Compensation in lieu of notification is always due if the notice of termination of the employment contract is not in writing, according to a recent Supreme Court ruling. This is not changed by the fact that the employee was given verbal notice and started a new job immediately afterwards. This blog discusses the judgment and provides practical tips.
Duty of notification: what does it mean?
The duty of notification applies when the employment contract has been entered into for a fixed term, but only if the minimum duration is six months or longer. If the duty of notification applies, the employer must indicate in writing whether or not the employment contract will be continued at the end of the agreed term. If the employment contract does continue, the conditions under which the employer wants to continue the employment contract must be made clear. The employer must do this at least one month before the contract ends. If the duty of notification is not complied with, the employer is liable for compensation.
It is important that employers observe the above. If employers do not do so – or not in a timely manner – the compensation is due. The amount of compensation is determined by law and as follows:
- For failure to comply with the duty of notification in its entirety, the employer owes the employee a notice fee in the amount of one month’s salary.
- If the duty of notification is not complied with in time, the employer owes the employee a pro rata compensation. For example: if notice is given one week late, one week’s salary is owed as notice compensation.
Written notification: a strict interpretation
The above is unlikely to give rise to questions. But what if the employer verbally indicates one month before the end of the employment contract that the contract will not be renewed, and the employee finds a new job at which he starts immediately after the end date of the employment? The notice was not given in writing, so is compensation due?
At first sight, it may seem as if compensation is not due, as ruled the subdistrict court: it was clear to the employee that the employment contract would not be continued. Moreover, the employee did not actually suffer any disadvantage from not continuing the employment contract, as he started at his new job immediately afterwards. Payment of notice compensation would therefore be unacceptable by standards of reasonableness and fairness. The Court of Appeal and the Supreme Court did not agree.
The duty of notification aims to protect the position of the employee with a fixed-term employment contract and is mandatory law. This means that the parties cannot agree otherwise to the detriment of the employee. Legislative history shows that the legislator intended the employer to be liable to pay compensation when the notification is not given in writing. According to the Supreme Court, it can be deduced that the notice fee should provide an incentive for compliance with the duty to give written notice. It is consistent with this to assume the notice fee is always due in the event of non-compliance with the written requirement. This is no different if it was verbally made clear to the employee that the employment contract would not be continued and/or if the employee did not suffer any disadvantage from not complying with the written requirement.
Tips for Practice
First and foremost: always give notice in a timely manner and in writing – this can be done by e-mail – whether or not the employment contract will be continued and, if so, under what conditions. It is in this regard possible to include a standard clause in the employment contract, stating that the employment contract will not be extended after the fixed term has passed. In this way, the obligation to give notice is fulfilled in advance. Note: if it is decided to extend the employment contract, this should still be confirmed in writing and in a timely manner, as well as under what conditions.