By: Transition Pay
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What to Do if Your Employer Terminates Your Employment Contract
Employment contracts in the Netherlands are governed by a number of laws and regulations, including the Collective Labor Agreement Act, the Unemployment Act, the Notification of Collective Redundancy Act, the Works Council Act, the Working Conditions Act and more. These laws regulate the employment relationship between employers and their employees – permanent employees and temporary workers included – and require that Dutch employers follow a certain procedure when dismissing their employees. If your employer terminated your employment contract without notice or without authorization from the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen in Dutch, or UWV), our lawyers can help you appeal the unfair dismissal. Or, if your termination was valid, we can help ensure that you receive a fair and timely transition payment. Contact our skilled employment law attorneys today to discuss your legal options.
- Dutch Dismissal Law
- Transition Pay Upon Dismissal
- Transition Pay Under the Labor Market in Balance Act
- Temporary vs. Permanent Employees
- Notice Period for Temporary Contracts
- Grounds for Dismissal
- New Cumulative Ground
- Protections Against Dismissal
- Collective Redundancies/Mass Layoffs
- Wrongful Dismissal in the Netherlands
- Contact Our Dutch Employment Law Attorneys for Legal Help
Dutch Dismissal Law
Employees in the Netherlands are better protected than employees in many other countries. Dutch employment law offers employees a great deal of security with regard to dismissal and termination of employment. For instance, there are generally only four ways Dutch employers can legally terminate an employment contract:
- Termination by mutual consent (settlement agreement),
- Termination with immediate effect for an urgent reason (summary dismissal),
- Termination with authorization from the UWV, or
- Dissolution of the employment contract by court ruling.
There are, however, other ways an employment contract can end in the Netherlands. An employee may decide to resign (quit). If a temporary employment contract expires, the employer may choose not to extend it. Or an employer may terminate a contract during the employee’s trial period. If you are dismissed for any of these reasons, or if your employer threatens to terminate your contract, it is in your best interest to seek legal advice as quickly as possible.
Transition Pay Upon Dismissal
Before the Dutch Work and Security Act entered into force in July 2015, severance payments were awarded either at the discretion of the employer or by the court in accordance with the cantonal court formula. However, with the Dutch Work and Security Act came the introduction of the statutory transition payment plan (transitievergoeding, in Dutch), which required employers to pay transition compensation to permanent employees whose indefinite-term contracts were terminated after two years’ employment and to temporary employees whose fixed-term contracts of two or more years were not renewed. The transition payments were based on one-sixth of the employee’s gross monthly salary for every six months they worked for the first 10 years of employment. For any years they worked beyond 10, employees were entitled to one-quarter of their gross monthly salary per six-month period.
Transition Pay Under the Labor Market in Balance Act
One of the major reforms introduced by the Labor Market in Balance Act (Wet arbeidsmarkt in balans, WAB) affects the Dutch transition payment plan. As of January 1, 2020, employees in the Netherlands are now entitled to transition pay beginning on their first day of work, rather than after two years. The way the transition payment is calculated also changed with the WAB. Now, transition pay is based on one-third of the employee’s gross monthly salary per full year of service and pro rata for each additional month or day short of a full year. There is no longer any differentiation between an employee’s first 10 years of employment and the period afterwards. Under the Labor Market in Balance Act, employees can receive up to €83,000 in transition compensation upon dismissal from employment, or one year’s salary, whichever amount is higher.
Temporary vs. Permanent Employees
Although the Labor Market in Balance Act seeks to put employees who have fixed-term contracts on more level ground with employees who have indefinite-term contracts, there are still some important differences in the dismissal procedure for temporary and permanent employees in the Netherlands.
Notice Period for Temporary Contracts
If you have a fixed-term employment contract and your employer does not intend to extend the contract beyond the agreed upon end date, your employer must notify you one month in advance of the contract’s end date. In some cases, it is possible for the employer to terminate the contract before the end date, but only when the termination is agreed upon in writing.
