Dismissal Law in The Netherlands
Seliz Demirci | GMW advocaten
Under Dutch law, the employment agreement can be terminated as follows:
- In the case of a fixed-term contract, on the agreed end date
- During the probationary period
- In the case of an urgent reason for dismissal: summary dismissal
- For company organisational or economic reasons: via the Employee Insurance Agency (UWV)
- For other reasons: via the court
- By mutual agreement: by means of a settlement agreement.
A unilateral termination, other than dismissal during the probationary period or summary dismissal, can be for one or a combination of the following grounds under Dutch law:
- Economic grounds
- Long-term illness or disability
- Regularly not being able to perform work due to illness or disability
- Underperformance
- Culpable acts or omissions
- Conscientious objection
- Disturbed working relationship
- Other grounds than those mentioned above
- Cumulated dismissal grounds based on more than two dismissal grounds as mentioned under C – H combined.
In practice, it often happens that an employer offers an employee a settlement agreement before proceeding with termination via the ‘formal route’ of a termination procedure – either through the UWV or through court.
As an employee working as an expat, what aspects should you consider when you are offered a settlement agreement?
First of all, a settlement agreement is a written offer from your employer that includes specific conditions under which you agree to give up your job and leave the company voluntarily. Critically, these conditions can deviate from standard Dutch employment law.
If you are in The Netherlands as a highly skilled migrant, losing your job can have consequences for your residence rights. Consider including arrangements about the job search period and garden leave in a settlement agreement to protect your future residence rights. Below are key aspects to discuss when negotiating a settlement agreement:
- Termination date: make sure that (at least) the applicable notice period is taken into account when agreeing to a certain termination date of your employment contract.
- Severance payment: under Dutch law, an employee is entitled to a statutory severance payment (the so called ‘transition payment’) in case of involuntary termination of their employment. In case of a settlement agreement, the statutory severance payment is not due. It can, however, be a guideline when negotiating a severance payment.
- Garden leave/exemption from work: you and your employer can agree on a garden leave. If you participate in the 30% ruling scheme, note that your entitlement will be affected in case of a garden leave.
- Final settlement: payment of (a pro-rated part of) vacation allowance and outstanding vacation days.
- Payment of bonuses: make sure to understand your entitlement to a bonus or a pro-rated part of it.
- The consequence of finding a new employment where you can start working prior to the termination date: it is conceivable that you would like to take advantage of a new job opportunity, even if you can start while your contract with your employer has not yet been (formally) terminated. Make sure you make arrangements about this with your employer, for example by agreeing that in that case you do not have to observe the notice period.
- A reference letter/testimonial.
- Post-contractual clauses, such as a non-competition clause.
- Reimbursement of legal expenses.
- Outplacement/training budget.
- Shares/stocks/options.
The above items can in any case be part of a settlement agreement and can be discussed with your employer.
Lastly, your employer cannot force you to sign a settlement agreement; it is always your choice. If you are unsure about the contents of your settlement agreement or the consequences for your situation, it is worthwhile consulting a lawyer.
Do you have questions about a settlement agreement or employment law in general? Please feel free to contact GMW lawyers for advice.
