News Update Employment & Pensions
25 October 2022
Under Article 7:668(1) of the Dutch Civil Code, employers are required to inform their employees in writing no later than one month before the end of their fixed-term employment contracts by operation of law as to whether their contracts will be extended, and if so on what terms. If the employer fails to notify their employee as to whether their contract will be extended, the employee is then entitled to compensation in lieu of this notification, to the sum of one month’s gross salary. If the employer fails to give notice on time, the employee is entitled to pro-rated compensation.A recent judgment by the Dutch Supreme Court addresses the question of whether the employer is also required to pay compensation if the announcement to the employee that their employment contract would not be extended was not made in writing, but the employee has not suffered any adverse consequences as a result.
The employee in question had a fixed-term employment contract that was set to end on 1 December 2019. During a meeting on 30 October 2019, the employer informed the employee that their employment contract would not be extended. Although the employee found a new job with a different employer starting on 1 December 2019, the employee still petitioned the Subdistrict Court to order the employer to pay compensation of one month’s salary on the grounds that the notice had not been given in writing.
The Subdistrict Court dismissed the employee’s petition, ruling that by standards of reasonableness and fairness it would be unacceptable to instruct the employer to pay compensation, given that the employer had given notice orally that the employment contract would not be extended, and that the employee had not suffered any adverse consequences as a result.
The Court of Appeal ruled otherwise, and held that, even though the employee had not suffered any adverse consequences from the oral (rather than written) notice, deviation from the obligation to pay compensation was possible only under exceptional circumstances. The Court of Appeal ordered the employer to pay the compensation accordingly.
The employer appealed the Court of Appeal’s judgment to the Dutch Supreme Court, which held that courts should exercise caution when examining whether the application of a legal rule in a specific case is unacceptable by standards of reasonableness and fairness. The importance of that caution is amplified in cases involving rules of mandatory law, for example Article 7:668 of the Dutch Civil Code, and when the legislature weighed various separate interests before forming that legal rule. In that context, the restrictive effect of the principle of reasonableness and fairness can be argued only in exceptional cases.
The legislature made a deliberate decision that employers should pay employees compensation if they fail to give written notice; the purpose of that compensation is to 'prompt compliance' with the obligation to give written notice. The Dutch Supreme Court ruled that the compensation must be paid in all instances where no written notice has been given, even if it was clear to the employee that their employment contract would not be extended, or if the employee did not suffer any adverse consequences as a result of the failure to comply with the requirement of written notice.
The relevance of this judgment is that the restrictive effect of the principle of reasonableness and fairness can set aside rules of mandatory law only in exceptional cases. Given the legislature’s intention behind Article 7:668(1) of the Dutch Civil Code, as a general rule an employer will always be obliged to pay compensation if it fails to give notice in writing, whether or not in addition to orally.
Dutch Supreme Court’s judgment of 7 October 2022, ECLI:NL:HR:2022:1374