Joost Kokje, 12 July 2024

Employment law in the Netherlands – part 4 termination procedures and dismissal law

Dutch employment law is designed to offer a balanced approach to the rights and obligations of employers and employees. This equilibrium is particularly evident in the procedures and laws surrounding the termination of employment contracts. Understanding these procedures is crucial for both employers and employees to ensure that dismissals are handled legally and ethically.

Grounds for termination

Employers can terminate an employment contract on several grounds, such as:

1. Economic reasons: This includes financial difficulties, reorganization, or redundancy.
2. Performance-related reasons: Inadequate performance or persistent incompetence.
3. Behavioural reasons: Misconduct, such as theft or harassment.
4. Long-term illness or disability: If the employee is unable to perform their job after a reasonable period of illness (usually two years).
5. Mutual agreement: Both parties agree to end the employment relationship.
6. Personal circumstances: Such as relocation or imprisonment of the employee.

Termination procedures

1. Mutual Consent: The simplest and most amicable method is termination by mutual consent. This involves both parties agreeing to end the employment contract, often documented through a settlement agreement (vaststellingsovereenkomst).
2. UWV Procedure: For economic reasons or long-term illness, employers must obtain a dismissal permit from the Employee Insurance Agency (UWV). This process involves submitting a request for dismissal with supporting documentation. The UWV reviews the request and makes a decision, which can be appealed by either party.
3. Subdistrict Court Procedure: For reasons such as underperformance, misconduct, or a disrupted working relationship, employers must file a petition with the subdistrict court (kantonrechter). The court evaluates the evidence, holds a hearing, and then makes a decision.
4. Summary dismissal: in the event of urgent cause, the employment agreement can be terminated immediately. It is essential that the employer acts fast when being made aware of any conduct which might justify such a dismissal.

Notice periods

Dutch law mandates specific notice periods, which vary based on the length of employment:

• Less than 5 years: 1 month’s notice
• 5 to 10 years: 2 months’ notice
• 10 to 15 years: 3 months’ notice
• More than 15 years: 4 months’ notice

However, collective bargaining agreements (CAOs) or individual contracts may stipulate different notice periods.

Severance Pay

In cases of dismissal initiated by the employer, employees are typically entitled to a transition payment (transitievergoeding). This payment calculated as follows: 1/3 of the monthly wage (including holiday allowance, average bonusses and/or commissions earned), times the time in service.

Protective measures

Dutch employment law strongly protects employees against dismissal, e.g. through the following:

1. Preventative review: Employers must obtain permission from either the UWV or the subdistrict court before proceeding with a unilateral termination.
2. Prohibition on dismissal during certain conditions: Employees cannot be dismissed during pregnancy, illness (up to two years), or membership in a works council (due to such membership).
3. Right to appeal: Both employers and employees have the right to appeal against the decision of the UWV or the subdistrict court.

Employee rights and remedies

Employees who believe they have been unfairly dismissed can challenge the termination in court. If the court finds the dismissal to be unjustified, it can order reinstatement or award additional compensation to the employee.

Conclusion

Termination procedures and dismissal law in the Netherlands are designed to protect the rights of both employers and employees. These laws ensure that dismissals are carried out in a fair and transparent manner, providing a structured framework for resolving disputes. For employers, adhering to these procedures helps avoid legal complications, while for employees, it ensures their rights are safeguarded during the termination process. Whether you are an employer navigating the complexities of dismissal procedures or an employee facing termination, understanding these legal frameworks is essential. Seeking legal advice or consulting with a labor law specialist can provide further guidance tailored to specific

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