The Netherlands: Those Who Do Not Provide Clear Information Pay the Price

An employer in the Netherlands has to inform an employee in writing or electronically of the key terms of employment, including any bonus plan, within one month of starting work.  This obligation to provide information ensues from a European Directive aimed at providing employees with transparency and predictability about their terms of employment. 

In principle, a violation of the obligation to provide information leads to the employer's liability. However, case law attaches other consequences to the failure to provide information or to the provision of incorrect information, specifically in terms of the obligation to furnish facts and the burden of proof. The Dutch Supreme Court recently ruled on this in a dispute about the interpretation of a bonus plan.

What was the case about? 

The parties had agreed in their employment contract that the bonus plan in effect at the employer would be explained in an addendum. The employer failed to do this and instead handed over a booklet during the application process, which included a component chart and bar charts linked to sales results to explain the bonus plan. The employee believed this document did not provide sufficient clarity on how the bonus was calculated and whether it would be offset against the fixed salary.  

The employee argued that the bonus amount to which he was entitled was intended to be an extra on top of the basic salary, whereas the employer was of the opinion that the basic salary should be deducted from the bonus, so that the employee would only be entitled to the payment of a bonus if and to the extent that it exceeded the basic salary. In other words, the employer felt that the basic salary was the minimum the employee would receive anyway, regardless of his sales results, and therefore that it already included compensation for the work.

Opinions of the subdistrict court and the appellate court

The subdistrict court did not find in favor of the employee. In contrast, the appellate court held that neither the booklet nor the component chart provided sufficient clarity on how the bonus plan should be applied. The appellate court gave the employer the opportunity to present evidence that it had explained to the employee during his job interview how the bonus system worked. The employer failed to do so, after which the appellate court ruled that the bonus plan as interpreted by the employee was applicable. 

Opinion of the Dutch Supreme Court

The Dutch Supreme Court ruled that in a contract interpretation dispute where the employee alleges the employer failed to fulfill its obligation to provide information, having the burden of proof rest on the employer is consistent with the European Directive’s objective. However, if the employer fails to provide that proof, it does not automatically mean that the provision to which the obligation to provide information pertains must be interpreted in the employee's favor. The interpretation has to be assessed according to the so-called "Haviltex criterion," which involves a consideration of what the parties could both reasonably expect of each other. 

The obligation to furnish facts and the burden of proof then rest on the employee who is invoking the legal effect of the provision. According to the Dutch Supreme Court, the fact that the employer violated its obligation to provide information did have to be taken into account when interpreting that obligation. 

That last addition means that the unclear wording of a provision to which the obligation to provide information applies may come to be at the employer's expense. As a result, this Dutch Supreme Court decision emphasizes the importance of employers providing clear and timely information.