6 April 2020

Salary during the crisis – when employers have to continue paying

The coronavirus has greatly affected the daily business activities of many companies. Offices and factories have closed, and employees have been forced to stay home. We expect employers, on the basis of article 7:628 DCC, will have to continue paying the salaries of employees who are unable to work because of the coronavirus crisis. The longer term situation remains uncertain. In this article, our employment experts explain why.
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Working from home

Employees who work from home are entitled to normal salary payments, even if they are less efficient than they would be at their usual place of work. The reason for this reduced efficiency may be, for example, that their family members are home as well, their IT system is not very efficient, or not all tasks can be done away from the workplace or office. If employees work from home unrelated to reasons of the employer having to close the workplace, but because they need to look after their children while schools and nurseries are closed, they are also entitled to continuing to receive their salary based on the same principle.

At home with coronavirus-related symptoms

Employees who show symptoms of the virus and cannot go to their workplace, either because they are too sick to work or because they have to self-isolate in accordance with government guidelines, are also entitled to their salary. When employees feel too ill to work and are therefore unfit to perform their work, they are entitled to continued salary payments under the normal statutory regime regarding illness and pay (art. 7:629 Dutch Civil Code). In our opinion, that regime also applies when an employee has light coronavirus-related symptoms. Even though a simple cold, for example, might not normally prevent an employee from going to work, under the current circumstances the employee has to stay home in self-isolation on government and employer orders. In this case, not performing the agreed tasks is also a consequence of illness. Employees with minor coronavirus-related symptoms who are working from home, are entitled to normal salary payments, because they perform work.

