What does an employer have to do after two years of illness of an employee – terminate the employment agreement or maintain it dormant? Can the employer avoid transition compensation?
Employers are not allowed to terminate the employment contract of sick employees unilaterally during the first two years of illness. During these two years, the employer is obliged to continue to pay (part of) the salary of the sick employee. If the employee will still be sick after two years, a so-called “dormant employment contract” will be the result. The employee is unable to perform his or her work and the obligation to continue to pay wages has come to an end.
It was customary for the employer to terminate the employment contract after two years of illness. However, since the introduction of the Work and Security Act, transition compensation must be paid. This also applies after two years of illness of an employee. Can the employer avoid payment of transition compensation?
The employer can avoid the obligation to pay compensation by maintaining the dormant employment contract. As long as the employer does not terminate the employment contract, he or she does not have to pay transition compensation. Dormant employment contracts cannot be maintained without risks though. The employer remains entitled to put in effort for the reintegration of the employee. In addition, employers must allow the employee to take up activities and pay salary when he or she has (partially) recovered, even if somebody else has been employed to perform these activities. If the employer still wishes to terminate the employment contract, the years of inability to work will also count for the calculation of transition compensation.
By keeping the employment contract dormant, the employee is “trapped” in his or her employment contract. The employee can terminate the employment contract on his or her initiative. However, in this case he or she will not be entitled to transition compensation.
It is not possible to avoid transition compensation by stating that the salary after two years of illness amounts to EUR 0. The Court will take the salary the employee would have received when he or she was completely fit for work as a starting point for the calculation of the transition payment.
The government has recognized the problem of dormant employment contracts as well and made a legislative proposal. In this proposal, the employers’ expenses regarding the transition compensation in case of dismissal due to long-term illness are compensated.
Would you like to get more information about the entitlement to transition compensation after two years of illness? Or would you like to learn more about other obligations of employers regarding employees with long-term illness? Please contact Russell Advocaten:
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