The financial value of holiday time at the termination of employment
Maaike Koot
by Maaike Koot
Recently, the Dutch Supreme Court emphasised the importance of properly informing and encouraging employees to take their vacation days in order to avoid a huge reservoir of holiday time to be paid out at the end of employment.
Expiry and limitation periods
Holiday days can expire and become time-barred. For holiday days to expire, a distinction must be made between statutory holidays and non-statutory holidays. Dutch law is strict about this:
Untaken statutory holidays lapse within six months after the calendar year in which they were accrued (Article 7:640a of the Dutch Civil Code);
Untaken non-statutory holidays lapse within five years after the calendar year in which they were accrued (Section 7:642 of the Dutch Civil Code).
Judgment of the Court of Appeal of The Hague
As stated above, the employer must actually enable the employee to take the holidays and also notify the employee that these days will soon expire. In the case that led to the Dutch Supreme Court, the Court of Appeal of The Hague ruled that the employer in question had to pay 186.5 untaken holidays to the employee worth EUR 62,604.32 gross, to which the employer also had to pay the employee a 10% statutory increase as well as statutory interest on both the principal amount and the statutory increase.[1]
European Court of Justice case law important for Dutch practice
On the importance of complying with the notice and incentive obligations, the Dutch Supreme Court refers to the Max-Planck[2] and Kreuziger[3] judgments of the European Court of Justice. In those rulings, the European Court of Justice considered that the right to statutory holiday days cannot lapse if the obligations of encouragement and notice have not been complied with, despite the existence of statutory time limits for expiry.
It was already assumed that this also applied to the general 5-year limitation period to institute a legal action; but after the Dutch Supreme Court ruling, we know for sure.
Dutch Supreme Court ruling
On 23 June 2023, the Dutch Supreme Court[4] ruled that, in addition to the above, and on the basis of European rules, the Dutch law on limitation of holiday days, which stipulates without any limitation that holidays become time-barred after five years (Section 7:642 of the Dutch Civil Code), may not be applied to statutory holidays if the employer cannot prove that they have complied with the above-mentioned notice and incentive obligation. Consequently, when an employer fails to do so, it will cost them a lot of money.
[1] Court of Appeal of The Hague, 21 June 2022, ECLI:NL:GHDHA:2022:1789.
[2] European Court of Justice, 6 November 2018, C-648/16, ECLI:EU:C:2018:874 (Max Planck).
[3] European Court of Justice, 6 November 2018, Kreuziger, C-619/16, EU:C:2018:872 (Kreuziger).
[4] Dutch Supreme Court, 23 June 2023, ECLI:NL:HR:2023:955.
TeekensKarstens advocaten notarissen (TK) is a full-service Dutch law firm with extensive experience in the field of international law. TK has established specific international teams to provide international clients with tailor-made services and information.
Maaike Koot is a lawyer at TK and part of the international corporate employment law team. Maaike advises on reorganisation and dismissal, (collective change of) employment conditions, sickness and reintegration, temporary employment law and management agreements. Contact Maaike.
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