Jan Dop, LL.M.
Russell Advocaten, B.V.
Amsterdam, Netherlands
The term of an employment contract is of major importance for the rights and duties of both, employer and employee. This applies in particular in the event of employment contracts of a total period of two years.
Term of employment
In just three days a lot can change regarding the rights and duties in the event of termination of an employment contract. These changes will be discussed on the basis of the following example:
An employer and employee have concluded an employment contract for one year. The employment relation is very satisfying and the employer and employee decide to continue the employment. What does the employer have keep in mind when deciding upon the term of the second fixed-term employment contract?
Two Years Minus One Day
In case the second employment agreement is concluded for a term shorter than one year, the employment agreement will end automatically when this period has expired. The employee has no right to compensation. However, the employer must fulfil the duty of notification.
Two Years
If the second employment contract is concluded for the term of one year, the employer has to pay the employee transition compensation in the event the contract will not be continued on the initiative of the employer since the two employment contracts together have had a minimum term of 24 months. For the obligation to pay transition compensation it is irrelevant whether or not it is a fixed-term contract or a contract of indefinite duration. In addition, the employer must fulfil his duty of notification.
Two Years Plus One Day
If the term of the second employment contract is longer than one year, the chain rule will apply. In this event, the employment contract will exceed a total period of 24 months so that the second employment contract will be considered as an employment contract of indefinite duration.
This has major consequences for the employer’s options to terminate the contract. An employment contact of indefinite duration can only be terminated with the employee’s consent that will usually only be given in the event of dismissal on the spot or a high compensation. If the employee does not consent, the employer is dependent on the permission of the UWV or the setting aside of the contract by the subdistrict court. In the latter two events, the employer has to pay transition compensation upon termination of the employment.
Advice
On termination of an employment contract, the situation might have changed completely within three days. Therefore, be aware of the consequences the choice for a specific term of an employment agreement has.
Contact
Would you like to learn more about the rights and duties of employers and employees regarding the term of the employment contract? Or do you need advice on drafting an employment contract? Please contact us.