Netherlands: The Dutch Supreme Court Clarifies The Notification Obligation: Timely And In Writing

In case a fixed-term employment agreement terminates by operation of law, an employer has the obligation to inform an employee whether the employment agreement of the employee will be continued or not and if so, on what terms and conditions. The so-called 'notification obligation' must be in writing and must be done no later than one month before the end date of the fixed term of the employment agreement. When the employer fails to do so, the employer owes the employee a compensation.

From the moment that the notification obligation was introduced in 2015, there had been debate about the statutory requirement that the notification should be provided to the employee in writing. How strictly should this requirement be applied? Does the employer owe an employee a compensation if the employer did not comply with the requirement that such notification should be in writing, also if it was still clear to the employee that the employment agreement would not be continued? On 7 October 2022, the Dutch Supreme Court clarified this requirement. In this article, we discuss the legal framework of the notification obligation, the ruling by the Dutch Supreme Court and the implications thereof in practice.

The legal framework

Pursuant to Section 7:668 of the Dutch Civil Code (DCC), an employer has the obligation to inform an employee in writing no later than one month before the fixed-term employment agreement ends by operation of law whether the employment agreement will be continued. If the employment agreement is continued, the terms and conditions under which the employment agreement will be continued, must also be provided to the employee. The legislator introduced the notification obligation in order to provide employees with a temporary employment agreement with more protection and more clarity on whether the employee should look for a new job.

The notification obligation does not apply in the following situations:

• parties have agreed in writing when entering into the employment agreement that the employment agreement will terminate at a (somewhat uncertain) time that is not set to a calendar date (for example, the situation where the employee replaces another employee during illness);
• the employment agreement was entered into for a fixed period of less than 6 months;
• prior notice of termination of the employment agreement is required;
• the employment agreement contains a provision that the agreement terminates by operation of law when the pensionable age is reached and the employee reaches that age; and
• in certain situations where the employer outsources a temporary worker to third parties and the temporary employment agreement provides that the temporary employment agreement terminates if such third party no longer needs the temporary worker.

We note that the notification obligation is not applicable if an employee terminates the employment agreement on his or her own behalf and that, in such case, the employer does not owe the employee a compensation.

If none of the abovementioned exceptions apply, the extension or termination of the employment agreement is subject to the notification obligation. It is up to the employee to claim that the notification obligation has not been fulfilled by the employer; the employer must then prove that all requirements have been met. If the employer does not wish to continue the employment agreement but fails to provide a timely notification, the employer owes the employee a compensation. This compensation amounts to a sum of up to one gross monthly salary if the notification obligation has not been fulfilled at all, or a pro rata compensation if the notification was not provided in a timely manner (for example, if it was provided two weeks late).

Failure of the employer to comply with the notification obligation may also result in the circumstance that the employment agreement will be continued for the same period as it was entered into, but for a maximum of one year, on the previous terms and conditions. Such situation arises if the employee continues to perform work activities even after the original termination date of the employment agreement. Depending on the number and duration of the employment agreements, continuing to perform working activities after the original termination date, may even lead to the conversion of the fixed-term employment agreement into an indefinite-term employment agreement (if this is the last allowed fixed-term employment agreement in the chain and/or the maximum duration for entering into fixed-term agreements is exceeded with the last employment agreement).

Ruling Dutch Supreme Court

Although Article 7:668 DCC explicitly states that the notification must be provided to the employee in writing, it was argued that as long as the purpose of the notification obligation was fulfilled (i.e. timely informing the employee about whether or not the employment agreement will be continued and, if so, the terms and conditions of such continuation), this would be sufficient for the employer to meet the statutory requirements of the notification obligation.

In the ruling of 7 October 2022, the Dutch Supreme Court provides clarification on this discussion. The statutory provision containing the notification obligation is considered imperative law, from which, in principle, an employer cannot deviate. Only in exceptional cases it may be deemed unreasonable to expect an employer to provide the employee with a written notification. Before such exception to the 'written form'-requirement of the notification obligation can be made, a balancing of interests must take place, weighing the employee's interest in being timely and accurately informed against the employer's interests. Such an exception may arise, for example, in a bankruptcy situation.

Conclusion

It is important for employers to comply with the notification obligation in a correct manner, which means that the employer informs the employee timely and in writing. If the employer fails to do so, the employer owes the employee a (pro rata) compensation. If the employee continues to perform work activities after the termination date of the employment agreement, the employment agreement is extended for a maximum of one year on the previous terms and conditions. Employers often choose to inform employees about the continuation or termination of the employment agreement during a personal conversation. Such personal approach may still be taken, but the employer must subsequently also inform the employee timely and in writing (where the notification in writing should still be one month before the termination date of the employment agreement).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.