A settlement agreement often seems like a neat and quick way to terminate an employment contract. In practice, however, there are significant risks involved. Many employees sign without fully understanding what they are giving up—and that can have major financial and legal consequences. In this article, you’ll learn about the main dangers of a settlement agreement and what you, as an employee or employer, need to be aware of.
Why is a settlement agreement (VSO) risky?
The essence of a settlement agreement is that the parties definitively resolve any uncertainty or dispute. This is explicitly stated in the law (Article 7:900 of the Dutch Civil Code). This means that the agreement remains valid even if it later turns out that the situation was different than originally thought.
That is precisely where the greatest risk lies:
👉 anything not explicitly recorded or reserved is often lost for good.
Case law confirms this. The Central Appeals Tribunal ruled that when entering into a settlement agreement, the parties consciously accept the risk that things may turn out differently in hindsight (ECLI:NL:CRVB:2026:372). Once signed, an agreement therefore leaves you little room to make any claims later on.
The five biggest dangers of a settlement agreement
1. Final discharge: you may be giving everything away
Most settlement agreements contain a so-called final discharge. By this, the employer and employee declare that they have no further claims against each other.
That sounds logical, but the consequences are often far-reaching:
- even unknown rights may lapse
- claims discovered later are also covered by the release
For example, the Rotterdam District Court ruled that a broad release clause may even encompass claims of which the employer was not yet aware at the time the agreement was concluded (ECLI:NL:RBROT:2026:1314).
👉 Conclusion: final release is often much broader than employees think.
2. Risk of unemployment or sick leave issues
A second major risk is that an employee:
- will not be entitled to unemployment benefits
- or will later face issues with sick leave (ZW) or disability
This is particularly relevant if:
- the reason for termination is not correctly stated
- the employee is still sick or becomes sick
Case law shows that employers have a duty to inform and a duty of care. For example, the Court of Appeal in The Hague ruled that an employee should have been better informed about the risks regarding benefits (ECLI:NL:GHDHA:2026:374).
👉 In practice, this often goes wrong—with major financial consequences.
3. Waiving the transition allowance or accepting an insufficient severance payment
Many employees do not realize that they:
- can waive the transition allowance
- or settle for an insufficient severance payment
Even though the transition allowance is, in principle, legally required (Article 7:673 of the Dutch Civil Code).
Note:
- if the compensation is “all-inclusive,” the transition allowance is often already included in the amount
- but that may not necessarily be to your advantage
👉 Without an explicit breakdown, it is difficult to verify what you are actually receiving.
4. Signing without proper information or under pressure
A common problem is that employees:
- are pressured to sign quickly
- do not seek legal advice
- are under pressure (for example, due to illness or conflict)
In such situations, annulment of the agreement may be possible in theory:
- due to mistake (Article 6:228 of the Dutch Civil Code)
- or abuse of circumstances (Article 3:54 of the Dutch Civil Code)
But in practice, this is difficult. The court will only intervene in cases of clear abuse. For example, an agreement was annulled due to abuse of circumstances (ECLI:NL:RBROT:2025:10437).
👉 Important: annulment is the exception, not the rule.
5. It is difficult to renege on it
A settlement agreement is specifically intended to be final. Outside the statutory cooling-off period (14 days, Article 7:670b of the Dutch Civil Code), it is difficult to renege on the agreement.
- The agreement must be in writing
- The employee has a 14-day cooling-off period
- If the employer does not mention this: a 3-week cooling-off period
In addition:
- a clause limiting this cooling-off period is void
But after that period, virtually the only grounds remaining are:
- mistake
- abuse of circumstances
👉 And these are only successful in cases of concrete and demonstrable errors.
Furthermore, it follows from the Xella ruling (ECLI:NL:HR:2022:63) that an employer cannot simply demand final discharge as a condition for termination by mutual consent.
VSO Checklist: What should you look out for?
Before signing a VSO, always check:
- Is the final discharge limited and specific?
- Are all items explicitly addressed:
- bonus
- vacation days
- expenses
- pension
- company car
- references
- Is unemployment insurance (WW) coverage properly arranged?
- Is the transition allowance clearly included?
- Have you had sufficient time and advice?
Conclusion
A settlement agreement is risky because it is very final.
The biggest risks for employees are:
- loss of rights due to final release
- problems with unemployment benefits (WW) or sickness benefits (ZW)
- an insufficient or unclear settlement amount
- signing without proper information or under pressure
- limited options to revisit the agreement later
The agreement is designed to buy out all uncertainty. What isn’t explicitly laid out often disappears permanently from the picture.
👉 That is why, in practice, one main rule applies:
never sign a settlement agreement without prior legal review.
Contact an employment law attorney in Amsterdam
Are you looking for dedicated support and direct, personal contact with an experienced employment law specialist in Amsterdam regarding a settlement agreement? Call our specialized attorneys in employment and termination law for questions and legal advice on settlement agreements.