Initial employer remains liable for paying compensation of damages because of not insuring Invalidity Benefits Shortfall (WAO-shortfall)

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Supreme Court February 10th 2012,, LJN: BU7249


An employer, who had failed to insure his employee for invalidity benefits shortfall (from here referred to as WAO-shortfall) and therefore was obliged to compensate the consequent employee’s damage, had to continue paying this compensation despite the fact that the employee was subsequently employed by another private limited company (B.V.).

A construction company had, under the applicable collective agreements, the obligation to insure its employees for WAO-shortfall, but had failed to do so. Since 1978 the construction company employed an employee who, on January 24th 1999, became incapacitated for work and who, as a result, effective from 24th January 1999, received full invalidity benefits. The so-called "WAO-shortfall" entered into force for him on January 24th 2002 and implied for him that his invalidity benefit dropped about € 400 per month. This was the moment that he discovered that no WAO-shortfall insurance had been taken out, so he addressed his employer for compensation. However, since by letter of 28th May 1999 the construction company had announced that henceforth he was “on ongoing employment terms”, employed at another private limited company (B.V.) who belonged to the same group, he addressed this other B.V. for compensation. With delays and hesitations this B.V. monthly pays the employee this com-pensation until February 1st 2005. When on February 16th 2005 the B.V. was adjudged bank-ruptcy, the employee addresses the initial building company again to pay the compensation. But this company now claims not to be the one who should pay the compensation.

Then it comes to a procedure in three judicial authorities. After the Subdistrict Court had ruled that, because of his behaviour, the employee had “forfeited” his right, to more compen-sation from the construction company and after the Court of Appeal had confirmed the magistrate’s ruling, the Supreme Court had to decide on the case.

Firstly the Supreme Court notes that the Court of Appeal did not base its judgment on the decision that in a transfer of an enterprise rights and obligations under the employment con-tract have been transferred to the liquidated B.V. The court holds that the employee entered employment at the bankrupted B.V. and concludes from a number of facts and circumstances that the liquidated B.V. also has taken over the obligation to pay compensation of the construction company. But here the Supreme Court disagrees. The omission that had given rise to liability for compensation was dated before the date the employee became incapacitated and could not be reversed from that date. This pushed the construction company under the obligation to pay compensation. Especially since there had been no transfer of enterprise the transition of the employment contract did not imply the transfer of the obligation for compensation to the now liquidated B.V. The fact that the liquidated B.V. had compensated the employee’s damages until February 1st 2005 also did not mean that the obligation to pay compensation was passed to the liquidated B.V. It only meant that the employee could not claim compensation until February 1st 2005 because his damage had already been compensated. Lastly the Supreme Court considers that there could have been a debt or contractual acquisition, but this was neither alleged nor proven.


The Supreme Court now has told another court to decide on the matter, but this court will very unlikely reach another conclusion than that the building company is kept to pay de com-pensation to the employee. For a debt or contractual acquisition the construction company should have proven that the employee agreed, which obviously did not happen. And acquisition of rights and obligations under the employment contract as ex officio is the case in a transfer of an enterprise, apparently was not an issue because, even though the employee was informed about the fact that he had entered another B.V. (which announcement he had accepted), no transfer of the enterprise of the construction company to the bankrupted B.V. had taken place.

The problem, of course never would have occurred if the construction company had timely insured the WAO shortfall. Cases where an employer has to pay compensation for not insuring as is required under the Collective Labour Agreement, the pension arrangement or the employment contract, in practice quite often happen. Employers would do well to be extremely careful with timely fulfillment of these obligations. Once the risk to be insured (incapacity, death, accident) has occurred, it is too late for the employer to still do so.

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