Grounds for Dismissal
If you have an indefinite-term contract, the contract can be terminated by one of the methods noted above. Keep in mind that your employer can only terminate your employment contract with permission from the UWV (a-b grounds) or by court ruling (c-h grounds) if he or she has a valid reason for dismissal. The following are the reasonable grounds on which a Dutch employer can legally base a request for dismissal, known as the “grounds for dismissal”:
- Bad economic circumstances (business reasons)
- Long-term illness (two years or more)
- Frequent absence due to illness
- Poor work performance
- Culpable behavior on the employee’s part
- Refusal to perform work due to conscientious objections
- Disturbed working relations between the employee and employer
- Other circumstances that are of such a severe nature that the employer cannot be reasonably expected to continue the employment relationship
Any employer who seeks to terminate an employee’s employment contract due to economic reasons (a-ground) or long-term illness (b-ground) is legally required to obtain a dismissal permit from the UWV before giving notice to the employee. If the employer terminates the contract without prior permission from the UWV, the dismissal is void.
New Cumulative Ground
With the entry into force of the Labor Market in Balance Act came a new ground for dismissal, known as the cumulative ground or i-ground. This new ground allows employers to base a request for dismissal on a combination of grounds that would not otherwise justify a dismissal on their own. Technically, this new cumulative ground makes it easier for Dutch employers to dismiss their employees. However, there is a flip side to this coin. If an employee’s contract is terminated on the basis of the i-ground, the transition payment the employee is entitled to collect is increased by 50%.
Protections Against Dismissal
There are certain situations in which an employee is protected against dismissal. For instance, if you are absent from work because you are sick (maximum of two years), if you are pregnant or on maternity leave, or if you are a member of the works council, your employer cannot terminate your employment contract. These are known as dismissal prohibitions. If you are dismissed while on maternity leave or during the first two years of an illness, contact a Dutch employment law attorney immediately to discuss challenging the validity of the dismissal. If you are dismissed after being unable to work for two or more years due to long-term illness, you may be entitled to transition pay for your entire duration of employment.
Collective Redundancies/Mass Layoffs
A collective redundancy, or mass layoff, occurs when an employer dismisses, or makes redundant, 20 or more employees within a period of three months, and there are specific rules and regulations that apply to collective redundancies in the Netherlands. Before initiating a collective dismissal, a Dutch employer must:
- Notify the UWV of the proposed redundancy,
- Consult the trade unions,
- Involve the works council (if any),
- Observe a one-month waiting period,
- Apply for dismissal permits (or else terminate the contracts with mutual consent), and
- Give notice to the redundant employees.
If an employer fails to adhere to the collective redundancy procedure required by Dutch law, the UWV may not issue dismissal permits, or the employer could face unfair dismissal proceedings.
Wrongful Dismissal in the Netherlands
Both employees and employers have the right to terminate an employment contract, but the Dutch laws governing termination on the initiative of the employer are far more stringent. If your employer requests permission from the UWV to terminate your employment contract and the justification for the request is found to be unreasonable, the agency can refuse to grant the dismissal permit. The court also has the right to refuse the termination of an employment contract. Any Dutch employee who has been dismissed without proper authorization or in violation of a dismissal prohibition has the right to ask the court to annul the dismissal or award compensation to the employee. In cases of unfair dismissal or gross misconduct on the part of the employer, the employee may be entitled to financial compensation.
Contact Our Dutch Employment Law Attorneys for Legal Help
Dutch employment law can be complex, especially when it comes to dismissal and the termination of employment contracts. The 2020 Labor Market in Balance Act introduced significant legislative changes affecting Dutch dismissal and employment laws, and it is important that employees and employers alike understand their rights and obligations under the current law. If your employer has terminated your employment contract and you believe the dismissal was in violation of the law or you want to find out how to collect the transition pay you are entitled to, contact our knowledgeable Dutch labor and employment law attorneys today. We have extensive experience representing clients in labor disputes and we can help ensure that your legal rights as a Dutch employee are protected.