Partial termination equals partial transition payment

Employers who convert an employee’s fulltime position into a part-time position have to pay a transition fee for the hours that the employee will no longer work, said the Dutch Supreme Court in a decision last Friday. In practice, this will probably lead to employees also claiming payment of a partial compensation in the event of reduction of working hours by agreement.

This matter concerned a teacher who had a fulltime contract. After two years of sickness she was declared partially unfit for work, after which she and her employer agreed on her resuming work for 55% of the working hours. She was formally dismissed, but the school immediately offered her new employment.

The teacher then went on to claim the transition payment for the part of the employment contract that had been terminated. The sub-district court decided in her favor. However, on appeal, the court found that the employment contract had been extended in an adapted form and that the teacher was therefore not entitled to claim compensation.

The Dutch Supreme Court found that if the continuation of the current adapted employment contract means that the current employment contract has been partially terminated, the employer does indeed owe a transition payment that is proportionate to the extent of that termination. Under the law, an employment contract can only be terminated as a whole. However, if special circumstances lead to a substantial and structural decrease in working hours, partial dismissal coupled with partial transition payment should be possible. For example, this can be the case with ‘commercial circumstances’ or when the employee is permanently partially unfit for work. This is why the school will still have to make a proportionate transition payment.

The Dutch Supreme Court believes this is logical, as the employee would otherwise miss out on part of the transition payment if the employment contract was eventually terminated (in full) at a later date. After all, the salary on which the transition payment would be based at that later date would be significantly lower. However, the working hours do have to be cut substantially – by at least twenty percent – and the cut must be expected to be permanent.

Employees who come up against partial termination of their contracts are still required to alert the court within three months; otherwise their right to the partial transition payment will lapse.

You can find the full ruling (in Dutch language) here.

Wouter Engelsman (we@clintlegal.com / +31 20 820 0330)