Termination of expat employment contract by a settlement agreement: Labour & Employment lawyer in Amsterdam
Termination of an expat employment contract in The Netherlands: our Amsterdam lawyers and attorneys have comprehensive experience in Dutch Dismissal Law (Dutch Employment Law), acting for employers, and employees (expats) in The Netherlands. Our lawyers offer legal advice and litigating in The Netherlands with all types of Dutch and international Employment Law matters, including dismissal (by agreement), severance payments and termination agreements regarding expatriate contracts of employment.
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Either an employee or employer can decide to terminate a contract of employment. It is however unlawful to dismiss an employee in the absence of a dismissal permit by the UWV (Employee Insurance Agency) or a court order barring exceptions like termination with immediate effect (dismissal on the spot ) or during a trial period. A local court may terminate (dissolve) an employment agreement on reasonable grounds.
Dutch Dismissal Law: WWZ
Our Amsterdam law firm has broad experience representing both employees and employers in all types of cases. The Netherlands WWZ Law (Wet werk en zekerheid) brought in 2015 a change to the Dutch Dismissal Law in The Netherlands, related to a.o. the system of consecutive fixed-term contracts, the non-extension notice, grounds for dismissal and severance compensation.
Termination of employment contract: fixed term contracts
As per 1 July 2015, an employment contract for a definite period is according to Dutch Dismissal Law automatically converted into a permanent one if:
- after 3 consecutive employment contracts, the next consecutive employment contract is entered into and the consecutive employment contracts have not been interrupted for more than 6 months;
- the total duration multiple temporary employment contracts exceed two years.
This rule is not applicable to:
- employees under 18 with a average employment of 12 hours or less a week
- pupils following a work-study program.
Notification fixed-term agreement in The Netherlands
Employers are obliged to notify employees in writing at least one month before expiring of the contract for a definite period,
- whether the contract is to be extended
- and, if so, under which conditions.
The penalty for failure is equal to the amount of one gross monthly salary. If the notification is too late, the employer’s penalty is a proportional amount of gross monthly salary. The employee should claim the notification penalty within 2 months after expiring of the fixed term contract.
Grounds for dismissal in The Netherlands (dissolution by the Dutch cantonal court)
When can an employer dismiss an employee? According to Dutch Law, an employer needs to follow a legal dismissal procedure if he or she wants to end an employment contract. The employer can terminate the employment contract with the employee in different ways. The employer can file a request for termination with the subdistrict court for reasons relating to the employee (termination due to personal reasons, Article 7:669 of the Dutch Civil Code). The Dutch court will check the dismissal against all relevant legal criteria. The employer should have a fair reason to dismiss employees in The Netherlands and the employer must deal with the matter in a proper manner. The ‘reasonable grounds’ for dismissal in Dutch Dismissal Law include:
- Redundancy due to economic circumstances (deteriorated economic conditions or reorganization);
- Long-term disability or illness (over 2 years);
- Frequent absence due to illness or disability which results in unacceptable consequences for business operations;
- Dysfunctioning for other reasons (i.e. underperformance or poor performance);
- Culpably acts and the employer cannot reasonably be required to continue the employment contract;
- Refusal to perform contractual duties due to conscientious objection;
- Disturbed (impaired) working relationship or other grounds due to which the employer cannot be expected to allow to continue the contract;
- A combination of ‘reasonable grounds’.
A lack in the ability to perform on the job or co-operation issues are examples of misbehavior that might constitute a ground for a termination on personal reasons. It is however required for the employer to investigate possibilities of an alternative solution before resorting to termination. Terminations are required to be well founded and reasonable according to the law.
Compensation: transitional compensation or fair reimbursement
If a termination is done in conflict with the law, the employer is liable for damages towards the employee. The employee may be able to claim transitional compensation or fair reimbursement. There are quite short deadlines for making claims. The decision of the Court is open to appeal. Different rules apply to the dismissal of a statutory (managing) director.
Consent of the UWV: termination contract by permission of the UWV
An impartial Dutch body (UWV, Employment Insurance Agency) must first decide if dismissal on other grounds according to Dutch Dismissal Law is allowed. For (business) economic reasons for example, when a reorganisation takes place or a (part of the) company closes down or relocates:
- enforced redundancy
- redundancy on grounds of long-term incapacity.