At home, but not working from home

What about employees who have to stay at home but cannot work from home? Are they also entitled to continued salary payments? NOW Under emergency legislation known as "NOW", employers may be eligible to receive up to 90% of salary costs in subsidies for a three-month period, with the option to renew for another three months. The salary subsidies are intended to enable employers to continue paying full salaries to those employees who cannot work, or who work less, because of the coronavirus preventative measures. For more information about NOW, read this article. Although NOW requires employers to use the salary subsidy to pay salaries, NOW does not interfere in the employment agreement between employer and employee. Whether or not an employer receives salary subsidies is relevant, but not decisive, for an employee's entitlement to receive salary during the coronavirus crisis, when not working. The employee's entitlement should be determined on the basis of the Dutch Work and Care Act and article 7:628 of the Dutch Civil Code. First hours or days: emergency leave under the Work and Care Act Under the Work and Care Act (art. 4:1), in an emergency, employees are entitled to their salary over a short, equitably determined period. We believe the current situation qualifies as an emergency under this legislation. The question is how long is an employee entitled to emergency leave and, consequently, to continued salary payments under this act? Under regular circumstances, this entitlement would exist for several hours or several days, at most. Do the exceptional circumstances of the coronavirus crisis justify the application of emergency leave to the entire period of the crisis? In our opinion, the courts are unlikely to rule that the current crisis extends the emergency leave to a period of more than a few days. Emergency leave is intended to help an employee deal with a sudden emergency, not to enable employees to stay home until the problem that led to the emergency is solved. Emergency leave is often part of a collective labour agreement and may therefore have a wider scope than the statutory rules. Do not forget to review the rules. After the emergency leave: legal framework for continued salary entitlement At the end of the emergency leave period, the question arises as to whether the employer has to continue paying the employee's salary on the basis of art. 7:628 of the Dutch Civil Code. If employees do not perform tasks, they are entitled to continue receiving salary payments if the reason for the non-performance falls within the employer's risk. Normal business risks are, in any event, borne by the employer. But the current coronavirus crisis does not qualify as a normal business risk. Some exceptional business risks and force majeure events are also at the employer's risk and expense. The limited case law available on this point, shows that exceptional circumstances and force majeure outside the employee's private sphere regularly come at the employer's risk and expense. When deciding on an employer's obligation to pay salary in accordance with article 7:628 DCC, the courts will have to take into account all relevant facts and circumstances and come to a reasonable outcome. Such facts and circumstances would be, for example:
  • the duration and impact of the restrictions set by the government;
  • whether or not the employer is entitled to salary subsidies under NOW and to use other governmental measures taken to decrease the effects of the limitations;
  • the financial position of the employer;
  • the measures taken by the employer to improve its financial position;
  • the measures taken by the employer to enable employees to work from home; and
  • the impact of not paying salary on the employee's (financial) situation.
Depending on the facts and circumstances, the outcomes of legal proceedings may vary from employer to employer and even from employee to employee. The courts will assess the situation retrospectively, with more knowledge of the situation and its effects than was available at the time of the employer's decision to continue or discontinue the salary payment. That makes it difficult to predict the outcome of legal proceedings for employers and employees during this crisis. Exceptional business risk So does this coronavirus crisis qualify as an exceptional business risk that should be borne by the employer? Yes, probably. The government is of the opinion that the coronavirus crisis is at the employer's risk. This is explicitly mentioned in the NOW (see page 20 under 11). According to the government, employees are entitled to receiving their full salary payment as long as their employment agreement continues, even if they do not work due to the measures taken. Although the government's opinion would be important in court proceedings, it is ultimately up to the courts to decide if and for how long article 7:628 DCC requires an employer to continue paying salaries during this crisis. The courts are likely to rule that at least part of the coronavirus crisis should come at the employer's risk and expense, based on:
  • case law on exceptional circumstances and force majeure in light of article 7:628 DCC,
  • the government's view that employers are obliged to continue to pay salary during the coronavirus crisis, and
  • the fact that employers that are hit by the crisis can apply for a salary subsidy under NOW.
Which part of the crisis is at the employer's risk? It is likely that the courts will rule that at least part of the coronavirus crisis should come at the employer's risk and expense. But what part? There are two possible approaches. Which approach is the appropriate one, is up to the courts to decide and will depend on the specific facts and circumstances, such as those described above. One could argue that the first weeks of this crisis are at the employer's risk, but that after a certain period it is no longer reasonable to expect an employer to continue to make salary payments if no work is done. For example, if the financial position of the employer becomes very weak or if the employer no longer receives a subsidy on the basis of NOW. This approach would be in line with case law on the effects of the 2008 economic crisis and the bird flu. Despite the exceptional character of those situations, they were considered to be at the employer's risk until the employer could rightfully terminate the employment agreement for economic reasons. A different approach is also a possibility: this crisis has come so suddenly and the effects are so substantial that it is not reasonable to expect employers to continue to make salary payments as if nothing has changed. However, after a certain period, employers should be able to adapt their business to the new situation and once again to pay employee salaries. This would be in line with case law on the effects of hurricane Irma on the island of Saint Marten, when employers suddenly had to close their businesses, but were expected to rebuild it during the three months after the hurricane, so that employees could start working again. As mentioned, all facts and circumstances will be taken into account when determining if an employer has to continue to pay employees their salary even though the employee is not working. We expect that a relevant factor will be whether the employer was able to apply for a salary subsidy under the NOW. If the employer had the option to apply, regardless of whether he actually did or not, it is likely that the employer will have to continue making salary payments. This is in line with the Supreme Court's ruling that employer obligations are influenced by whether it could apply for a subsidy that would have covered the transition payment owed to an ill employee after termination of a dormant employment agreement. Just like the NOW subsidy, the subsidy that repays the transition payment paid to ill employees does not cover the full amount paid by the employer. The gap between the amount to be paid to the employee and the amount received from the government, did not prevent the Supreme Court from ordering that employers have the obligation to pay the transition payment. We also expect measures an employer could have taken to enable its employees to work despite the restrictions imposed by the government, to be relevant if courts have to decide whether the employer should make salary payments to employees who do not work because of the crisis. For example: did the employer make reasonable changes to its IT system in order for its employees to work from home, or did the employer make reasonable changes in its manufacturing process so that every employee could keep 1.5 metre distance from other employees? If such measures were reasonably possible, but the employer chose not take them, courts are more likely to accept an obligation to pay employee salaries than if an employer was unable to adjust its business to the new circumstances. How to proceed - transparent communication We expect that, on the basis of article 7:628 DCC, employers will – at least for a certain period, whether now or later on – have to pay the salaries of employees who are not working because of the coronavirus crisis. Even so, the situation remains uncertain. The circumstances that influence the position of employers and employees are changing rapidly. We therefore believe it is not necessary for employers to explicitly acknowledge employees' entitlement to continued salary payments. Employers can confirm that salaries will continue to be paid for the time being, but that the situation will be monitored closely and reviewed from time to time. This will include a review of whether the payment of salary to those not working from home and those not ill, continues to be possible and appropriate. If you have any employment-related questions during the coronavirus crisis, get in touch with our dedicated team at employment@debrauw.com or with your usual De Brauw contact.