Dismissal law

There can be various reasons for dismissal. A dismissal permit is always required. This can be obtained from the ‘UWV WERKbedrijf’ (UWV) or the subdistrict court. Statutory directors can be dismissed directly. The procedures are different. Rules and jurisprudence are complex. The risks are great. The subdistrict court formula is not a right but a directive. A summary by our dismissal specialists.

Type of contract

Most employees have an employment contract. Civil servants usually do not have an employment contract and other rules apply to them. Rules that apply to employment contracts are mainly directed at protecting the employee from the employer. The employer is, after all, the economically stronger party.

The employment contract

If the employee works for and receives a salary from the employer then the employee works on the basis of an employment contract as defined in the Dutch Civil Code. The employment contract does not necessarily have to have been put in writing or signed. This is, however, often the case.

Collective Labour Agreement (CAO in Dutch)

In many cases a CLA (collective labour agreement) applies to the employment contract. A CLA is a coordinating agreement between employers’ and employees’ organizations setting down rules relating to terms of employment. A CLA has a direct influence on the employment contract between the employer and the employee. The employment contract usually mentions whether a CLA applies.

Duration of the employment contract

An employment contract is entered into for a definite or an indefinite period of time. An employment contract for a definite period is entered into for a definite period (for example for a year) or for the duration of a project. (An employment contract for a definite period may not be terminated before the agreed date unless this has been agreed upon in writing beforehand). Contracts for a definite term will terminate automatically at the end of the fixed-term period. An employment contract for an indefinite period cannot, however, be terminated as easily. This will have to be terminated by giving notice or by dissolving the contract. In cases of dismissal it is necessary to determine on the basis of what kind of employment contract the employee is employed. This can almost always be found in the written employment contract. Note, however, that an employment contract for a definite period could have been changed, by law, into an employment contract for an indefinite period ( for example, after three successive fixed-term contracts have been concluded at the same employer). This also needs to be checked.

Termination of the employment contract

By the employee

If the employee wishes to resign then s/he can terminate the employment contract. S/he will have to take the notice period into account. Should the employee wish to leave before the end of this period s/he will need the permission of the employer. If the employer agrees then this is a case of termination of the employment contract by mutual consent.

By mutual consent

If and when the employee and employer both wish to terminate the employment, the employment contract will be terminated on the basis of mutual consent. It is customary that a termination contract is drawn up for this. The employee will have to take into account that terminating the contract will have consequences for his/her entitlement to severance pay and unemployment benefit. In general it is so that when the employee himself/herself resigns or the employment contract is terminated due to the employee’s fault, s/he has no entitlement to unemployment benefit. In practice, the resignation by the employee or mutual consent, whereby the employee is to blame, only takes place if the employee has found another job.

Unilaterally by the employer

If the employer wishes to terminate the employment contract without the consent of the employee, then there are several ways in which the employer can do this. The employer can terminate the employment contract by applying for a dismissal permit from the UWV WERKbedrijf (UWV) or the employer can have it dissolved by the subdistrict court. If the employer has indicated his wish to terminate the employment contract, it is important for the employee to find out how the employer wishes to do this, namely, by dismissal (UWV) or dissolution (subdistrict court).

Dismissal via the UWV WERKbedrijf

If the employer wants to terminate the employment contract by dismissal, for whatever reason, then the employer needs to apply for permission from the UWV, the so-called dismissal permit. The UWV will determine, together with a Dismissal Advisory Committee whether they will grant the employer permission to terminate the employment contract. The UWV offers the employee the opportunity to oppose the dismissal request by the employer. The final decision is made by the UWV. If the UWV decides that the employment contract can be terminated they will grant the employer a dismissal permit. This allows the employer to legally terminate the employment contract, taking the agreed notice period into account .

Reasons for dismissal

The employer can terminate the employment contract for several reasons. Grounds on which the UWV would consider granting a dismissal permit are dismissal due to:

• dysfunctional behaviour
• business reasons
• refusal to work because of moral reasons
• culpable behaviour
• unwilling to cooperate in the reintegration program during occupational disability
• disturbed working relationship
• dysfunctional behaviour due to frequent sickness absence – the employee cannot be given another position and will not recover within 26 weeks
• no reintegration possibilities within the company

Dysfunctional behaviour

If the employer requests a dismissal permit because the employer feels that the employee has shown dysfunctional behaviour then the employer needs to be able to prove this. The employer’s dissatisfaction with the performance of the employee should be evident from the personnel file, for example, from performance reviews. In addition, the employer should have given the employee sufficient possibilities and time to improve his/her performance. In short, it should not come as a surprise to the employee that the employer wants to terminate the contract for reasons of poor performance.

