Are employers required to give notice of termination?
Yes. There are different ways to terminate an employment contract:
- termination by mutual consent;
- termination during the probationary period;
- expiry and non-renewal of a fixed-term employment contract (in this case, the employer must notify the employee one month in advance);
- summary dismissal for an urgent reason;
- dissolution of the employment contract by court ruling; and
- giving notice to terminate with authorisation from the Employee Insurance Agency (UWV).
Termination by mutual consent All employment contracts may be terminated at any time by mutual consent between parties, with or without observance of the statutory or agreed notice period and with or without payment of compensation to the employee. It is important for the employer to ensure that the employee’s consent to the agreement is explicit and clear. Therefore, it is advisable that employees seek legal advice before entering into a settlement agreement. Since the Work and Security Act came into force in 2015, a two-week reflection period has been introduced. Within this period the employee has the right to dissolve the settlement agreement. The employer must inform the employee of this right; if the employer fails to do so, the reflection period will be extended.
Termination during probationary period During the probationary period, either party may terminate the employment contract at any time without observing a notice period and without any liability for severance pay, unless the termination is, for instance, based on discriminatory reasons. At the employee’s request, the employer must provide the reasons for the termination of the employment contract during the probationary period. Further, there are no conditions for terminating the agreement.
Non-renewal of fixed-term contract When the employer decides not to renew a fixed-term contract, this means that the contract will automatically terminate after the contract’s end date. Sometimes there is a possibility to terminate the contract before the end date, but only when this is agreed in writing. The employer must inform the employee at least one month in advance, regardless of whether the employment contract will be renewed – although if so, it must stipulate under which conditions.
Dismissal for urgent reason In certain exceptional cases the employer or the employee may face circumstances in which one cannot be reasonably expected to continue the employment relationship. If the employee’s conduct raises a so-called ‘urgent cause’, the employer can, under certain circumstances, terminate the employment contract effective immediately (ie, summarily dismiss the employee). The employee has a similar right if the employer’s conduct raises an urgent cause. However, this form of dismissal is possible only in very exceptional cases (eg, for gross negligence in the performance of duties, theft or fraud).
Dissolution of contract by court ruling If the dismissal is for reasons relating to the employee, the employer must ask the cantonal labour court to dissolve the employment contract on the basis of one of the reasonable grounds set out in Clauses (c) to (h) of Paragraph 3 of Article 7:669 of the Dutch Civil Code. The list is exhaustive and it is not possible to combine different (incomplete) dismissal grounds to justify a dismissal. The reasonable grounds are as follows:
- Frequent sickness absence – where no improvement is expected within 26 weeks and it is not possible for the employer to arrange cover for the employee's workload during this period. The employee's absence must have unacceptable consequences for the employer's operations and the reason for the absence should not be connected to any failure of care by the employer.
- Poor performance – where the employee has been given sufficient opportunity to improve his or her performance and has been notified of the consequences of failure to do so.
- Culpable behaviour – the employee has committed culpable acts or omissions to the extent that continuation of the employment contract cannot reasonably be expected.
- Conscientious objections – the employee refuses to perform work under his or her contract of employment due to conscientious objections.
- Disturbed working relations – the employee's working relationship with his or her employer is disturbed to the extent that continuation of the employment contract cannot reasonably be expected.
- Other grounds – the circumstances are of such a severe nature that continuation of the employment contract cannot reasonably be expected.
As mentioned above, it has proven difficult for employers to dismiss an employee on one ground. The government has therefore introduced a new ground for dismissal (which will likely become the ‘i-ground’), which intends to give the cantonal judge the option to determine the end of the employment contract on more than one ground for dismissal, if justifiable.
The Balanced Labour Market Act expects to introduce a new reasonable ground for dismissal, known as the ‘i-ground’. In order for this to apply, there must be a combination of circumstances pertaining to two or more other grounds for dismissal, which is such that the employer cannot reasonably be expected to continue the employment relationship. If the court dissolves the employment contract on the i-ground, the transition payment is increased by 50%.
Dismissal with official authorisation of UWV The employer needs permission from the UWV before it can terminate the employment contract in the following situations:
- The employee has been absent due to sickness for more than two years.
- The employer wants to terminate the contract due to bad economic circumstances within the company (business reasons).
This dismissal permit must be obtained before notice is given to the employee. Termination in these cases without the UWV’s prior permission is void. The employer must apply for a dismissal permit to the UWV (regional employment office) covering the location where the work is normally carried out or where the employee is employed, giving reasons for the proposed dismissal. It usually takes around six weeks for the UWV to respond. It assesses the reasonableness of the proposed dismissal, consulting an advisory committee made up of representatives of trade unions and employers' organisations. Sometimes these representatives will ask for more information from one or both parties.
After obtaining the dismissal permit from the UWV, the time spent on the UWV proceedings may be deducted from the applicable notice period, although the remaining notice period must be at least one month.
Severance payments Before the entry into force of the Work and Security Act, severance payments beyond the right to paid notice were either at the discretion of the employer or awarded by the courts under the ‘cantonal judge formula’. This position changed with the introduction of the statutory transition payment scheme. Now, on non-renewal of a fixed-term contract of two years or more or a dismissal after two years' employment, an employer must pay transitional remuneration (unless the dismissal results from seriously culpable conduct).
Transition payments are linked to length of service and age, as follows:
- For the first 10 years of employment, the payment is one-sixth of monthly wages for each completed six months of service;
- From the 10th year of employment onwards, the payment is one-quarter of monthly wages for each completed six months of service; and
- For employees aged over 50 and employed for more than 10 years, the payment is one-half of monthly wages for each completed six months of service (this is a transitional arrangement until 2020 that does not apply to small employers with fewer than 25 employees).
An employee is not entitled to a transition payment if the dismissal resulted from his or her seriously culpable conduct. However, the court may award additional compensation to an employee where the employer's conduct has been seriously culpable.
Monthly wages, for the purposes of calculating a transition payment, include holiday pay, overtime, shift allowances and bonus payments. Transition payments are capped at €79,000 or one year's salary, whichever is the greater.
The costs incurred by employers for employees' training and development may be deducted from transition payments where the costs were incurred to assist the employee in finding alternative employment.
The calculation of transitional payments may be varied by a collective agreement, provided that employees receive equivalent severance compensation.
What are the rules that govern redundancy procedures?
Pursuant to the Collective Dismissal Notification Act, in case of collective redundancy – which involves at least 20 employees within a period of three months – specific information and consultation rules apply.
Employers initiating a collective redundancy must inform or consult the trade unions, notify the UWV, involve the works council (if any), observe a one-month waiting period, apply for dismissal permits or terminate the employment contracts with mutual consent and give notice. More specifically, the notification and invitation of trade unions must be made at such time as to allow for timely consultation. The employer must give its works council the opportunity to give advice on any decision that it proposes to make concerning (among other things) a significant reduction in the workforce. The advice must be requested in writing and sought in sufficient time for the works council to have a significant impact on the decision to be taken.
Failure to comply with the redundancy process may result in the UWV’s not issuing dismissal permits or unfair dismissal proceedings.
Are there particular rules for collective redundancies/mass layoffs?
What protections do employees have on dismissal?
The employer may terminate an employment contract only when the dismissal is based on solid grounds. Dismissal is void when:
- it is based on discrimination or one of the statutory grounds;
- the employee is pregnant or on maternity leave;
- the employee is a member of the works council; or
- the employee is absent from work due to sickness.
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