No paid vacation days during a dormant employment relationship
In an article we published on our website last September, we noted that a ruling by the Gelderland District Court dated August 12, 2025 (ECLI:NL:RBGEL:2025:7054) held that employees continue to accrue vacation hours even during a dormant employment relationship, which would result in significantly higher final settlements for employers. However, in the meantime, three rulings have been issued in which subdistrict court judges reached a different conclusion. So, the matter is not yet settled. The earlier article by Myrddin van Westendorp therefore warrants an update.
The transition allowance in the case of a dormant employment contract
Previously, the Supreme Court (November 8, 2019, ECLI:NL:HR:2019:1734, Xella) that, based on the principle of good employment practices, an employer must agree to an employee’s proposal to terminate the employment contract by mutual consent—in practice, through a settlement agreement—in the event of long-term incapacity for work. In doing so, the employer must pay the statutory transition allowance. An employer may therefore not maintain a “dormant employment relationship” to avoid paying the transition allowance.
However, in the case of an employee requesting termination by mutual consent, the amount of that compensation need not exceed the amount that would be due upon termination on the day following the expiration of the 104-week waiting period. Only in that specific case is the duration of the employment contract fictitiously shortened. Keep in mind, therefore, that when you, as an employer, terminate the employment contract in the regular manner, the accrual of the transition allowance continues until the end of the employment relationship as usual. (See: Arnhem-Leeuwarden Court of Appeal, June 3, 2021, ECLI:NL:GHARL:2021:5510)
Accumulation of vacation days after two years of illness
According to Article 7:637(1) of the Dutch Civil Code, sick days may only be counted as vacation days if the employee explicitly agrees to this. The legislative history indicates that this may only occur on an occasional basis and must always be agreed upon through consultation.
Article 7:634(1) of the Dutch Civil Code further stipulates that vacation days are accrued only during the period in which the employee receives wages. At first glance, this would mean that after two years, there is no longer any entitlement to accrue vacation days.
European law takes precedence
However, that statutory provision is not in line with European law, as the Gelderland District Court ruled in August 2025. Article 7(1) of Directive 2003/88/EC and the case law of the European Court of Justice stipulate that employees are indeed entitled to vacation, regardless of whether they receive wages. Article 31(2) of the Charter of Fundamental Rights of the EU confirms this right, and the Charter may be invoked directly by individuals.
The European Court of Justice has ruled that national provisions contrary to this must be set aside by courts. Thus, in the Netherlands as well, employers cannot simply rely on the restriction in Article 7:634(1) of the Dutch Civil Code. An amendment to the law is desirable.
Dormant employment is a special circumstance
However, the District Court of Northern Netherlands ruled that an employee with a dormant employment relationship does not accrue paid vacation days. (See: ECLI:NL:RBNNE:2025:5517) The court referred to the European Working Time Directive, which the Netherlands, as an EU member state, is required to comply with. This directive stipulates that every employee is entitled to at least four weeks of paid vacation each year. However, since there is no entitlement to wages under a dormant employment contract, there can be no question of paid vacation. Furthermore, the directive states that the original purpose of annual leave is to recover from work. It is aimed at recovery and relaxation from work. That purpose can no longer be achieved in the case of a dormant employment contract. In the case of an employee with a dormant employment contract, there is no work from which one needs to recover, since the employee is no longer obligated to work or to reintegrate. Finally, it has been noted that an employee in a dormant employment relationship often receives benefits, meaning that there is in fact some form of income during vacation. These considerations have been followed by the District Court of Rotterdam and the District Court of Utrecht (See: ECLI:NL:RBROT:2026:1852 and ECLI:NL:RBMNE:2026:688). On March 2, 2026, the Rotterdam District Court announced in a ruling that it intends to refer a preliminary question to the Supreme Court regarding whether vacation days are accrued at wage value during a dormant employment relationship. (See: ECLI:NL:RBROT:2026:2021).
For employers and employees, this means in practice that uncertainty still exists, but that based on these rulings, the scales appear to be tipping in favor of employers.
Questions
If you have questions about unused vacation days, how vacation days are calculated, or vacation days for employees on long-term sick leave, please contact one of our employment law specialists.
