"The Supreme Court: compensation in lieu of notification also due if the employee was notified but did not receive written confirmation"
Article 7:668(1) of the Dutch Civil Code (BW) provides a notification obligation whose purpose is to prevent employees from receiving late information about whether their fixed-term employment contracts are to be continued. On the basis of this article, an employee on a fixed-term employment contract has to be notified at least one month in advance whether his or her contract is to be extended and, if so, on what terms. This obligation does not apply if the end date of the employment contract is not a fixed calendar date, which for example would apply where a pregnant employee is being replaced, or if the contract is for less than six months. If the employer does not fulfil this obligation or does not do so on time, it will owe compensation in lieu of notification (aanzegvergoeding), which is equal to the salary payable for the period the employer was in default.
The Supreme Court: compensation in lieu of notification also due if the employee was notified but did not receive written confirmation
In a recent decision (ECLI:NL:HR:2022:1374), the Dutch Supreme Court ruled that this compensation is also due if an employee did not receive written confirmation that his employment contract was not going to be renewed, even though he was already aware of that and suffered no damage from the fact that this written requirement had not been fulfilled.
The employee had a fixed-term employment contract with the employer, in the position of general employee, until 1 December 2019. On 30 October 2019, i.e. more than a month before the end date, the employer told the employee during an interview that his employment contract would not be renewed on 1 December 2019. The employee had another job starting on that date.
Nevertheless, he then claimed compensation in lieu of notification in the amount of one month’s salary because the employer had not confirmed in writing that his employment contract was not going to be renewed. He based his claim on the fact that his employer had not notified him in writing of this non-renewal at least one month in advance.
The Subdistrict Court found that compensation in lieu of notification was not due
The Subdistrict Court dismissed the claim, finding that, according to standards of reasonableness and fairness, it was not acceptable for the employer to be liable for the compensation.
The Court of Appeal adhered to the written requirement and awarded the compensation
The employee appealed the Subdistrict Court decision before the Court of Appeal and won his case. The Court of Appeal held that the failure to comply with the written requirement in this case meant that the obligation to pay the compensation in lieu of notification was not unacceptable according to standards of reasonableness and fairness, even though the material information requirement – the employee knew where he stood as a result of the interview – had been met. The Court of Appeal considered that the legal effect, i.e. the compensation itself, resulted not just from a contractual rule but rather a provision of mandatory law, one that the employment contract could not derogate from to the detriment of the employee. In such a case, a legal effect can only be set aside under special circumstances. According to the Court of Appeal, the option for doing so is “extremely narrow if the legislature already considered the interests in question when drafting the legal rule that gives rise to the legal effect.” It held that the legislature had done so in the case of this article.
The Supreme Court followed suit
The Supreme Court agreed with the Court of Appeal, ruling that the courts must exercise restraint when assessing whether applying a statutory rule in a particular case would be unacceptable according to standards of reasonableness and fairness. This applies in particular to rules of mandatory law. The obligation to notify provided by Article 7:668 of the Dutch Civil Code is mandatory law. Its purpose is to strengthen the position of employees on fixed-term contracts by giving them clarity, by written notification issued in a timely manner, about whether their contracts are to be renewed or not. The legislature thus intentionally decided that employers who do not fulfil their obligation to provide written notification are liable for compensation in lieu of notification.
In a nutshell, liability for this compensation provides an incentive for employers to fulfil their obligation to issue a written notification. Accordingly, compensation in lieu of notification is due where the written requirement has not been met, even where an employee has clearly been told during an interview, for example, that his or her contract is not up for renewal. It is also due where the failure to fulfil that obligation has not caused the employee any harm, which was the case with the employee discussed above, since he already had another job.