The UWV will assess whether there is a reasonable ground for terminating the employment agreement and whether the employee might be re-employed. It is therefore important for employees to be aware of their rights if they should end up in such a situation. An employee who is absent from work due to illness may not be dismissed for that reason during the first 24 months after becoming incapacitated for work.
Statutory notice period in The Netherlands
The employer must observe the applicable notice period when terminating the employment relationship. If there is no written employment contract and no collective employment agreement, the period of notice is regulated by the Dutch Civil Code, Book 7, Article 672. The length of the notice period for an employer depends on the duration of the employment contract, with a maximum of 4 months:
- 1 month for less than five years of service;
- 2 months for service between five and less than 10 years;
- 3 months for 10–14 years of service;
- 4 months for 15 or more years of service.
Bans on dismissal
There are a number of bans on dismissal. An employee cannot be dismissed on the grounds of gender or when she is pregnant.
Transition compensation (Severance pay)
According to Dutch Dismissal Law, an employer is obliged to pay a transition compensation to the employee:
- if the employment agreement will terminate as a result of the employer’s initiative.
Termination of employment contract by mutual consent (settlement agreement and termination agreement) according to Dutch Dismissal Law
A settlement agreement according to Dutch Law is a legally binding agreement between employer and employee, to formally record that all parties involved in a contract have agreed to its cancellation. The termination of employment relationships by a termination agreement is required to be in written form to be valid. Settlement agreements are offered in The Netherlands to employees when they are being made redundant and in case of involuntarily unemployment. The settlement agreement outlines the terms of the deal. The termination of an employment relationship by way of a termination agreement makes the most economic sense.
Severance pay provisions
The employer can offer the employee compensation for leaving the job “voluntarily”. Many employers and employees will agree on severance pay provisions to avoid lengthy court proceedings concerning the effectiveness of the termination. In case of a settlement agreement, some employers will be prepared to pay more than just the statutory severance payment. This may vary depending on the individual circumstances of the case. The advantage of such termination is that the employer is not required to provide ‘reasonable’ reasons for the termination, as would be the case if the employment contract was terminated by the court. Agreed payments from the employer are taxable. As with any signed contract, the parties signing a mutual termination agreement must freely give their consent. Our Amsterdam Employment Solicitor (attorney) can assist you with your termination agreement to terminate your employment agreement by mutual consent. A termination agreement can contain the following information:
- Severance pay
- Release from work duties, garden leave
- Date of termination
- Continued payment of remuneration up to the end of the employment relationship
- Post-contractual items like non-competition clause
- Final payment
- Contribution for the legal fees
- Final discharge
A settlement agreement has the option to back out of the contract within 14 days after the date of the settlement agreement.
Summary dismissal for an urgent cause
Employment contracts may also be terminate by instant dismissal for ‘an urgent cause’ (serious misconduct, dismissal on the spot). Termination can take place immediately without compensation in cases such as fraud or other crimes involving a breach of trust. In such a situation, no period of notice applies. Due to their serious consequences, dismissals on the spot within the meaning of article 7:678 of the Dutch Civil Code must be declared clearly and unambiguously. Examples of gross misconduct could include:
The dismissed employee is not entitled to a benefit according to the Unemployment Insurance Act (WW benefit). The dismissed employee may file a claim before a Labour Court in order to challenge the termination of the labour contract.
Unfairly laid off?
If you believe you have been unfairly laid off, you should contact WS Lawyers in Amsterdam.
Call our lawyers in Amsterdam for all of your employment law needs and advice on Dutch Dismissal Law and termination of employment
An employer should always follow a fair procedure when considering any dismissal. Our experienced Amsterdam solicitor (lawyer) mr. P.Chr. Snijders offers comprehensive legal services to both employers and employees, both inside and outside of court. Our lawyers in Amsterdam will support you in all fields of Dutch Labour and Employment law. For further information regarding Dutch Dismissal Law and termination of employment (legal advice and litigating) contact our attorneys Employment Law in Amsterdam.