Grounds for Termination
A fixed-term employment contract or a contract for a specific project ends by operation of law upon expiration of the term or completion of the project. As from 1 July 2015, an employer is obliged to notify the employee at least one month before the end of a fixed-term contract of six months or longer, as to whether the employment contract will be extended. The employer is also required to inform an employee who has a fixed-term contract about vacancies with an open-ended employment contract.
If an employer wants to dismiss 20 employees or more within a term of three months within one of the working areas of the Employee Insurance Agency, he must notify and consult the relevant trade unions and notify the Employee Insurance Agency of its intention to do so. If the employer fails to comply with its obligation under this Act, the employee has a right to nullify the termination of his/her employment contract.
An open-ended employment contract can be terminated in the following ways:
- the employer gives notice after receiving permission from a governmental organisation. Since 2015, there is a possibility of appeal against a decision of the Employee Insurance Agency;
- the employee consents after the employer has given notice, without the abovementioned permission. However, there is a reflection period of 14 days, during which the employee can withdraw his/her consent. The employer has to point out the reflection period within two days after the employee has given his/her consent. If the employer fails to do so, the reflection period will be extended to 21 days;
- termination by decision of the Court, by filing a petition for dissolution in case of:
- frequent and disruptive absence due to illness;
- unsuitability for the position/underperformance (other than because of illness);
- culpable acts or omissions of the employee;
- refusal to work due to a serious conscientious objection;
- impaired working relationship as a result of which the employer cannot reasonably be required to continue the working relationship;
- a new ground for dismissal called the “cumulation ground” was introduced, which allows an employer to combine different grounds for dismissal, whereas these other grounds are, by themselves, insufficient to justify a dismissal. The cumulation ground can only be applied for the dismissal motives mentioned above and cannot be employed for dismissals on the grounds of (i) business economics or (ii) due to long-term incapacity for work. In case an employment is terminated on the basis of a cumulated dismissal, the Court can grant an extra severance, equal to a maximum of half of the transition payment, in addition to the statutory transition payment that the employee is ordinarily entitled to receive. Since 1 July 2015, there is a possibility to appeal against the Court’s judgment;
- other reasons and/or circumstances (by way of an exception).
- mutual consent (no notice period needs to be observed, although it is usual to do so);
- immediate dismissalfor urgent cause;
- employee elects to resign, with due observance of the applicable notice period.
Is Severance Pay Required?
A statutory transition payment was introduced, effective 1 July 2015. From 1 January 2020, employees are entitled to a transition payment from the first day of employment, as well as during probationary periods. An employee will receive a third of the monthly salary per calendar year. The transition payment is capped at EUR 83.000 gross – or if the employee is entitled to a higher annual salary – then one annual salary. The transition payment is not due if the employee terminates the employment contract, unless this termination is a result of seriously culpable actions on behalf of the employer.
As of 1 April 2020, a new compensation scheme entered into force. Employers can apply for compensation for the transition payment, if they dismiss an employee on the grounds of long-term occupational disability (after two years of sickness).
Moreover, as of 1 January 2021, in the event of a closure of a business by the employer for reasons of illness or pension, the employer will now be compensated. Employers must satisfy a number of narrowly circumscribed conditions in order to qualify for compensation. It is important to note that this option is only available to small-business employers (with less than 25 employees) who owe a transition payment incurred during a period of six months prior to the consent of the Employee Insurance Agency or termination of an employment contract.
For calculating the duration of an employment contract, one or more employment contracts between the same parties (or successors) that have followed each other with intervals lasting no longer than six months, will be counted together. In 2015, supplementary orders and decrees became effective, permitting employers to deduct costs that were made for the benefit of the employee, during the employment, from the transition payment.
The statutory transition payment will not be due if the employee is younger than 18 and the average working hours did not exceed 12 hours per week. The transition payment will also not be payable if the employment contract ends as a result of the employee reaching the pensionable age, or another age at which the employee is entitled to a pension, or if the employment is terminated or otherwise ceases to continue as a result of a grave culpable act or omission, on the part of the employee (e.g., a legally valid summary dismissal).
In addition to the statutory transitional payment, the Court may also award a fair dismissal payment in case of seriously culpable acts and omissions on the part of the employer. This only applies to exceptional situations.
Separation agreements are used when the employment contract will be terminated with mutual consent (the so-called settlement agreement). A settlement agreement is not a legal requirement, but is considered best practice, as an employee is also able to apply for unemployment benefits after concluding a (legally correct) settlement agreement.
Remedies for Employee Seeking to Challenge Wrongful Termination
After concluding a settlement agreement, the employee has a reflection period of 14 days. During that period the employee can withdraw the given consent at any time, without having to give an explanation. When this period is over, it is still possible under Dutch law to void a contract. A contract is voidable if for example, one of the parties misused the circumstances that the other party was in while signing the settlement agreement, or if a party was misled into signing the contract by the other party (with a 3 year time limit for invoking a voidable settlement agreement).
The Dutch Whistleblowers Authority is available to employees who want to report an abuse in the workplace within the public or private sector. The Whistleblowers Authority provides advice, support and, if necessary, carries out investigations. The Whistleblowers Authority Act, which came into force in the Netherlands on 1 July 2016, obliges all organisations in the Netherlands with more than 50 employees to introduce an internal reporting procedure for reporting abuses. The Act also bans retaliation against the whistleblowers (individuals) who have reported a possible abuse in the proper manner.