Mutual Termination Agreements in the Netherlands: A Legal Overview

Learn how mutual termination agreements work under Dutch law and what they mean for employers and employees.

As a Dutch employment lawyer, I understand that terminating an employment contract can be a sensitive and complex process for both employers and employees. When it comes to finalizing the end of an employment relationship, a termination agreement, also known as a settlement agreement, plays a crucial role in ensuring a smooth transition. In this comprehensive guide, we will outline the essential components that should be covered in a termination agreement to protect the interests of both parties involved.

1. Date of Expiry of the Employment Contract

The first and foremost aspect of a termination agreement is specifying the date of expiry of the employment contract. It is essential to consider the notional notice period required by law to ensure that both parties are aware of the exact termination date. This is crucial as an employee is only entitled to unemployment benefits after the notice period specific to the employer has elapsed.

2. Exemption from Work / Garden Leave

The termination agreement should address whether the employer grants the employee full or partial paid leave from work until the expiry date of the employment contract. This period, known as garden leave, allows for a smooth transition and can prevent potential conflicts during the notice period.

3. Holidays

The treatment of untaken holidays is another critical aspect of the termination agreement. It must be determined whether the employee will receive payment for unused holidays or will be required to take them before the employment contract ends.

4. Reimbursement of Study Costs

In some cases, employees may have incurred study costs that need to be addressed in the termination agreement. The agreement should establish whether the employer will provide reimbursement for these study costs or not.

5. Severance Pay

While employers are generally not obligated to pay severance to employees, offering such compensation can increase the likelihood of the employee's agreement to the terms. The termination agreement should clarify the amount of severance pay, which could follow transition compensation guidelines but can be negotiated between the parties.

6. Final Financial Statement

Setting a clear date for the final financial statement is crucial in determining the financial obligations between the employer and the employee. The statement should outline any outstanding payments owed by the employer to the employee, such as wages, holidays, holiday allowance, thirteenth month salary, bonuses, and more.

7. Pension Accrual

The termination of the employment contract may affect the employee's pension accrual. The termination agreement should address whether pension accrual will cease or if the employee can continue to contribute voluntarily.

8. Use and Return of Company Property

Employees should be informed about the continued use of company resources until a specific date and the deadline for returning company property like access passes, laptops, mobile phones, lease cars, etc.

9. Post-Contractual Obligations

The termination agreement may include post-contractual obligations, such as confidentiality, non-competition, and non-solicitation clauses. These provisions aim to protect the employer's interests and ensure the employee's compliance after the termination of employment.

10. Social Media Clause

To safeguard the employer's reputation, a social media clause can be included in the termination agreement. This clause may restrict the employee from making unfavorable comments about the employer on the internet and may require the employee to remove professional contacts from their social media.

11. Outplacement Budget

The termination agreement may provide for an outplacement budget, which allows the employee to receive assistance in finding new employment after the termination.

12. Compensation for Legal Assistance

Employers may choose to offer employees a budget for legal assistance to seek advice during the termination process.

13. References

The agreement should address whether the employer will provide a positive or neutral reference for the employee upon request.

14. Dismissal with Immediate Effect or Death of Employee

The termination agreement may contain provisions regarding the termination's validity in the event of immediate dismissal or the death of the employee before the expiry date.

15. Reflection Period

Employees have a legal right to a reflection period after signing the termination agreement. During this period, they can withdraw their agreement in writing without providing any reason. Employers must inform employees about this right to withdrawal to ensure compliance with the law.

16. Full and Final Settlement

To avoid future legal disputes, employers and employees can grant each other full and final settlement regarding potential claims that are not explicitly covered by the termination agreement.

17. Entitlement to Unemployment Benefits

To ensure an employee's entitlement to unemployment benefits, the termination agreement should confirm that the employer initiated the termination and that there was no urgent cause for dismissal (dismissal with immediate effect).

18. Annulment after Reflection Period

In exceptional cases, the settlement agreement may be annulled after the reflection period due to vitiated consent, such as error, fraud, or abuse of circumstances. However, annulment requests are subject to careful consideration by the court.

Conclusion

A well-drafted termination agreement is crucial in protecting the rights and interests of both employers and employees during the termination process. At Fennek Advocaten, our experienced team of employment law specialists can provide tailored advice and expert assistance in creating comprehensive and legally sound termination agreements. Whether you need help drafting or assessing a settlement agreement, or if you have any other questions related to employment law and dismissal, please do not hesitate to contact us. Our dedicated team is here to assist you every step of the way.

Contact us now to ensure a smooth and legally compliant termination process.

Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. For specific guidance on your situation, I recommend consulting with a qualified professional.