Accrual of vacation days in a dormant employment relationship

In this case, the court ruled that an incapacitated employee also accrues vacation hours after the (extended) period for which the employer is obligated to pay wages during illness.

The case

The case involved an employee who was completely unable to work following a motorcycle accident. After the incapacity for work had lasted two years and the employer had continued to pay the employee’s wages for two years, the employer received a wage sanction from the Employee Insurance Agency (UWV) because the employer had not sufficiently fulfilled its reintegration obligations. This meant that the employer was required to continue paying the employee’s wages for another year. After the three years, the employee received an IVA benefit from the UWV, which applies when an employee is fully and permanently incapacitated for work.

Although it was clear that the employee would no longer be able to work for the employer, the employer did not terminate the employment relationship. The employment relationship thus became a “dormant employment relationship”. The employee requested the employer to terminate the employment contract, but the employer refused, forcing the employee to take the matter to court.

The Subdistrict Court’s judgment

The subdistrict court ruled that the employee was no longer able to perform the agreed-upon work due to illness or disability and that redeployment to suitable employment was no longer possible. The subdistrict court terminated the employment contract effective the date of its ruling, August 12, 2025.

The subdistrict court calculated the amount of the statutory transition payment as of the date on which the employer could have terminated the employment contract due to disability. Because the employee received an IVA benefit from March 1, 2024, the subdistrict court judge will calculate the transition payment as of March 1, 2024.

However, a different date than March 1, 2024, applies to accrued but unused leave days, which the employer was required to pay out at the end of the employment contract.

Dutch law versus European law

The interesting thing in this case is that, under Article 7:634, paragraph 1, of the Dutch Civil Code, an employee only accrues vacation days for the working hours for which they receive wages. This would mean that the employee would accrue vacation days until March 1, 2024, the date from which they received an IVA benefit.

However, Article 7:634, paragraph 1, of the Dutch Civil Code conflicts with a European directive (Directive 2003/88/EC, Article 7) and case law of the European Court of Justice. Although the court cannot rule contra legem, contrary to the statutory provision of, in this case, Article 7:634, paragraph 1, of the Dutch Civil Code, it can apply the Charter of Fundamental Rights of the European Union in a dispute between private individuals and thus set aside Article 7:634, paragraph 1, of the Dutch Civil Code.

Article 31, paragraph 2, of the Charter also stipulates that every employee has the right to paid annual leave. The European Court of Justice clarified in the Max Planck judgment that, if national legislation cannot be interpreted in such a way that it is compatible with Article 31, paragraph 2, of the Charter, it is for the court, within the framework of its powers, to ensure judicial protection and safeguard its full effectiveness by disapplying the conflicting national provision.

The subdistrict court ruled in this case that Article 7:634, paragraph 1, which stipulates that an employee only accrues vacation hours during the period in which they are entitled to wages, is contrary to European law. Sick employees accrue full vacation hours during the entire period of illness, not just the first two years, regardless of whether they perform work and regardless of whether they are entitled to wages.

For the employee in this case, this meant that they were entitled to the accrued but unused leave days until the end of their employment. The employer was required to pay for the vacation hours until August 12, 2025.

Practical advice

For employers: This ruling gives employers in these types of cases grounds to terminate the employment contract as soon as the mandatory sick pay period has expired and not to maintain it dormant.

For employees: Be aware that your vacation entitlement continues throughout the entire period of illness, even after the statutory sick pay period ends.

One way or the other.

Read the full court ruling here.