Business reasons

If the employer requests a dismissal permit because of business reasons the employer should take into account a number of rules. These rules are strictly enforced by the UWV. The employer will have to prove that the job reduction will really take place (usually due to financial reasons or a reorganisation). The employer will usually have to produce company figures. In addition, the employer will have to enforce the principle of seniority, in other words, the employees who joined most recently will be first to qualify for dismissal. An exception can be made if an employee proves to be indispensable to the company. If more than ten employees are to be dismissed then a special principle of seniority applies, namely, the principle of proportionality. This means that the employees are divided into 5 age groups and then the principle of seniority is applied to each age group. Note: The principle of proportionality is always applied nowadays.

Shortened procedure via the UWV WERKbedrijf

If business reasons are given for the dismissal and the employee explicitly accepts this, then the employer can start a shortened procedure via the UWV. The dismissal application will then include a so-called ‘certificate of no objection’, in which the employee declares that s/he has no objections to the dismissal. The employee will then have to be cooperative, which s/he is not normally compelled to be. The UWV can then come to a quick decision on the dismissal application. Signing a certificate of no objection does not have any consequences for the employee’s entitlement to unemployment benefit. Many workplaces are usually involved in dismissals due to business reasons. This is the reason that employers often have a social plan (redundancy scheme) in such cases. This social plan is usually formulated together with the trade unions or the works council. They assess the feasibility of the plan. If a social plan already exists it is advisable to sign the certificate of no objection as things have then been well laid down and contesting the dismissal at the UWV is usually unsuccessful. It is, however, important that the employee checks that the principle of seniority has been correctly applied.

Restrictions on termination

Can an employer with a dismissal permit from the UWV always terminate an employment contract? No, there are a number of cases in which this is not allowed. A number of the reasons for restriction have been laid down by law. The employer may not terminate the employment contract if:

• employer is in violation of the ban on sex discrimination
• there is a difference in working hours compared to the conditions under which the contract was entered into
• it is a case of incapacity to work due to illness (during the first two years of the employee’s illness)
• it is a case of incapacity to work due to pregnancy
• the employee is drafted for compulsory military service
• the employee is a works council member (or related organisation)
• the employee is an active employees’ organization member
• the employee has leave for political activities
• the company is in a transitional phase
• the employee is on parental leave
• the employee refuses to work on Sundays

No dismissal permit from the UWV or violation of the ‘restrictions on termination’ guidelines

If the employer has terminated the employment contract without a dismissal permit from the UWV or has violated the guidelines on ‘restrictions on termination’ then the termination is invalid (it does not exist). The contract has never been terminated. The employee is still employed by the employer and has the right to wages. Should the employer refuse to pay the wages then the employee can requisition the wages via the court. The judge will have to agree with the employee that it is a case of invalidity. If this is the case the judge will grant the requisition and will order the employer to pay the wages. Note that in order for the requisition of wages to be possible certain statutory periods apply.

Notice period

If the dismissal procedure has been concluded and the employer has the dismissal permit from the UWV needed to be able to terminate the contract, the employer will still need to take into account the period of notice. The notice period can usually be found in the employment contract or in the collective labour agreement (CAO). If the notice period has not been stated in the contract then the statutory period of notice applies. In this case, the employee’s age can influence the applicable period of notice. If the employee was older than 45 on 1 January 1999 and did not change employer after this date, then a longer period of notice may apply. The statutory notice periods are:

• employed for less than five years – 1 month
• employed for 5 to 10 years – 2 months
• employed for 10 to 15 years – 3 months
• employed for more than 15 years – 4 months

If the notice period has not been complied with

If the employer has not complied with the notice period applicable to the particular employee when terminating the contract then the employee can claim compensation. The statutory basis on which compensation can be claimed is that the employer terminated the employment contract ‘without observing the prescribed notice period’. The employee can submit his/her compensation claim to the subdistrict court.

