This article is about ending an employment agreement. It is about dismissal with and without mutual consent. Furthermore it is about collective redundancy, what happens when a employer gets ill and about the Transition Compensation.
Dismissal without mutual content
Sometimes employers have their reasons to dismiss an employee. In The Netherlands, if an employer wants to dismiss an employee, there must be a valid reason. For example you can think of a refusal to perform work, excessive sickness absence (when certain conditions have been met, which shall be discussed below), reorganisation and company closure. An employer needs to have permission to dismiss an employee. Depending on the fairness of the dismissal, permission is required of the Employee Insurance Agency (in Dutch: UWV) or from the sub-district court.
The Employee Insurance Agency decides if there are valid economic reasons for the dismissal or in case the employee is sick for a long period of time (minimum of two years). This applies to permanent contracts and fixed-term contracts. If the Employee Insurance Agency does not give permission for the dismissal, the employer will have to go to the sub-district court.
For all other reasons of dismissal, the employer needs to go to the sub-district court, for example when there is a conflict between the employer and employee. For fixed-term contracts which do not have a clause to terminate the employment agreement before the end date, the employer can also turn to the sub-district court. They will verify if the legal criteria are met.
Dismissal by mutual content
An employer and an employee may also terminate the employment agreement by mutual consent. Most of the time, this shall be lead down in a settlement agreement. In that case, an employer needs the consent of the employee, but does not need permission of the Employee Insurance Agency or the sub-district court. The employee can obtain legal advice and may revoke his consent for a short period of time without any reason. This must be captured in the termination contract, because otherwise the reconsideration period will be twenty-one days (instead of fourteen days).
In case an employer needs to dismiss many employers this is called “collective redundancy”, which means the employer dismisses more than twenty employees at once within three months and within one geographical work area for economic reasons. For this, special rules apply. The employer must comply with the Collective Redundancy Notification Act (in Dutch: WMCO). The employer must report to the Employee Insurance Agency and the trade unions that his company is going to collectively dismiss employees. Furthermore, the employer must consult with the trade unions and often also with the Works Council.
The end of the agreement in case of illness
An employer cannot dismiss an ill employee based on the sole fact that the employee is ill. However, in case an employee is ill for more than two years and it is plausible that no recovery will occur within 26 weeks or it is plausible that the employee can work in an adapted form, an employee may obtain for a permit from the Employee Insurance Agency to terminate the employment agreement.
During these two years the employer has to make sure he has done all he can to ensure the employee returns to work. If the employer has not done this, the Employee Insurance Agency could impose a fine. This means the employer is obliged to pay the employee salary for the maximum of one more year and dismissal is not possible during that period.
The employer has to pay a transitional allowance, for which the employer can apply for compensation in certain cases. The employer can reclaim this compensation via the Transition Compensation Scheme, to prevent employers from being saddled with sky-high costs after paying the salary of the ill employee for two years. The amount compensation depends on the age of the employee, the amount of the salary and the duration of the employment.