Ways of terminating the contract

Ways of terminating the contract

13 januari 2021

Dutch law provides a limitative amount of ways to terminate a labour agreement. Which route to choose depends on the reason for dismissal. Below we have listed the grounds for dismissal recognized by Dutch law and the corresponding way to terminate the contract.

Dismissal with official authorisation from the regional public employment office

Dismissal with authorization of the public employment office (UWV):

  1. Redundancy      
  2. Long-term illness or disability

Dismissal procedure before the Dutch court:

  1. Frequent sick leave
  2. Inadequate performance
  3. Culpable acts or omissions of the employee
  4. Conscientious objection
  5. Disturbed employment relationship
  6. Other grounds

Besides these formal routes, it is also possible to end a contract by mutual consent.

Furthermore, an employment may also end due to:

  • Non-renewing of a fixed-term contract
  • Termination during the trial period
  • Summary dismissal for urgent reasons
  • Termination by the employee

Dismissal with official authorisation from the regional public employment office

In case of redundancy (reorganization, budget costs, etc.) or in case of long-term illness authorization for dismissal can be asked from UWV. This application at UWV has to be sent through filling out a form online and adding all the necessary documents to substantiate your application. In the form you will have to explain how you have reached your decision to dismiss this specific employee. Keep in mind you have one chance to convince UWV that the dismissal is inevitable. If you do not receive permission from UWV, your employment relationship with the employee will likely be damaged and a risk of reporting ill by the employee is realistic. Therefore, we strongly advise employers to seek counsel when filing for dismissal at UWV.

UWV will assess whether the dismissal is valid and will inform you and the employee on their decision within 4 weeks. Upon receiving authorization for dismissal, you have 4 weeks to use the permit from UWV and formally terminate the contract. Both you and your employee may appeal to the decision of UWV before the regional court.

Rescission of the contract by a court

This procedure is started by the employer, who petitions for a dismissal at a sub district court. This petition is also send to the employee, who then may send their statement of defence to the court. After this written part of the procedure, a court session will take place where both parties explain their case to the judge. Afterwards, they can either reach a settlement or await the verdict from the judge.

It is up to the employer to deliver all the necessary evidence and prove that the ground for dismissal is there. You will also have to prove there’s no other job function or relocation available as an alternative solution to the dismissal. Our legal counsel can represent you in these court sessions and file all the necessary paperwork.

If the termination is amicably and your employee agrees with the termination, then you have two possibilities to arrange this together: the employee can formally consent to the termination by the employer due to which he will be entitled to the transitional payment; or via agreeing on a settlement agreement.

The settlement agreement is most often used in these situations. It provides you and your employee the opportunity to put all your arrangements concerning the termination in writing. For example the notice period that will be taken into account, whether or not the employee will be taking leave of absence, if there will be a remuneration or not, etc. Also, under Dutch law you are obliged to include several other topics in this agreement. Our legal counsels can assist you in drafting these agreements and if necessary assist you in the negotiations with your employee or their lawyer.

The settlement agreement is not yet final after signature. During 14 days after the day that the settlement agreement was reached (the date on which employer and employee signed the settlement agreement), there is a statutory period to reconsider for the employee. During that period the employee can, in writing and without having to state his reasons, renege on the settlement agreement. In that case the settlement agreement will be annulled and the employment contract remains in effect. The same time-period to reconsider is provided for the option of consenting to the termination of the employment contract.

If there’s no mutual consent about the termination of an employment, you can ask the sub district court to terminate the contract or ask authorization for dismissal at UWV. Please note that it might be wise to start the procedure before entering into negotiations with the employee on a possible settlement agreement. We advise to always contact INretail and discuss the appropriate action, before informing your employee(s).

Non-renewal of a fixed-term contract

When a fixed-term contract ends,  you have the choice to either offer a new contract or terminate the employment. It is important to notify your employee at least one month in advance in writing about the decision. If you are late with this notice, you risk a fine which the employee may claim from you. It does not however influence the ending of the contract. You are still able to terminate the employment, if you give the notice too late. However, if a contract has expired and the employee continues to work, a new contract automatically has started. This could even be an open-ended contract. It is therefore very important to keep an eye on these deadlines. If a situation like the above has occurred, contact INretail for advice.

Summary dismissal for an “urgent” reason

In case of an urgent reason it is possible to dismiss the employee without a legal procedure before the court or UWV. Examples of an urgent reason are theft, repeatedly being late, refusal to work, persistent refusal to comply with your instructions, etc. A summary dismissal can be executed immediately, thus leaving the employee with no salary and without social benefits. Therefore it is a very severe measure and can’t be imposed lightly.

The measure in itself has to be proportionate with regard to these severe consequences. Furthermore, there’s a small time window after discovery of the urgent reason to impose the measure of summary dismissal.

We highly recommend to seek legal counsel in order to determine whether you are right to impose a summary dismissal. Upon discovery of a possible urgent reason, contact INretail immediately to discuss your situation and possible actions.

Summary dismissal for an “urgent” reason

In case of an urgent reason it is possible to dismiss the employee without a legal procedure before the court or UWV. Examples of an urgent reason are theft, repeatedly being late, refusal to work, persistent refusal to comply with your instructions, etc. A summary dismissal can be executed immediately, thus leaving the employee with no salary and without social benefits. Therefore it is a very severe measure and can’t be imposed lightly.

The measure in itself has to be proportionate with regard to these severe consequences. Furthermore, there’s a small time window after discovery of the urgent reason to impose the measure of summary dismissal.

We highly recommend to seek legal counsel in order to determine whether you are right to impose a summary dismissal. Upon discovery of a possible urgent reason, contact INretail immediately to discuss your situation and possible actions.

Termination by the employee

Resignation by the employee with an open-ended contract is always possible. During a fixed-term contract this is only possible if you have provided this opportunity in the labour agreement. If not, you may ask of the employee to continue working for your company, until the fixed-term contract ends. If the employee hands in their resignation, they do have to take into account a period of one full calendar month.

The resignation by the employee can be communicated in any way possible. Thus, oral resignation can be valid, just as a WhatsApp-message, an e-mail, a letter in the post, etc. It is always recommended to confirm a resignation via e-mail or post.

Due to the resignation, an employee does not have any rights regarding social benefits. Especially in situations of conflict and when an employee does not have a new job yet, it is therefore recommendable to ensure whether the employee actually oversees these consequences. If not, they may plead that their resignation is to be ignored. For instance, an oral resignation during an emotional dispute between you and your employee might not be valid. 

If you have doubts on how to handle a resignation, don’t hesitate to contact INretail to discuss the situation.

Thijmen de Coo

Thijmen de Coo

Adviseur Ondernemersservice

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