Does holiday leave continue to accrue after 2 years of sickness?
6 June 2024
In the dynamic world of employment law, the termination of employment agreements after two years of sickness is still a relevant subject.
The obligation to continue to pay wages ends after two years of sickness. If the sick employee cannot return to work within their own organisation, this will be a logical time to terminate the employment agreement. In many cases, a termination agreement will be concluded. If the employee does not agree to this, the employer can apply to the Employee Insurance Agency (UWV) for a dismissal permit due to long-term incapacity for work. After obtaining approval, the employer can terminate the agreement, subject to a notice period. In both termination situations, the end date will usually not coincide exactly with the date on which the obligation to continue to pay wages ends. Issues such as the accrual of holiday leave during this period and whether or not an obligation exists to cooperate in the sick employee's dismissal and to pay them a transition payment are regularly cause for debate.
ACCRUAL OF HOLIDAY LEAVE AND LONG-TERM SICKNESS
It is important to emphasise that the accrual of holiday leave is directly linked to the obligation to continue to pay wages. This obligation ends after two years of sickness. Article 7:634 of the Dutch Civil Code states that an employee will continue to accrue hours of holiday for every year in which they are "entitled to remuneration for the full number of the agreed working hours". For that reason, the Roermond Subdistrict Court (in Dutch) ruled in 2017 that when an employee is no longer entitled to wages after two years of sick leave, they do not accrue any holiday leave entitlement either. However, the question is whether this judgment is consistent with EU law, as EU law links the accrual of holiday leave to the performance of work. According to the CJEU, for the accrual of holiday leave entitlement no distinction should be made between workers who have actually worked and workers who have not worked because they were absent on sick leave. The Supreme Court has not yet addressed this question or considered whether Dutch law is indeed consistent with EU law on this point.
ENTITLEMENT TO DISMISSAL WITH TRANSITION PAYMENT FOR SICK EMPLOYEES?
Legal proceedings on the termination of employment agreements after two years of sickness are – unfortunately – not uncommon. An illustrative example is the Supreme Court's 2019 interlocutory decision in Xella (in Dutch), followed by the ESD and Ammega judgments in 2022 and ROC Twente in 2024. These judgments are highly significant for legal professionals, as they clarify the legal frameworks surrounding the termination of employment agreements in the event of long-term incapacity for work and the granting of transition payments.
The Xella decision was given in the run-up to the entry into force of the Compensation of Transition Payments Regulation (Regeling compensatie transitievergoeding), which compensates employers for transition payments made for dismissal after long-term incapacity for work. Partly in view of the introduction of this compensation, the Supreme Court decided that, in principle, employers are obliged to cooperate with an employee's request to terminate their employment agreement after two years of sickness and pay them a transition payment. In ESD, Ammega and ROC Twente, the Supreme Court answered a number of questions that had arisen in the wake of its Xella decision.
FUTURE DEVELOPMENTS
It is also important to look ahead to future developments. The government's outline agreement includes the plan to possibly discontinue, from 1 July 2026, the right of employers with 25 or more employees to compensation for transition payments made for dismissal due to long-term incapacity for work. This future policy can also have significant implications for employers' strategic staff planning.
HOUTHOFF'S ROLE
As lawyers at Houthoff, we appreciate the complexity and nuances of this area of law. Our litigation expertise also enables us to assist and advise employers on all aspects of employment law, including disputes and any proceedings on long-term incapacity for work.
CONTACT
For more information or advice on these subjects, please contact Anouk Boutens and Naomi Dempsey. Experts in employment law and pension law, they are well equipped to give you the legal support you need.
