When an employee is dismissed by their employer, the employer must pay the transition allowance, regardless of the reason for the dismissal. To avoid this, employers retain employees who are on (long-term) sick leave. This results in a dormant employment relationship.
Employee unable to work
An employer must continue to pay the wages of an employee who is unable to work. This obligation to continue paying wages applies for the two years following the onset of the incapacity for work. After that, the employee may become entitled to benefits under the statutory incapacity for work insurance schemes.
The employer is not always obliged to continue paying the full wage. At least 70% of the wage must continue to be paid (and, during the first year of sickness, at least the minimum wage as well). However, the collective agreement (or an individual arrangement) may stipulate that a higher amount must be paid for a certain period.
The obligation to continue paying wages may be extended by the UWV if insufficient efforts have been made to try to reintegrate the sick employee into the workplace.
Employer must dismiss the employee
When Healthcare Arbitration Tribunal is the subject of arbitration judgement has ruled that the employer must dismiss the sick employee. This concerns an employee who has been unfit for work for almost three years and who receives incapacity benefit from the UWV. His employer refuses to dismiss him in order to avoid having to pay the sick employee €144,659 in transition compensation.
The arbitration tribunal is of the opinion that, in exceptional circumstances, the employer may be obliged to terminate a dormant employment contract on the basis of the duty of good faith as laid down in Article 7:611 of the Dutch Civil Code.
In the present case, such exceptional circumstances apply. The employee is seriously ill and it is plausible that he has only a short time left to live (possibly just a few months). Apart from avoiding the payment of the transition allowance, the employer has no interest whatsoever in the continuation of the employment relationship. It must be assumed that the employer will be fully reimbursed for the transition payment in due course. After all, the bill regulating the reimbursement of the transition payment has already been passed by Parliament and is now only awaiting publication in the Government Gazette. This bill will come into force on 1 April 2020, but will in principle also apply to transition payments already made prior to that date.
The arbitration tribunal orders the employer, on the basis of the special circumstances described above, to terminate the employment contract within two days of the judgment being served, subject to the payment of the transition allowance. The judgment is enforced by a penalty payment of €5,000 for each day that the employer fails to comply with the judgment (up to a maximum of €150,000).