The law on dismissal (for employers)
Is there someone on your payroll whom you’d really prefer to let go? What are your options if you can’t dismiss him or her on the spot because there are no urgent grounds on which to do so, given that the probationary period has already ended and the contract does not terminate automatically because it is for an unspecified period of time?
Please note that the new Balanced Labour Market Act (WAB), which came into force on 1 January 2020, has led to a number of changes in the law.
The law on dismissal
Except in certain special cases, such as summary dismissal (i.e. on-the-spot dismissal) or dismissal during a trial period, an employer needs to obtain permission to terminate an employee’s contract of employment. As an employer, you can choose from three options:
1. You can submit an application for dismissal to the Employee Insurance Agency (the UWV) or you can ask the court (kantonrechter) to terminate the contract of employment.
2. You can ask the employee to consent to the termination of his or her contract of employment by signing a ‘settlement agreement’.
3. You can ask the employee to consent to the termination of his or her contract of employment.
Purported grounds for dismissal
Whether you are obliged to submit an application for dismissal to the UWV or the court depends on the purported grounds for dismissal. In other words, the reason for the dismissal determines the procedure that is followed.
If you are applying for dismissal on account of your organisation’s financial position or because of the employee’s long-term incapacity to work, you will need to ask the UWV for permission to do so.
Where other grounds for dismissal apply, you will have to apply to the court for permission to terminate the contract of employment. These other grounds are as follows:
- frequent absence due to illness (which is not the same as a prolonged absence due to illness);
- poor performance;
- culpable conduct on the employee’s part;
- the employee’s refusal to perform a particular job on conscientious grounds;
- an impaired working relationship;
- other grounds. Note that this is not simply a residual category. The reason given for the employee’s dismissal must be clearly unrelated to any of the foregoing grounds for dismissal. Imprisonment or the absence of the requisite work permit (subject to certain conditions) are two examples of ‘other grounds’;
- a combination of two or more of the grounds referred to above, such that you cannot reasonably be expected to allow the contract of employment to continue. This is sometimes referred to as the ‘cumulative ground’. A combination of poor performance and an impaired working relationship is an example of a cumulative ground for dismissal.
Employees who wish to terminate their contract of employment themselves other than by giving notice of termination are free to ask the court for permission to do so. In order for the court to give its permission, the circumstances must be such that it is reasonable for the contract to be terminated either immediately or at short notice.
Submitting an application for dismissal to the UWV
You can ask the UWV in writing for permission to terminate an employment contract with one or more members of staff, either on account of your organisation’s financial position or on the grounds of the long-term incapacity to work of the staff in question. Once the UWV has received all the necessary information from you, it will send a copy of the application for dismissal to the employee in question and invite him or her to respond. The employee must submit his or her defence in writing to the UWV.
Depending on the defence, the UWV will then decide:
- whether a decision can be taken on the application for dismissal;
- whether you and your employee should be given another opportunity to respond to each other's standpoints.
The UWV eventually decides whether or not to grant the dismissal permit you have requested. Only once a permit has been granted may you terminate the employment contract. Although you are still required to give the relevant period of notice, you are entitled to deduct the duration of the application procedure at the UWV from this period, provided that at least one month remains.
If the UWV rejects the application for dismissal, you are free to submit a further application to the court. Should the court also rule against you, you are entitled to appeal (in the first instance to the Court of Appeal and in the second instance to the Supreme Court) against the ruling.
If the UWV grants the application for dismissal and the contract of employment is then terminated, the employee is entitled to ask the court to order you to reinstate the contract. The employee is also free to apply to the court for an additional (reasonable) payment if you are deemed to have committed a ‘grievous culpable act or omission’.
Applying to the court to terminate the employment contract
The court procedure starts with the submission of a written application for dismissal, known in Dutch as an ontbindingsverzoekschrift. After receiving this request, the court will set a date for a hearing, which you and your employee will be invited to attend. Your employee will be invited to submit a written response (the ‘defence’) to the court before the date of the hearing, in principle by no later than 10 days before the date of the hearing. Should it not prove possible to reach an amicable settlement during the hearing, the court will take a decision within four weeks.
If the court decides to terminate the employment contract, it will set a date for this. The basic principle here is that the relevant term of notice is taken into account, starting from the date of the court ruling. However, the duration of the court proceedings is deducted from the term of notice, on condition that at least one month remains. If the court decides that the contract should be terminated, you no longer need to give notice of dismissal.
The court may also (but is not obliged to) state whether or not your employee is entitled to severance pay and if so, how much.
Because the right to a ‘transition payment’ (transitievergoeding) is enshrined in the law, the court is not obliged to award such a payment. At the same time, the court may rule, at your request, that the employee should not receive a transition payment if it takes the view that he or she has committed a ‘grievous culpable act’.
