A mutually agreed termination (“rupture conventionnelle”) offers the ability for an employer and an employee to separate on amiable terms. Both parties sign a standard form that is submitted to the Labour Administration for approval.
Often considered halfway between a resignation and a dismissal, under this system, the employee is entitled to the statutory severance indemnity and will receive unemployment benefits.
It offers the employer some protection against the termination being challenged. However, some risks remain in this popular system.
Below are rules to keep in mind when contemplating and entering into a rupture conventionnelle.
- Do remember that this is a voluntary process for both parties. Neither can force the other to accept a rupture conventionnelle.
- Do remember that it only offers protection against the termination being challenged, unless the employee proves that his consent was invalidated.
- Do set a prospective termination date that allows sufficient time for the administration to approve it (typically around 7 weeks is a good bet).
- Don’t forget to waive the non- compete covenant, if any, in the standard form if you do not wish to pay the financial compensation of said non- compete
- Don’t forget that for protected staff members (such as works council’s members) the termination is subject to a specific proceeding requiring an express authorization from the labor inspectorate and that such process may be quite long.
- Don’t forget that the employee can still sue for the performance/execution of the employment contract.
- Do consider entering into a settlement agreement if the company wants to be protected against any possible claim in relation to wages, overtime etc.
- Don’t negotiate or sign a settlement agreement until after the Administration has approved the rupture conventionnelle.
- Do be careful of the social contributions and tax consequences of such agreements.