The Supreme Court has finally handed down its ruling on the dormant employment contract.
Good employment practices
According to the …, the requirement of “good employment practices” entails Supreme Court, which means that an employer may not keep an employee on a dormant contract in order to avoid paying the transition allowance. In other words, as an employer, you are obliged to terminate the dormant contract.
This may be different in exceptional cases where there are legitimate interests that lead the employer to wish to retain the employee who is unfit for work. This is the case, for example, if there is a realistic prospect of reintegration (recovery within 26 weeks). However, this does not apply if the employee is approaching retirement age.
Compensation scheme
The above ruling is partly based on the fact that a compensation scheme has been established. From 1 April 2020, employers will be compensated by the UWV for the transition payment made in the event of a dormant employment contract (the UWV may take up to six months to do so).
However, it should be noted that compensation is only payable for the transition payment that would have been due upon termination of the employment contract on the day following that on which the employer could have terminated the employment contract (or had it terminated) due to the employee’s incapacity for work (i.e. the point at which the employee has reached two years of sickness and the employer’s obligation to continue paying wages has ceased). Furthermore, the UWV will only compensate up to the amount of the transition payment that you, as an employer, have paid in wages to the sick employee over the period of sickness (normally 104 weeks).
If, for example, as an employer you have continued to pay €60,000 in wages over the 104 weeks of sickness, but the transition payment amounts to €65,000 once the 104 weeks of sickness have been reached, you will receive €60,000 in compensation from the UWV.
Opinion
Our advice is therefore that, if you are in a dormant employment relationship, you should proceed to terminate the employment contract. Should you face financial difficulties as a result of paying the transition payment, there are exceptions to this, such as the option to pay in instalments.