Termination during probation period

The employer can terminate the employment contract during the probation period without UWV permission, i.e. without a dismissal permit. In addition, the employer does not, in this case, need to take into account the restrictions on termination or the notice period. During a valid probation period the employer and the employee can part immediately. During an invalid probation period the employer can terminate the employment contract but the employer will have to follow the normal dismissal procedure via the UWV. A valid probation period requires that:

• it be included in the employment contract in writing
• the period is the same for both parties
• for a contract for an indefinite period there is a maximum of 2 months
• a fixed-term contract of less than 2 years there is a maximum of 1 month

Dismissal with immediate effect

The employer can terminate the employment contract for urgent reasons (dismissal with immediate effect), without permission from the UWV i.e. the employer does not need a dismissal permit. In addition, in such a case the employer does not need to take into account the restrictions on termination or the notice period. The employer can terminate the employment contract with immediate effect. The employer can also stop the payment of wages to the employee. But an urgent reason needs to be present. This does not occur often. Examples of urgent reasons can be theft, fraud or drunkenness. The reason has to be serious enough for the employer to warrant not continuing the employment contract with the employee. At the time that the employer dismisses the employee with immediate effect the employer has to inform the employee of the urgent reasons. Dismissal with immediate effect is the most drastic way to be dismissed. It is, therefore, advisable that the employee immediately objects to the dismissal.

Invalid terminations

The employment contract is terminated during an invalid probationary period or dismissal with immediate effect has been wrongfully used. The employee has two options to object to termination during an invalid probationary period or wrongful dismissal with immediate effect:

1. The employer cannot just terminate the employment contract during an invalid probationary period or if there is no urgent reason to dismiss the employee with immediate effect. The employer should have followed the normal dismissal procedure through the UWV in such cases. The result is that the termination of the contract is invalid (it does not exist). The contract has never been terminated. The employee is still employed by the employer and is entitled to wages. Should the employer refuse to pay the wages then the employee can requisition the wages via the court. The judge will, first of all, have to agree with the employee that it is a case of invalidity. If this is the case the judge will grant the requisition and will order the employer to pay the wages. Note that in order for the requisition of wages to be possible certain statutory periods apply.
2. The employee can claim compensation on the grounds of termination without observing the prescribed notice period (the employer should have taken this into account). The first option is the more usual.

Bankruptcy

A bankruptcy trustee will be named in the case of a company going bankrupt and s/he will take over the management of the bankrupt company. The bankruptcy trustee does not have to ask the UWV for permission to terminate an employment contract i.e. he does not need a dismissal permit. In addition, he does not have to take any restrictions of termination into account. The employee nevertheless has the right to receive his/her wages up until the day on which his/her employment contract is actually terminated. However, this obligation to pay the wages is taken over by the industrial insurance board. The bankruptcy trustee arranges all this.

Apparent unfair dismissal

If the employer terminates the employment contract after having obtained a dismissal permit, the employer does not as such have to offer severance pay (golden handshake). In spite of the fact that the employer followed all the dismissal regulations and correctly terminated the employment contract the employee can all the same sometimes lay claim on compensation or reinstatement of the employment. Using the so-called ‘apparent unfair dismissal procedure’ obtained from the subdistrict court the employee can claim compensation or reinstatement on the grounds of ‘apparent unfairness’ of the dismissal. The employee commences these proceedings via the subdistrict court after s/he has been dismissed. A dismissal can, for example, be apparently unfair if the employee is dismissed for dysfunctional behaviour despite repeatedly good appraisals. Another example is if the employee has become partially incapacitated due to illness and insufficient effort has been made by the employer to reintegrate the employee within the company. The settlement amount often corresponds to the subdistrict court formula.

Termination via the subdistrict court

The employer can request the subdistrict court to terminate the employment contract because of substantial reasons (just cause). This is done by submitting an application to the subdistrict court. An application is an official legal document that is often submitted by a lawyer. The employer takes a formal termination proceeding (pro forma) or a substantive termination proceeding before the subdistrict court.

Grounds for dismissal

A substantial reason to terminate the employment contract can be an urgent reason that can lead to a distorted working relationship. Examples of urgent reasons are theft and drunkenness. Another urgent reason can be a change in circumstances that makes it unreasonable to keep the employee in service. This could be a decrease in the number of commercial activities, for example, because of a poor economic situation whereby the position of the employee will have to go (business reasons) but also if the employee no longer performs well in his position (dysfunctional behaviour). A distorted working relationship can also be a sufficient cause to terminate an employment contract.

Dysfunctional behaviour

If the employer wishes to terminate the employment contract because he feels that the employee no longer performs well, he will have to prove this. The employer’s dissatisfaction with the employee’s performance must be affirmed by the personnel file, for example, from the performance interviews. In addition, the employer should have given the employee sufficient possibilities and time to improve his/her performance. In other words, it should not come as a surprise to the employee that his/her employer wishes to terminate the employment contract because of poor performance.

