Is your fixed-term contract sufficiently clear?

In the Netherlands, the end of a fixed-term employment contract is usually linked to a calendar date. Another possibility is for its duration to be linked to a particular piece of work or a project, provided that it is possible to specify with a sufficient degree of objectivity when that work or project will be completed. In addition, according to a recent judgment of the ’s-Hertogenbosch Court of Appeal, an employee has to take action within two months if it is clear that the employer intends to terminate their employment contract.

Background

The employer and the employee had concluded a contract entitled, “Fixed-term employment contract for the duration of a project” which included a “project clause.” According to that clause, it was up to the employer’s client to determine the end date of the project and, furthermore, the employment contract would end by operation of law:

  • during the trial period if the employer saw fit;
  • at the end of the project, in accordance with the project schedule;
  • upon termination of the agreement between the employer and the client;
  • if the client terminated the employee’s deployment on the project due to an act, omission or shortcoming of the employee.

After the employee had failed to appear at a meeting with the client and then reported sick, the employer sent him a letter dated 13 December 2016 stating that, in accordance with the project clause, his employment contract would end by operation of law on 1 January 2017 due to the termination of the agreement between the employer and its client.

The Subdistrict Court

The employee did not accept that and filed a claim with the Subdistrict Court for continued payment of his salary. The court concurred with the employee that the project clause was not valid, as it did not describe the project nor did it clarify its temporary nature. Furthermore, it was possible that the end of the project and thus the end of the employment contract itself could be left up to the client.

Given that the project clause was invalid, no fixed term had been agreed to and it was therefore an open-ended employment contract.

That did not help the employee, however, because the Subdistrict Court judge also ruled that the letter of 13 December 2016 was a letter terminating the employment contract with effect from 1 January 2017. Because the employee had not asked for that termination to be set aside within the limitation period, it became final.

The Court of Appeal

On appeal, the employee argued that the letter of 13 December 2016 should be regarded as a notice letter and not termination letter; therefore, he was still employed for an indefinite period.

According to the Court of Appeal, the issue was what the employer intended to express in the letter and how the employee should interpret that intent. All the circumstances of the case were relevant in that regard. Considering the project clause and the various clauses of the employment contract, it should also have been clear to the employee that his employment contract had been concluded for a fixed term. In addition, given that the employee had not disputed the project clause prior to the letter of 13 December 2016, it was difficult to imagine that he had regarded the letter as a notice letter rather than a termination letter. Furthermore, the letter made it clear that the client had ended the project and the employment contract was therefore going to end on 31 December 2016. Accordingly, it was clear to the employee that the employer wanted the employment contract to end, and when.

The Court of Appeal also found that employee’s protection had not been infringed. The legislature had limited the limitation period to two months to ensure rapid legal certainty about whether an employment contract has been terminated validly.

Takeaways:

  • Employer: when concluding an employment contract for the duration of a certain piece of work or a project, ensure that it can be determined with a sufficient degree of objectivity when that work or project will be completed.
  • Employee: take action in good time, because if the employer issues a statement expressing the intention to terminate the employment contract, that is considered to be a termination letter and you must take action within two months.

Eric van Dam (evd@clintlegal.com / +31 20 820 0330)