The court may rule, at the employee’s request, that you are also bound to pay a reasonable additional sum if it believes that the termination of the contract of employment is due to your having committed a ‘grievous culpable act or omission’. The court is responsible for fixing the size of this additional, reasonable payment.
If the court decides to terminate the employment contract on the basis of the cumulative ground, it may, if it so wishes, award the employee an extra payment in addition to a transition payment and a reasonable additional sum, if awarded. The value of this extra payment may not exceed 50% of the transition payment, which it is regarded as supplementing. As we have said, an employee’s eligibility for such an extra payment is restricted to situations involving a combination of two or more grounds for dismissal.
If the employee is employed under a fixed-term contract of employment that does not provide for the possibility of termination prior to its expiry, the court may also award a payment no larger than the amount of pay due for the remainder of the contract.
If the court denies the request for termination, the employment contract remains in force.
Either party is entitled to appeal (in the first instance to the Court of Appeal and in the second instance to the Supreme Court) against a court ruling.
You are at all times liable to pay the employee a transition payment, irrespective of the application procedure that is followed.
All staff whose employment is terminated against their wishes are entitled to a transition payment, unless the termination or non-continuation of the contract is due to a ‘grievous culpable act’ on their part. This means that, even if the employee has been employed for no more than a month or even just a week, he or she is still entitled to a transition payment if you (i.e. the employer) have taken the initiative to terminate the employment contract.
Because the right to a transition payment is enshrined in the law, the court is not obliged to award such a payment. At the same time, the court may rule, at your request, that the employee should not receive a transition payment if it takes the view that he or she has committed a ‘grievous culpable act’.
If you fail to pay the transition payment, your employee is entitled to start proceedings against you within three months of the end of the contract of employment. The value of the transition payment is one-third of the monthly salary for each year of service, with the amount payable in respect of part of a year of service being calculated on a pro rata basis.
The maximum gross value of the transition payment is either €81,000 or a year’s salary, whichever is higher.
If the employee has been employed under successive terms of employment, his or her years of service with previous employers are also taken into account.
The temporary scheme applying to employees aged 50 and above has been discontinued with effect from 1 January 2020. Under this arrangement, employees aged 50 and above who had been employed for more than 10 years were entitled to a higher transition payment. In the new situation applying since 1 January 2020, however, the transition payment is calculated in the same way for all staff and the law no longer makes any exceptions.
Subject to certain conditions, you are entitled to deduct certain costs incurred during the course of the employee’s employment from the transition payment. These must be costs incurred to prevent the employee from becoming unemployed (such as an outplacement service) or to enhance his or her employability. The deduction of such costs is subject to strict conditions, one of which is that the employee involved must give his or her written consent. This latter point does not apply, however, if an arrangement for the deduction of costs has been made in the relevant collective agreement.
You and your employee may come to a mutual agreement about the termination of the employment contract. This requires both parties to sign a document known as a ‘settlement agreement’ (beëindigingsovereenkomst). If your employee agrees to a proposal to terminate his or her employment by signing a settlement agreement, this does not affect his or her entitlement to unemployment benefit (WW).
The law gives employees a 14-day ‘cooling-off period’. In other words, they are entitled to terminate a settlement agreement they have already signed within a period of 14 days from the date on which they signed it. If the settlement agreement does not mention this cooling-off period, the period is automatically extended to three weeks. The employee’s right to a period of time to think the matter over cannot be excluded or limited.
If your employee consents to the termination of his or her contract of employment, you don’t need to take the matter to the UWV or the court. Once the employee has given their consent, they have a period of 14 days in which to retract. If consent is indeed withdrawn, the employee then remains in your employment. You are not obliged to ask your employee for their consent.
If your employee consents to the termination of their contract of employment, this does not constitute a case of ‘voluntary’ or ‘culpable’ unemployment as it is assumed that you have taken the initiative to terminate the contract of employment. Here too, the employee retains the right to unemployment benefit, provided that the contract has not been terminated on urgent grounds. The employee is also entitled to the statutory transition payment.
Obligation to give notice at the end of a fixed-term contract
Please note that you have certain obligations, even if the contract of employment is a fixed-term contract that expires as planned. Any staff employed under a fixed-term contract of employment with a duration of six months or more must be informed in writing, by no later than one month before the expiry of the contract:
- whether or not you are planning to renew their contract, and
- if you are planning to renew their contract, under which terms and conditions this will be.
If you fail to give this written notice, you will be obliged to pay your employee (or former employee, as the case may be) one month’s salary. Should you give written notice, but do not observe the time limit referred to above, you will be obliged to compensate the employee (or former employee) on a pro rata basis, in accordance with the length of the period between the above deadline and the date on which notice was given.
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Whether you are an employer who wishes to dismiss an employee or an employee who does not wish to lose his or her job, please do not hesitate to contact us!
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