Many employment contracts include a clause on ‘advance notice’. This means that, as an employer, you indicate right at the start of a fixed-term contract that it will not be renewed. This may sound convenient, but what are the legal implications? Is this simply allowed? And what happens if you do end up renewing the contract?
What is the duty to give notice?
As an employer, you are obliged to give written notice at least one month before the end of a fixed-term contract (of 6 months or longer) as to whether or not you will be renewing the contract. If you fail to do so (in good time), you must pay the employee compensation. This compensation amounts to one day’s pay for each day you are late, up to a maximum of one month’s salary. To avoid this penalty, the notice period is often included in the employment contract in advance.
Legal validity of advance notice
Good news for you as an employer: in principle, advance notice is legally valid. This has been confirmed in a ruling by the Gelderland District Court. The court ruled that a clause stipulating, at the time the employment contract is entered into, that it will not be renewed, is legally valid.
Upon renewal, the provision may become invalid
But be careful! The situation changes if you do decide to renew the contract after all. In a recent ruling by the Rotterdam District Court It was held that if a contract containing a notice clause is subsequently renewed on several occasions, this provision may cease to have effect and may even be declared invalid. This is because the notice of non-renewal may conflict with the principle of legal certainty: if you first state in your employment contract that you will not renew it, but then go on to do so on several occasions, the earlier notice of non-renewal becomes less credible.
What does this mean for you as an employer?
Under the initial contract, the “advance notice” clause remains legally valid, but if you do extend the employment contract on multiple occasions, you run the risk of the clause becoming invalid. To avoid having to pay a fine, it is advisable – when renewing the contract after the initial term – to give a new written notice at least one month before the end of the contract. This ensures the notice remains legally valid and helps you avoid legal complications.