Employers are sometimes keen to make a reservation when they form an employment contract. A reservation can be formulated as a condition precedent or a resolutive condition. Both types of conditions depend on an uncertain future event.
A resolutive condition in an employment contract means that the contract ends with immediate effect once the condition is fulfilled.
A resolutive condition does not, in principle, fit within the Dutch ‘closed dismissal system’ under which the employer needs a reasonable ground to terminate an employment contract. Depending on the reasonable ground, the court or the UWV [Dutch Employee Insurance Agency] reviews whether such a reasonable ground exists. Because a resolutive condition is slightly incompatible with the ‘closed dismissal system’, it must meet a number of requirements:
1. Not contrary to the closed dismissal system
This must be reviewed on a case-by-case basis, but it does mean that the termination of the employment contract should not be contrary to the legal prohibitions on dismissal, such as the prohibition against dismissing employees who are sick or pregnant. Plus, an employer should not be able to influence a resolutive condition coming into force in order to prevent circumvention of the closed dismissal system.
It should be clear to both the employer and the employee when a resolutive condition is fulfilled. Including a resolutive condition that comes into force at the employer’s discretion is therefore not permitted. For example, the employer may not stipulate in the employment contract that it ends if the employee’s performance is poor.
3. Depriving the employment contract of any substance
After the resolutive condition comes into force, the employment contract should really cease to apply, so that it should be deprived of any substance, for example a doctor who is removed from the BIG register or a taxi driver whose driver’s licence is revoked. In these cases, the employee can no longer perform his or her work. It is not entirely clear whether this condition (still) applies, given that the Dutch Supreme Court has not mentioned it for a while. Lower courts do however still include this condition in their assessment.
The condition precedent
Including a condition precedent in an employment contract means that the contract only “takes effect” once the condition precedent has been fulfilled. Until it is, the contract is deemed never to have been concluded and there is no obligation of restitution if any part of the contract has been performed.
Because the employment contract does not end with immediate effect if a condition precedent comes into force, as it does in the case of a resolutive condition, the literature usually assumes that a condition precedent is, in principle, valid. It goes without saying that the condition precedent must comply with legal requirements and must fit within the statutory system that is geared towards protection of the employee.
Like a resolutive condition, the law prescribes that a condition precedent must be dependent on an uncertain future event and, in addition, must be objectively determinable, irrespective of the will or subjective assessment of the employer. Moreover, a condition precedent may not be at odds with the law, public morals or public order. It may not, for example, be discriminatory in nature.
Although employers may be tempted to include a resolutive condition or a condition precedent in the employment contract, they should exercise restraint in doing so, because a resolutive condition in particular is rarely deemed valid and employers must state special reasons in support of it.