Business reasons

If the employer wishes to terminate the employment contract for business reasons, the employer will have to substantiate this. The employer will have to prove that the job position of the employee will really disappear (often due to financial reasons or reorganisations). The employer will usually have to present company figures. The judge will initially also take into account the principle of seniority.

The formal termination procedure, ‘the termination by agreement’

It is possible that the employee is not in agreement with the employment contract termination but renounces putting forward a substantive defence. This could be because the employee is satisfied with the severance pay being offered, after having negotiated this with the employer. The employee will then put forward a formal defence ‘for the sake of formality’ but will inform the employer that s/he will not put forward a defence on the termination ‘as such’ if the compensation offered is paid. If the employee does want to put forward a substantive defence, for example, because s/he is not satisfied with the compensation then the employee will ‘really’ put forward a (substantive) defence. The formal termination procedure is a written procedure carried out via the subdistrict court. The employer submits an application to terminate the employment contract as of a fixed date and thereby offers the employee severance pay. The employee should file a defence. Prior to the procedural documents being handed to the subdistrict court judge, the employee and employer coordinate the documents. These documents are usually compiled by a lawyer for the employee. It is mainly a standard procedure in which, in almost all cases, the subdistrict court judge terminates the employment contract according to the conditions mentioned in the procedural documents. The judge will, therefore, usually grant the agreed upon severance pay. The judge’s decision is recorded in a court order (a sort of judicial decree). The date on which the court order is issued is the court order date. This is not the date on which the employment contract is actually terminated. The termination date is mentioned separately in the court order. That is the date on which the employment will end. The employer does not need to also terminate the employment contract. An appeal cannot be filed against this decision by a higher judicial body. As the employee has formally filed a defence the right to any possible unemployment benefit is safeguarded. It is common practice and advisable to be represented by a lawyer.

The substantive termination proceedings – you disagree

If the employee disagrees with the employer beforehand on the amount of severance pay or other conditions, substantive proceedings will be conducted. The employer has to submit an application to the subdistrict court requesting employment contract termination as of a fixed date and thereby either offering the employee severance pay or not. The employee then has the possibility to file a defence within a certain period of time stating the employee’s substantive objections to the termination of the employment contract. After this written round of procedural documents the judge will decide on a date on which the case can be verbally explained in court (i.e. ‘the case comes before the court’). The judge will then take a decision. The judge will record his decision in a court order (a sort of judicial decree). The date on which the court order is issued is the court order date. This is not the date on which the employment contract is actually terminated. The termination date is mentioned separately in the court order. That is the date on which the employment will end. The employer does not need to also terminate the employment contract. An appeal cannot be filed against this decision by a higher judicial body. The judge will usually award a severance pay. A substantive procedure is usually complex. It is, therefore, common practice and advisable to be represented by a lawyer.

The termination date

The judge does not need to take into account a period against which he terminates the contract. The termination date set by the subdistrict court judge has to be in the future. The subdistrict court judge sets the date on which the employment contract will be terminated in his court order. This is the date on which the employment will end. If the employee is entitled to unemployment benefit after termination of the contract, the UWV (the UWV takes care of unemployment benefit on behalf of the UWV, the Employee Insurance Schemes Implementing Body) takes into account a certain period after the date of the court order termination after which the unemployment benefit will be paid. This is also called the ‘notional notice period’. Entitlement to unemployment benefit commences once the notional notice period has lapsed. It is, therefore, possible that the employee no longer receives his/her wages because the employment contract has been terminated but is not yet entitled to unemployment benefit. It is customary that this risk is covered by adjusting the amount of severance pay accordingly. If the employee and employer follow a formal termination procedure then the negotiations should take into account the notional notice period.

The severance pay

It is customary that the employer offers the employee severance pay (a golden handshake) . The severance pay is included in the application. The guideline used for the amount of severance pay is the so-called subdistrict court formula. The subdistrict court formula is calculated using: A x B x C, where A = number of years in service The number of years in service starts on the date on which the employee joined the company until the date on which the employment contract is terminated. The number of years in service being full years. The number of years in service up to and including the age of 35 counts for 0.5, the service years from the age of 35 to and including the age of 45 counts for 1, the service years from the age of 45 to and including the age of 55 are subject to a factor 1.5 and the years in service after the age of 55 counts for 2. For example: if the employee is 56 years old and has been in service with his current employer for 26 years then the employee’s entitlement can be calculated as follows: (5 x 0,5 = ) 2,5 + (10 x 1 = ) 10 + (10 x 1,5 = ) 15 + (1 x 2 = ) 2 = 29,5 B = monthly salary at time of dismissal Calculation made using gross monthly salary earned at the time of dismissal including accompanying fixed wage components such as holiday pay. C = correction factor The subdistrict court judge can adjust the amount of severance pay using the factor C to an amount he deems fitting. The correction factor expresses the degree to which the employee or employer is to blame for the dismissal. In principle C=1. The correction factor is usually between 0.8 and 1.5. An example of the subdistrict court formula:
 29,5 x € 3.000,00 x 1 = € 88.500,00 In this example, this is the amount that you will receive as severance pay.

