Case law on the accrual of holiday days during a dormant employment contract is very much in flux. Recent rulings from various district courts show a divided picture. At the same time, an important change to the compensation scheme for the transition payment is due to take effect on 1 July 2026. In this article, we explain what this means in practice for employers.
Conflicting case law
This month, Rotterdam District Court ruled that employees with a dormant employment contract who receive a WIA or WW benefit are entitled to holiday days while retaining that benefit. If they also accrue holiday days during the same period with the employer with whom they have a dormant employment contract, the subdistrict court considered this would amount to a double entitlement.
Earlier, Noord-Nederland District Court also ruled that no holiday days are accrued during a dormant employment contract. By contrast, Gelderland District Court ruled in August 2025 that an employee does continue to accrue holiday days during a dormant employment contract. That same court ruled in June 2025, in a different case, that an employee no longer had a right to wages during a dormant employment contract, and therefore not to holiday days either. In that ruling, it was explicitly noted that Dutch law conflicts with EU law. According to the court, this is a task for the legislature.
The conclusion is clear: the rulings of national subdistrict courts are not aligned.
Linked to wages or not?
The central question is whether the right to accrue holiday days is limited to the period during which the employer must continue paying wages during illness under Section 7:629 of the Dutch Civil Code, or whether this right extends over the entire period of incapacity for work, including the phase in which the employment contract continues as “dormant”.
Section 7:634(1) of the Dutch Civil Code links the accrual of holiday days to the right to wages. In practice, this means that no more holiday days are accrued once the obligation to continue paying wages ends.
EU law
This strict interpretation is, however, under pressure from EU law. Article 7(1) of Directive 2003/88/EC provides that every worker is entitled to a minimum number of paid holiday days. Section 7:634(1) of the Dutch Civil Code conflicts with the Directive and with the case law of the Court of Justice of the EU. The Court has ruled that member states may not impose conditions that limit the minimum holiday entitlement set out in Article 7 of the Directive. In practice, this means member states, including the Netherlands, may not link the accrual of holiday days to an entitlement to wages.
Change to transition payment compensation as of 1 July 2026
Alongside this debate, an important legislative change is underway. As of 1 July 2026, compensation for the transition payment after two years of illness will, in all likelihood, be abolished for large employers. From that date, only small employers with fewer than 25 employees will be able to apply to the UWV (Employee Insurance Agency) for compensation for a transition payment paid to a long-term sick employee. Although the bill is still being considered by the House of Representatives, it is expected that this restriction will be introduced.
The explanatory memorandum to the bill confirms, in this context, that limiting the statutory compensation option may affect the operation or scope of the “Xella” standard developed in case law.
What does this mean for employers?
The Xella case law obliges employers, under certain circumstances, to cooperate in ending a dormant employment contract, while paying the transition payment. This case law is closely linked to the compensation scheme mentioned above. Once compensation for large employers is abolished, the financial incentive is expected to shift towards keeping the employment contract in place, especially now that no holiday days are accrued during the dormant period of the contract either way. It remains to be seen whether, based on the Xella rationale, employers will still be required to cooperate with a termination request that includes payment of the statutory transition payment.
The expectation is therefore that, as the compensation scheme is restricted, dormant employment contracts will make a comeback, until clarity is once again created, politically and/or through case law, on whether a transition payment is owed after 104 weeks of illness.
Are you an employer with an employee who will reach the end of the waiting period before 1 July 2026? Do not wait too long to conclude a settlement agreement, so you still qualify for compensation of the transition payment owed. Are you an employee who will reach the end of the waiting period after 1 July 2026? Anticipate the risk of a dormant employment contract.
Do you have questions about an employee who is nearly two years sick, about dormant employment contracts, or about (changes to) the transition payment compensation scheme? Our employment lawyers are ready to help.
