Termination of employment

Under Dutch law, an employer can choose from various ways to terminate an employment agreement with an employee. Three options will be explained more extensively in this article.

1. Termination of the contract with mutual consent.

The employer and the employee can agree on the terms to terminate the employment agreement by means of a settlement agreement. In this scenario, the employee voluntary agrees to the dismissal. The most important conditions open for discussion are a possible termination remuneration and the end date of the employment agreement. Other terms, like a non-competition clause, can also be of importance to one or both parties though.

When parties reach an agreement with mutual consent, no permission of the Dutch Unemployment authorities or dissolution of the cantonal court is needed.

2. Request permission of the Employee Insurance Agency (UWV).

An employer who wants to give notice of termination to the employee, generally needs to file a request for permission to the Employee Insurance Agency first.

The reason for the dismissal has to be substantiated, for example a reorganization or company closure. This has to be supported by evidence, for example with documents to state the poor financial circumstances of the company and proof that the office rent will be terminated. The employee can file objections. It takes the UWV approximately 8 weeks to decide on the matter. If granted, the employer may then proceed and give notice.

The risk of this procedure is that there is always a chance that the UWV does not grant permission to terminate the employment agreement. When the permission is granted, the employer has to take the applicable notice period into account before the contract can be terminated. In total it will take the company at least three months to terminate the employment agreement.

3. Request the cantonal court to dissolve the employment agreement.

When the employer decides to request the cantonal court to dissolve the employment agreement, the reason for the dismissal has to be substantiated. The employee will have the opportunity to file objections. This procedure is meant for the situation that the contract has to be terminated on short notice and therefor is a lot faster than via the UWV. The cantonal judge will not have to take a notice period into account in determining the end date of the employment contracts.

Requests should be substantiated, otherwise one runs the risk that the court decides that the grounds for termination are not in conformity with the law, wich will lead to a dismissal of the petition. When the cantonal court does dissolve the contract, the court will usually order for a redundancy payment as a compensation for the termination. For furhter information on redundancy payments see our article on redundancy payments in the Netherlands.

4. Summary Dismissal

An employer may summarily dismiss an employee for an urgent cause. Summarily dismissal should be given without delay. A non-exhaustive list of acts that amount to urgent cause is provided in Article 7:678 DCC. An urgent cause is a circumstance or set of circumstances which are such that the employer cannot in all reasonableness be expected to allow the contract to continue. For further information please see our article on summary dismissal for urgent cause.

5. Ipso jure

To make the list complete it should be added that contracts of employment als end if a (valid) fixed-term contract is not renewed and and in the event of the employee’s death. The use of a mix of fixed-term contracts and indefinite term contracts is one of the various ways to keep the company sizable.

See also:

• Hiring and Firing in the Netherlands
• Summary dismissal for urgent cause
• Redundancy Payments in the Netherlands

In conclusion

Although it looks complicated, the reality is that the Dutch labour market is more flexible than the markets of many other countries. But one should know his way and choose the proper termination method. It is advisable to consult us before taking any major decision with regard to terminating employment contracts for Dutch employees. For further information regarding Dutch Employment Law, please contact our contact person of the Labour and Employment Law Practice Group.