Collective dismissal (redundancy)

It is a matter of collective dismissal or redundancy if the employer wishes to dismiss at least 20 employees (working within the same UWV region) within a continuous period of 90 days. Collective dismissal will often be relevant in the case of reorganisations. In the case of collective dismissals a special law applies, namely, the WCO (Collective dismissal act). This law states that, among other, the employer has to report the proposed collective dismissal to trade unions and the UWV. The reason for this is to, as far as possible, try to prevent collective dismissals and in cases where it is inevitable to ensure as fair a treatment as possible for the employees. After the employer has requested the collective dismissal at the UWV, the UWV waits for a month before the application is processed. This month gives the UWV the chance to find other possible solutions. The employer uses this time to negotiate with the works council and the trade unions. This often leads to a social plan. This social plan is usually drawn up together with the trade unions. They also check whether the plans are reasonable. In the case of a social plan already existing, there is little point in putting forward a defence. In this case, the employee can submit a so-called ‘certificate of no objection’ in which the employee states that he has no objections to the dismissal. After this, the UWV can make a quick decision on the application for dismissal. Signing a certificate of no objection has no consequences for the entitlement to unemployment benefit.

Work and pay

Exemption from work. The employee can be exempted from work by the employer. This can, for example, occur during a termination issue in which the employer can exempt the employee from work up to and including the termination of the employment after the employer has applied for termination via the UWV or the subdistrict court. The employer can do this if the employee agrees to this. The employee does not have to turn up at his/her work when exempted from work but does continue to receive his/her pay.

Right to turn up at work

The employee has no legal right to turn up at work. The employee can, therefore, not demand that s/he can turn up at work (again) to carry out his/her tasks. The employer does, however, need to have a very good reason to deny the employee. Particularly if his/her pay is dependent on the actual carrying out of tasks, or his/her professional competence needs to be kept up to standard or when it relates to his/her position on the labour market.

Suspension

Under certain circumstances the employer has the possibility to suspend the employee. In this case, the employer can deny the employee entrance to the work floor. The employee can be suspended as a measure due to misconduct. The employer can also deny the employee work for reasons that are not only, or are not at all, the employee’s fault. The employee is then suspended. This could, for example, be due to lack of work. Suspension is only possible in exceptional situations. Suspension is only justified if the employer cannot in all reasonableness be expected to allow the employee to work. Suspension can have nasty consequences for the employee such as suffering damage to one’s good reputation and honour, losing his/her professional competence and decreasing his/her job prospects. Before the employer can suspend someone, the employer will have to carry out a careful examination into the necessity of the measure (substantial commercial interest !). The employee will need to be told the reasons for the measures taken when s/he is suspended. These reasons will have to be confirmed in writing. The employee should be given sufficient time to oppose the measure (the right to hear and be heard). The employee can immediately demand termination of the suspension through the subdistrict court judge. In many cases a suspension is followed by a request for the termination of the employment.

Pay during suspension

The employer can not just stop paying the employee’s salary. If the employee is suspended, thereby preventing him/her from working, s/he keeps the right to pay. Suspension is at the expense of the employer, even if the employee has given cause for this measure. If the employee has been suspended s/he will have to make it clear to the employer that s/he is available, and will remain so, for work. The employer will, as mentioned, in this case have to continue to pay the employee’s salary ! (unless another agreement has been made or the CLA states otherwise). If the employer stops the payment then the employee can claim his/her pay via a proceeding through the subdistrict court judge. (If the employee has a leased company car that s/he also uses privately, s/he may often continue to use it).

Sick Pay

If the employee cannot work due to illness then s/he is entitled to 70 % of the agreed upon pay for a period of 104 weeks (2 years) up to a stipulated maximum amount. This also applies to employees incapacitated to work due to pregnancy and childbirth except during maternity leave. During this period the employee is entitled to 100 % of their daily earnings. Many employment contracts and CLA’s (Collective Labour Agreements) stipulate that sick pay is not 70 % but 100 %.