FAQ’s about termination agreements in The Netherlands

1. What is a termination agreement?

A termination agreement can be used to terminate an employment agreement in The Netherlands. As employment agreements for indefinite term can not be terminated unilaterally by the employer under Dutch law, the employer must seek termination through one of the available forms. There are mainly three ways to terminate the employment in The Netherlands (see Hiring and Firing in The Netherlands): 1. Proceedings with the Cantonal Court 2. Proceedings with the employment authorities (UWV) 3. Termination by mutual consent.  Needless to say that the easiest and cheapest way to terminate the employment will normally be by mutual consent. In the latter situation, the termination is usually laid down in a termination agreement.

2. Why would you use a termination agreement?

Under Dutch law it is required that the agreement to terminate the employment is concluded in writing. Otherwise, the employer cannot claim the employment agreement has in fact ended and the employee may claim wages.

For the employee it is advisable to lay down the agreed conditions of the termination in writing to be able to claim performance of the obligations that the employer has engaged in in view of the termination, such as payment of a redundancy compensation or a waiver of post-contractual obligations. In some cases the employee will also need a termination document to obtain unemployment benefits.

3. Are termination agreements recognized under Dutch law?

Termination agreements are recognized under Dutch law. Moreover, the UWV, the employment and benefits authorities of The Netherlands, recommends that parties lay down their mutual consent about the termination in the form of a settlement agreement. Courts will in principal uphold the settlement agreement.

4. Are there any requirements as to the form of the termination agreement?

As stated above it is required that the agreement is made up in written form. Also it should include a phrase in which the employee is reminded that he has the legal possibility to cancel the agreement within a 14 days reconsideration period. To be a useful termination document, the agreement must further contain at least the names and positions of the parties, a reference to the employment agreement and the end date of the employment. Usually the contractual notice period is observed when determining the end date, but is possible to agree to deviate from this.

A very basic form of a termination agreement can be found on the website of the UWV. The form that is most widely used includes many standard clauses that have proved their value over the years.

5. Are there any suggested provisions?

There are several provisions that will make the termination agreement more valuable for the parties using it. To begin with: it is highly advisable to mention whether the employer will pay any amount as a termination or redundancy compensation.  Furthermore it is essential for the unemployment benefits entitlement of the employee to mention that the employment ends at the initiative of the employer and that the employee can not be reproached for the termination. Other suggested provisions include payment of accrued but unused holidays, provisions regarding a possible non-compete clause and arrangements as to the hand-over of company goods. Furthermore there are provisions arranging what will happen if the employee finds a new job before the end date of the employment or if some unexpected other reason for termination of the employment arises after the termination agreement has been concluded. Although these situations do not occur in each termination case, it can be useful to have this arranged.

6. Is the employer obliged to compensate the employee for legal fees?

There is no legal obligation for the employer to compensate the legal fees that the employee will incur to have the termination agreement reviewed by a lawyer. A valid termination agreement may be concluded without any lawyer being involved. However, if the employee concludes the agreement unassisted and without legal advice, the employee may at a later stage claim that he did not fully appreciate the legal consequences of the agreement and tries to have the agreement annulled. To avoid this risk many employers offer a compensation of legal fees incurred by the employee for a review of the termination agreement. Often an amount of around EUR 750 is offered by the employer. This should normally cover the fees for a reasonable review of the termination agreement.

7. Is a termination agreement final?

After expiry of the period of reconsideration of 14 days, the termination agreement  will normally be considered as the final arrangement of all the issues between the parties in relation to the employment. Most termination agreements will state that the parties will have no further obligations after the have fulfilled everything that is laid down in the settlement agreement. It is therefore important for both parties to include all obligations and issues related to the employment.

see also:

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