Terminating a Dormant Employment Contract is not an Obligation for the Employer

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Sub-district Court ‘s-Hertogenbosch, 24 June 2019, ECLI:NL:RBOBR:2019:3539


An employer was not obliged to terminate the employment contract with an employee who had been labour incapacitated for over two years, despite the prospect that the UWV would compensate the employer for the transitional allowance.

Since 1975, a large party catering company had employed an employee in the position of a chef de partie. Late 2014, the employee had become incapacitated for work and after the employer had initially been imposed a wage sanction for making insufficient reintegration efforts (as a result of which the wage payment had to be continued during the third year of illness as well), the UWV had granted a WGA benefit late 2017. But then the employer had not terminated the employment contract.
Since, in the meantime, the wage payment obligation had come to an end and, in the absence of suitable work with the employer, the reintegration obligation had expired as well, in fact a "dormant employment contract" had arisen. Since the employment contract had not been terminated, the employer did not have to pay the employee the transitional allowance either, which for the employee would have amounted to € 81,000. The employee would reach the AOW entitlement age on 7 August 2019. That was the moment that the employer wanted to use to terminate the employment contract without having to pay the transitional allowance.
In order to prevent this, the employee requested the Sub-district Court in summary proceedings that the employer should pay him compensation equivalent to the amount of the transitional allowance, or at least that the employer would immediately terminate the employment contract with him. To that end, the employee gave his permission in advance and he also in advance waived the notice period. The employee referred to a law, effective since 1 April 2020, entitling the employer to request the UWV compensation with retroactive effect for the transitional allowance paid. Therefore, according to the employee, maintaining the employment contract, as a result of which the employee would miss the transitional allowance, would be contrary to good employment practices.
The Sub-district Court rejected the employee's claims, however.
To this end, the Sub-district Court first of all pointed out that it was clear from the case law that failure to terminate a dormant employment contract does not constitute a seriously culpable behaviour and that, for that reason, the employer does not owe the transitional allowance if the employee terminates the employment contract himself. Although this ruling predated the establishment of the statutory compensation scheme, the Sub-district Court saw no reason to depart from this jurisprudence. According to the law, the employer has the right to terminate the contract; not the obligation to do so, and the law regulating compensation of the transitional allowance did not change this. Neither did this law stipulate that the transitional allowance should always be paid.
The Sub-district Court also considered it of importance that, to a certain extent, compensation for the transitional allowance is ‘one of his own cigars’ for the employer, since all employers collectively have to meet the costs of this compensation in the form of a higher premium to be paid to the tax authorities. The Sub-district Court also pointed out that the employer had argued as an objection that he would have to pay the transitional allowance in advance. The statutory provision implies that compensation can only be obtained from the UWV for the amount that was actually paid as the transitional allowance in advance.


There is a lot of debate about the entitlement to the transitional allowance for dormant employment contracts of employees who have been labour incapacitated for over two years. Previously, the Healthcare Arbitration Tribunal -in a case in which the settlement of labour law disputes under Collective Agreement was assigned to arbitrators- and the Sub-district Court of The Hague -in the case of terminally ill employees- had ruled that the employer was bound to terminate the employment contract and to pay the transitional allowance in accordance with good employment practices.
The Sub-district Court of Maastricht, however, had reached a different conclusion.
The Sub-district Court of Roermond has referred questions to the Supreme Court for preliminary ruling, which the Supreme Court will answer in October.
In the above case the employee had requested to await the Supreme Court's judgment, if necessary, but this claim was rejected by the Sub-district Court because it would be conflicting with the principle of proceedings for interim relief.
Our advice to employers who are confronted with claims for terminating dormant employment contracts is to be careful when meeting these claims. Much uncertainty remains about the conditions under which the UWV will provide compensation and there is a risk that in certain cases, even if the transitional allowance was paid-out, the retrospective compensation will not be effected.

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