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Dismissal & end of contract

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Dismissal and end of contract

The Dutch lawyers of Penrose specialise in dismissal and termination of employment contracts in the Netherlands. Our employment lawyers assist employers and employees with dismissal / termination procedures and reorganisations, for example by drafting, amending and terminating employment contracts. Hereafter, we will discuss a number of relevant topics and frequently asked questions regarding the dismissal and termination of Dutch employment contracts.

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The end of an employment contract can have several causes. Usually an employment contract ends because the employee gives notice in order to work somewhere else, or because the employee retires. Yet, often an employment contract ends against the employee’s will. The end of an employment contract may for example be due to a work related dispute, or because the employer can no longer allow the employment contract to continue for business-economic reasons. The various roads that can lead to dismissal or termination of the employment contract are discussed hereafter.Notably, a mistake in the relevant termination procedures is quickly made, with major consequences for the employer or employee. The interests in case of dismissal are usually opposite aspects for the employee and employer. In order to make the right choice between the different options, it is advisable to seek timely legal advice from a Dutch employment lawyer.

Very often, a conflict between the employer and the employee about the end of the employment contract results in a settlement agreement, also called a termination agreement. The employer and employee set down in a settlement agreement that they have reached mutual agreement on the termination of the employment relationship and the relevant agreements.

The termination of an employment contract can be initiated by both the employer and the employee. In the event of resignation by an employee, the letter of resignation is a vital legal aspect. After all, for the employer it is the most obvious instrument to prove that an employee has indeed terminated the employment contract on his own initiative and that the employment protection and severance pay do not form an obstacle to the end of the employment contract.

In the event of dismissal by the employer, there are different ways of parting with the employee, depending on the reason for the dismissal. The most common ways are:

– termination with the permission of the UWV (Employee Insurance Agency) for business-economic reasons, or because the employee has been ill for more than 2 years;

– termination of the employment contract due to (for example) malperformance by the employee or a disrupted employment relationship.

Under Dutch law an employer may only dismiss an employee (Employee Insurance Agency) for business-economic reasons or after more than 2 years of illness with permission from the UWV or with permission from the subdistrict court if there are “reasonable grounds” (a sound legal reason) for doing so. The grounds for dismissal through the subdistrict court (also called cantonal court) in the Netherlands are:

– economic reasons (if the UWV has not agreed to these),

– long-term sickness / incapacity for work (if the UWV has not agreed to this),

– frequent absenteeism due to illness,

– dysfunction / non-performance,

– culpable acting (e.g. fraud or theft(,

– conscientious objections,

– disrupted employment relationship,

– other circumstances and (since 1 January 2020) a combination of grounds for dismissal (the cumulation ground).

Different grounds of dismissal / reasons can be combined with the latter cumulation ground. This means that the various reasons for dismissal, which are not severe enough for termination by themselves, can together be sufficient grounds for dismissal under Dutch law.

In the event of wrongful dismissal / termination, an employer is, in principle, liable to pay damages. It is therefore advisable to have an intended dismissal assessed in advance by a Dutch employment lawyer.

The notice period applicable in the event of termination of a Dutch law employment contract depends on the arrangements already made between the parties in the contract. In addition, Dutch labour law sets a number of minimum conditions for the notice period. For example, in the case of an employment contract for an indefinite period, a statutory notice period of one month applies to the employee who terminates the contract. Depending on the duration of the employment contract, the employer must observe a notice period of one to a maximum of four months. In the case of a fixed-term employment contract, there is no statutory notice period required: the employment contract ends on the agreed end date. In the case of a fixed-term employment contract for a period of 6 months or more, a written notification (announcement)of at least 1 month before the end date of the fixed-term contract does however apply.

If the probationary period of the employment contract still applies, then the notice period does not need to be adhered to.

At the end of the employment relationship on the initiative of the employer, an employee is entitled under the laws of the Netherlands to receive a transition allowance by means of severance pay. The transition allowance is a legal right that has replaced – what used to be referred to as – the subdistrict-court formula. Various tools are available online to calculate the transition allowance, for example via the Dutch website ontslag.nl.

At the end of the employment relationship on the initiative of the employer, an employee is entitled to (at least) the transition allowance. However, a termination payment may comprise more than just the transition payment. This severance payment is often the result of negotiations and is usually included in a Dutch law settlement agreement through which the parties terminate the employment relationship by mutual consent. The amount of the severance pay differs for each situation. In addition to a monetary amount, the employer sometimes reimburses extra training, outplacement or (legal) costs.

Our Dutch lawyers specialise in dismissal law. They help you consider and deal with any of your issues and are happy to answer your questions. The contact details of our experts can be found here.

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Attorney at law, Partner
Profielfoto rond Sophie
Attorney at law
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