers with multiple dormant employment contracts.
U will find the decision from the High Court here (ECLI:NL:HR:2019:1734) vinden.