Dormant employment contracts

19 April 2024

What is the reference date for determining whether there is a real reintegration opportunity in dormant employment agreements? Is this reference date at the time an employee’s employment has become dormant or at the time an employee makes the termination proposal to the employer? The Supreme Court answers this question in a recent ruling of 15 March 2024 (ECLI:NL:HR:2024:400).

In 2019, the Supreme Court already provided clarity on the termination of dormant employment in the so-called Xella ruling. An employer must agree to an employee’s proposal for termination of the employment agreement and payment of the statutory transitional compensation on the basis of good employment practice (Section 7:611 of the Civil Code) if the statutory requirements for termination of the employment agreement due to long-term disability are met. There is an exception to this, namely if the employer has a legitimate interest in maintaining the employment agreement. An example is if there are real reintegration possibilities for the employee.

In the decision of 15 March 2024, an employee had requested the employer to terminate the employment agreement while granting the transitional allowance. The employee had been employed by the employer for almost 30 years when he dropped out due to disability. After more than three years of incapacity for work, he asks the employer to terminate his employment, while granting him a statutory transitional allowance.

The employer does not agree as it believes there are real reintegration possibilities for the employee. The following year, the employment agreement ends because the employee reaches retirement age.

The issue in this case was whether the employer was bound by good employment practice to accept the employee’s proposal (including the transition allowance). The district court and the court of appeal ruled that the employee did not have to accept the proposal. At the Supreme Court, this judgment was upheld. The Supreme Court ruled that if the employer relies on an exception to the starting point mentioned in the Xella decision – for example, on the ground that there are real possibilities for reintegration for the employee – this should be assessed at the moment the employee has made the proposal to terminate the employment contract by mutual agreement. After all, only when the employee makes such a proposal can the employer be obliged to agree to it on grounds of good employment practices. In assessing whether the employer has a legitimate interest in maintaining the employment agreement at the time of the proposal, any relevant facts and circumstances that occurred before or after that time should also be taken into account.