Supplemental salary payment during illness, an acquired right?

If nothing has been agreed about the level of continued salary payments during illness, and if the employer has habitually continued to pay 100% of an employee’s salary, can it then suddenly reduce it to 70% during the second or third year of illness? The District Court of Rotterdam considered this question in a recent case.

What does the law say?

The employer is under a statutory obligation to continue paying at least 70% of the most recently earned salary, up to a maximum figure currently set at EUR 3,218.87 gross, during 104 weeks of illness, but the first 52 weeks have to be at least at the statutory minimum salary (currently EUR 1,594.20 gross). Most collective labour agreements (CLAs) and employment contracts state that the continued payment will 100% be at 100% of the most recently earned salary in the first year and 70% in the second year.

The Employee Insurance Agency (UWV) can extend the 104-week period by a maximum of 52 weeks if the employer has not made adequate efforts towards rehabilitation. The law says nothing about the level of an employee’s salary in this third year of illness, and the same often holds true for the employment contract and CLA.

What was the Rotterdam case about?

After the employer had continued paying 100% of an employee’s salary for almost 2 years during his illness, it sent out a letter taking the stance that it had overpaid monthly salaries by 30%. The employer also announced that from that point on it would continue paying 70% of the salary. Neither any CLA nor the employment contract contained any fixed arrangements about this.

Despite this announcement, the employer continued to pay 100% of the salary. The employer was subsequently ordered to continue paying the employee’s salary for 52 weeks. The District Court of Rotterdam then had to consider whether the employee was entitled to 70% or 100% continued salary payments during the second and third years of illness.

Finding by the judge

The judge held that the employer had raised the expectation that the employee would have a claim to 100% of continued salary payments during the second year of illness, as the employer had continued to pay 100% of the salary for nearly 2 years. Admittedly, the employer had indicated towards the end of the second year of illness that it no longer felt obliged to continue paying more than 70% of the employee’s salary, but despite this it continued making 100% payments. The employee was therefore entitled to rely on the fact that the employer had deviated from the statutory scheme in his favour.

However, the judge held that only 70% of the employee’s salary had to be paid during the third year of illness. It is established case law that in cases where the employer is obliged by an employment contract or CLA to continue paying more than 70% of an employee’s salary during the first two years of illness, this does not mean that the employer will still have to pay more than 70% during the third year of illness. In addition, the employer was not obliged at all in this case to continue paying more than 70% in the first and second years of illness based on any regulation but did so entirely voluntarily.

A selection from the case law

It follows from the case law that when employers voluntarily pay more than they are statutorily obliged to do during illness, this can lead to extra (sometimes unintended) obligations in the future. Here are a few examples:

  • the District Court of Overijssel held that an employee could claim 100% continued salary payments, as this had been the standard rate within the organization for years on end;
  • the Court of Appeal of Den Bosch held that 100% continued salary payments for a total period of eight months’ illness was sufficient for the employee to have legitimate confidence that he was entitled to that higher salary during illness;
  • ·  according to the District Court of Limburg, the mistaken continued payment of 100% of salaries for a period of three months, despite the fact that only 70% was due under the employment contract, was not enough to form the basis of an entitlement to this in the future.

 

This line was therefore not followed through in the third year of illness. Case law makes it clear that 70% continued salary payments are in breach of good employer conduct if the employee suffers a financial disadvantage as a result. This financial disadvantage would have to be that any benefit payment under the Dutch Work and Income (Capacity for Work) Act (Wet werk en inkomen naar arbeidsvermogen (WIA)) would have to be more than 70% of the employee’s salary. However, this will almost never be the case.

Conclusion

A lesson for employers: by paying more than you are obliged to do by law or under an employment contract or CLA, you are also creating an obligation to continue to pay more in the future. As an employer, you need not continue to pay any more than 70% of an employee’s salary during the third year of illness. This would only be different if the employment contract or CLA states a higher percentage or if the employee sustains a significant financial disadvantage because of this continued payment of 70%.

Anneke Pelser (ap@clintlegal.com / +31 20 820 0330)