How to do business in The Netherlands – How to dismiss employees

Dutch law
Termination in the Netherlands is based on a system of preventive review instead of repressive legal action (as is most common in other countries). In short this means that, if an employer wants to terminate an employee’s employment agreement, it will have to request permission from the relevant authorities (UWV) or the County Court prior to such termination.

If the UWV grants permission to terminate or the County Court rules that the employment agreement should be dissolved, then the employee is entitled to severance pay/compensation, also known as the ‘transition fee’. The employee can also appeal the UWV’s or Court’s decision.

Grounds
There are several grounds that can be presented for termination. The grounds determine whether the permission for termination has to be presented to the UWV or before the County Court. The grounds are as follows:

–       UWV:
A. Economic reasons (including restructuring for organizational reason)
B. Illness/disability for longer than 104 weeks.

–       County Court:
C. Frequent sickness absence
D. Inadequate performance
E. (Gross) misconduct
F. Conscientious objection
G. Damaged working relationship
H. Other grounds, not being C t/m G (residual ground).

Steps to be taken

  • Building a “file” -> depending on the grounds for dismissal, substantial documentation is required.
  • Submit termination form with UWV or submit petition for dissolution with the County Court. Attach the above mentioned documents.
  • UWV will allow employee to respond (defense). Depending on the arguments that the employee presents, the UWV could require a second written round.
  • If a petition for dissolution is submitted to the Court, then the court will allow the employee to submit a written defense and schedule a court hearing. After the hearing the Court will rule.
  • The entire process for both proceedings takes between 8 and 12 weeks.
  • In both instances the notice period will (have to) be taken into account.
  • Note! Should termination be requested for economic or organizational reasons, then, if permission is granted, for a period of 26 weeks (six months) after termination, a new employee cannot be hired in the same position as the terminated employee fulfilled.
  • Alternative to UWV/Court proceeding à offer a settlement agreement. Terms to be included:
    • Notice period;
    • Transition fee (severance pay);
    • Reimbursement of outplacement costs (optional);
    • Reimbursement of legal fees (optional);
    • (Positive) testimonial/reference;
    • Correct final payment regarding holidays and holiday allowance;
    • Waiver of non compete (optional).

Transition fee
Employees that have been employed for longer than two years on the basis of a fixed term employment contract are entitled to a transition fee upon termination, unless the employer can prove gross misconduct on the part of the employee or the employee retires.

The transition fee is calculated as follows:

For the first 10 years of employment:
1/6 of a month’s salary for every ½ a year of employment.

After the first 10 years of employment:
¼ of a month’s salary per ½ a year of employment.

After first 10 years and employee is older than 50:
½ a month’s salary for every ½ a year of employment.

The transition fee is maximized to EUR 75.000,- gross. If a one year salary is higher than this maximum, it will be maximized to that salary.

Termination by operation of law
If an employee is hired based on a fixed term employment agreement then such a contract will end automatically by operation of law as of the ‘expiration’ date included in the employment agreement.

Termination in mutual consent
If there are grounds for termination but employer and employee choose to forgo the costs and hassle of going through the UWV or court to achieve termination of the employment agreement, then they can choose to conclude a settlement or termination agreement. In such a settlement agreements parties will agree to terminate the employment agreement in mutual consent as of a certain date and on certain conditions.

Elements normally included in a settlement agreement as described above are:

– Termination date;
– Severance pay/compensation;
– Final payment;
– Testimonial and references;
– Compensation for outplacement;
– Compensation for legal fees;
– Confidentiality;
– Release from non compete;
– Final settlement.

Of course any other relevant clauses can be included in the settlement agreement as well.

Summary/immediate dismissal
In cases of extreme or gross misconduct on the part of the employee, the employee may choose to summarily dismiss the employee. This means an employee will be immediately barred from performing his or her work. The employee is “fired on the spot”.

Gross misconduct behavior that could give the employer urgent cause for immediate dismissal. Article 7:678 of the Dutch Civil code defines ‘urgent cause.’ A rough translation of the relevant section of the code reads as follows:

“1) For the employer, urgent reasons (as described in subsection 1 of article 677) are considered to be such acts, characteristics or behavior by the employee, that result in the situation that the employer can in all reasonableness not be expected to let the employment agreement continue.

2) Among others urgent reasons may be deemed to exist:

a. if, at the time that the employee entered into employment with the Company, he mislead the Company by providing false or forged testimonials (from former employers), or intentionally gave false information regarding the way in which his previous employment ended.

b. if the employee lacks in a serious way the capability or suitability for the work to which he has committed himself.

c. if, despite warning, the employee indulges in drunkenness or other debauchery.

d. if the employee is guilty of theft, fraud, deception or other crimes, as a result of which he has become unworthy of the employer’s trust.

e. if the employee abuses (assaults) seriously offends or seriously threatens the employer, his family or housemates or his employees.

f. if the employee seduces to tries to seduce the employer his family or housemates or his employees to commit acts that are in conflict with the law or morality.

g. if the employee intentionally, or despite warning recklessly, damages the employer’s property or exposes the employer to serious danger.

h. if the employee intentionally, or despite warning recklessly, exposes himself or others to serious danger.

i. if the employee reveals details regarding the employer’s household or company that he should have kept confidential.

j. if the employee persistently refuses to follow reasonable instructions or assignments given to him by or on behalf of the employer.

k. if the employee in some other way grossly neglects the duties that the employment agreement requires of him.

l. if, as a result of intent or recklessness the employee becomes incapable of performing the agreed work.

3) Clauses that allow for the employer to determine whether an urgent reason (as determined in article 677 subsection 1) has come into existence, are null and void.”

In addition to the contents of abovementioned article of law, employers could choose to define reasons which are considered to be urgent cause for summary dismissal within the employer’s company. The list above is not exhaustive. Therefore, certain acts or circumstances that occur but that are not mentioned above could still constitute an urgent reason for summary dismissal.

Aside from establishing the reasons summary dismissal, there are also rules, defined by case law, that determine how summary dismissal is to be given. When discovering urgent cause for summary dismissal on the part of the employee, the employer should:

  • Proceed with speed and care;
  • Suspend the employee until further notice for further investigation;
  • Present any evidence to the employee and allow for a fair hearing of the employee;
  • Inform the employee of the decision with regard to summary dismissal and motivate the decision.

Legal counsel
Any type of dismissal could be challenged by the employee in court. Therefore, we advise that as an employer, you weigh your options carefully and if necessary, enlist the help of legal counsel. The attorneys of the International Desk will be happy to advise you.

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