Dismissal: Termination of the employment contract
An employment contract can be terminated in various ways. Each way is subject to different rules that must be respected. Which rules apply depends, among other things, on whether the employment contract is agreed upon for a fixed term or for an indefinite term.
Fixed-term employment contract
An employment contract can be entered into for a fixed term. This means that, in principle, the employment contract expires by operation of law (= automatically) at the end of the agreed term. However, the employer must give notice in good time. Read more about the obligation to give notice here [Linkje opnemen naar hoofdstuk Arbeidsovereenkomst- en voorwaarden + relevant tussenkopje].
Termination of a fixed-term employment contract: premature termination
In general, a fixed-term employment contract cannot be terminated during its term. In that case, the employer cannot terminate the employment contract before the end date. This also applies to the employee. This can then only be done through a judge.
If the fixed-term employment contract stipulates that both the employer and the employee can terminate the employment contract prematurely, it is possible to terminate the fixed-term employment contract before the end date. This means that the employee can terminate the employment contract at any time with due observance of the applicable notice period. This also applies to the employer, but he must first obtain permission from the UWV. Read more about this below. This also means that it is easier for the employer and the employee to terminate the employment contract by means of a termination agreement. Read more about this below.
Employment contract for an indefinite term
An employment contract can also be entered into for an indefinite term. This means that the employment contract does not – like the fixed-term contract – expire by operation of law. Therefore, in general, the employment contract will continue until it is terminated. This is possible if the employer or the employee terminates the employment contract or if the court dissolves the employment contract at the request of the employer or the employee. It also often happens that the employer and employee terminate the employment contract by mutual agreement.
More about the ways in which the employment contract can be terminated can be found below. This applies both to the termination of the employment contract of only one (1) employee and to the dismissal of 20 employees or more, which is called a collective dismissal.
In practice, the employment contract often ends without the intervention of the UVW or a judge. The termination is arranged between the parties themselves by means of a termination agreement, also referred to as a settlement agreement. Prior to the termination agreement, the parties have discussed the terms for the termination of the employment contract. These terms are laid down in a termination agreement. Think of:
– The date on which the employment contract ends;
– the amount of any compensation to be paid by the employer;
– financial settlement of the employment (final settlement, outstanding claims of the employer against the employee or vice versa, payment of vacation days and holiday pay);
– the hand-over of company property;
– what to do with any post-contractual clauses such as confidentiality and non-compete and/or non-solicitation clauses);
– any other matters agreed upon between the parties.
Since the introduction of the Work and Security Act on 1 July 2015, an employee has the right to dissolve the termination agreement within two weeks of its conclusion by means of a written statement addressed to the employer (reflection period). The employee must be informed of the reflection period in the termination agreement. If this is omitted, the reflection period will be extended from two to three weeks.
Termination and dissolution
In addition to the conclusion of a termination agreement, an employment contract may be terminated by termination or dissolution thereof. This is possible if there are reasonable grounds for doing so and the employee cannot be reassigned to a suitable position within a reasonable period of time (equal to the notice period).
Since the introduction of the Work and Security Act, it is no longer possible to choose between the UWV or the cantonal court. The grounds for dismissal, the related assessment criteria and the body that judges on the dismissal have been included in the Act.
If an employee is incapacitated for work for more than 104 weeks or is dismissed for economic reasons (reorganisation), the UWV is competent. This means that the employer must ask the UWV for permission to terminate the employment contract. If the UWV grants this permission, the employer will receive a dismissal permit, which can be used to terminate the employment contract with application of the applicable notice period. The parties may appeal the UWV’s decision to the cantonal court.
The cantonal court is competent for other grounds for dismissal, that are more personal in nature (such as failure to perform work, seriously culpable behaviour and disrupted employment relationship). An appeal (and even cassation) is also possible against the decision of the cantonal court.
Regardless of in which of the aforementioned ways the employment contract is terminated, the applicable notice period will have to be taken into account. After all, the notice period applies as the waiting period for an unemployment benefit. This means that an employee will not receive an employment benefit until the applicable notice period has expired.
For the employee, the notice period is, in general, one month. The notice period to be observed by the employer depends on how long the employment contract has lasted:
|Duration of employment contract
||Notice period for employer
|Less than 5 years
|Between 5 and 10 years
|Between 10 and 15 years
|15 years or more
N.b. If an employee has reached the state retirement pension age, the employer has a notice period of one (1) month.
A longer notice period can be agreed upon in the employment contract. In that case, the notice period of the employer must be twice as long as that of the employee. The parties may also agree on a shorter notice period if this is stated in an applicable CLA.
Has a dismissal procedure at the UWV been completed and does the employer then terminate the employment contract? In that case, the employer may deduct the procedure time from the notice period. However, at least one (1) months’ notice must always remain.
Finally, in the event of serious misconduct, it is possible to dismiss an employee immediately and without the intervention of the UWV or the cantonal court. Because of the serious consequences that an instant dismissal has for an employee (he loses his job overnight and is usually not entitled to unemployment benefits), very strict requirements apply. It is advisable to seek good advice in advance about the possibilities of instant dismissal of an employee.
First of all, for a valid instant dismissal, there must be an urgent reason. An urgent reason may be, for example, if an employee is guilty of theft or threat. The situation must be so urgent and serious that a dismissal in any other way cannot be waited for. In the event of an instant dismissal, it will therefore be necessary to act expeditiously. An instant dismissal is only valid if it is given without delay.
The judge will take all circumstances of the case into account when deciding whether the instant dismissal is legally valid. The nature and severity of the employee’s conduct will be weighed against, for example, the duration of the employment, the manner in which the employee has functioned and the employee’s personal circumstances.
If an employee has reached the state retirement age, the employer may terminate the employment contract for that reason. We call this pension dismissal. Often, the retirement age is the AOW entitlement age. However, the employment contract must have been entered into before the date on which the employee reaches the AOW entitlement age. If the employer terminates the employment contract, he must observe a notice period of one (1) month. If the employer and the employee have agreed on a different age at which the employee will retire, in short, the employer may then terminate the employment contract.
A so-called “pension dismissal clause” may be included in the employment contract. This clause states that the employment contract will end by operation of law when the employee reaches the AOW entitlement or retirement age. In that case, the employer does not have to terminate.