Wednesday, December 14, 2011

Netherlands - Amendment of Dutch holiday legislation per 1 January 2012

Els de Wind and Cara Pronk, Van Doorne NV, Amsterdam, The Netherlands

As per 1 January 2012 the Dutch legislation on holidays was amended. In this short article we will first provide some general information on the Dutch holiday legislation and then focus on the recent amendments.

Dutch holiday legislation

Under Dutch law employees working full-time (mostly 40 hours a week) are entitled to at least 20 holidays each year. These holidays are usually called statutory holidays. Most employers, however, grant their employees more holidays than the statutory minimum, for example 24 or 25 days per year (in the case of a 40-hour working week). The “extra” days above the statutory minimum are called non-statutory holidays. Employees are entitled to such non-statutory holidays pursuant to a sector wide or company collective labor agreement or an individual labor agreement. Generally the employee can determine when holidays are taken after acquiring the consent of the employer in this respect. Statutory and non-statutory holidays which have not been taken by an employee, will be compensated at termination of the employment, unless these have lapsed by law. Under the present legislation, holidays lapse automatically after 5 years after the end of the calendar year in which these were built up.

Background of amendments: European Court of Justice ruling

The amendments to the Dutch holiday legislation followed from a judgment rendered by the European Court of Justice (ECJ) in a German case on the interpretation of EU Directive 2003/88/EU on working hours. The ECJ ruled that it follows from the Directive that employees on sick leave build up holidays in the same way as regular employees. The Dutch Act implementing the Directive stipulated that employees on sick leave only build up holidays over the last 6 months of sickness. The Dutch Act therefore was in violation of the ECJ judgment. This was later confirmed by some local Dutch courts. As a result of this, the Dutch government amended the existing legislation on holidays to bring it in line with the Directive.

Amendments to holidays legislation

Under the amended holidays legislation, employees who are sick will (per 1 January 2011) build up the same number of holidays as employees who are not sick. For employers this means that they will have to grant sick employees holidays over the entire period of sickness. This will lead to additional expenses for employers employing employees who are (long term) sick which comes on top of the existing obligation to pay sick employees at least 70% of the salary (up to a certain statutory maximum amount) during the first 2 years of sickness. In order to compensate the employers for this amendment in the holiday legislation, the Dutch government implemented another amendment.

As a result of the amendments as per 1 January 2012, holidays will lapse 6 months after the end of the calendar year in which they were built up. Holidays built up in 2012 will therefore expire on 1 July 2013. The employee will then not be entitled any more to these holidays nor be able to be compensated for them. The expiry period of 6 months applies to statutory holidays built up by employees who are sick as well as by those who are not sick. The expiry period of 6 months does not apply (i) for holidays built up prior to 1 January 2012; (ii) for non- statutory holidays; and (iii) in cases where the employee “was not reasonably able to take holidays”. In these 3 situations holidays will lapse after 5 years. Whether an employee was not reasonably able to take holidays should be assessed on the basis of the circumstances of the case. This can for instance be due to a high workload. It is not clear yet how this will all work out in practice. It may well be that the employee will ask the employer for a written statement confirming that he was not able to use a certain number of holidays. The employer and the employee may make arrangements deviating from this rule to the employee’s benefit in the labor contract, for instance by agreeing a longer expiry period.

The amendments are warmly welcomed. Under the present holiday legislation, building up holidays over a period of 5 years could become a huge financial burden for employers. Under the new legislation, employees will not be able to build up such a large number of holidays as they used to be able to. This amendment will therefore also lead to less holidays being compensated at termination of employment. Furthermore, it is expected that as a result of the amendments, employers will have to more closely monitor the balance of the statutory and non-statutory holidays: statutory holidays will lapse after 6 months after the end of the year in which these were built up (unless employer and employee have agreed to a longer expiry period) whereas non-statutory holidays will still lapse after 5 years after the end of the year in which they were built up. Many payroll companies have already developed IT systems to facilitate this new administrative burden. Finally, employers with employees employed under Dutch law should review their individual and collective labor contracts and employee handbooks to make sure that they are adjusted to be in line with the new legislation.