Agreed settlement

What is an agreed settlement?

Dismissal is a major event, for the employer, but certainly for the employee. It will therefore not be surprising that employers and employees often dread dismissal proceedings at the UWV or the subdistrict court. Such procedures can be expensive and stressful. Moreover, a procedure often has no 'winners'.

It is therefore not surprising that most dismissal cases are not resolved through a procedure. Parties can also arrange the dismissal themselves in mutual consultation - with or without the support of lawyers. The parties negotiate the conditions for terminating the employment contract and record the achieved result in an agreement. That agreement is then called a settlement agreement or a termination agreement, or a settlement agreement for English speakers. This method of dismissal is also called dismissal by mutual consent.

The agreed settlement is a popular dismissal route

The settlement agreement has become increasingly popular in recent years because it has been possible for several years to terminate the employment contract with a settlement agreement while retaining unemployment rights. The settlement agreement must then meet a number of conditions, more about which below.

Conditions for a unemployment-safe settlement agreement

Not culpably unemployed

To be eligible for unemployment benefits, the employee must not be culpably unemployed. In short, the employee must not have behaved in such a way that the employment contract is terminated for that reason. Consider urgent reasons for dismissal such as theft, assault and fraud.

The employee's poor performance is generally not a culpable reason.

Due to the requirement of non-culpability, a so-called 'neutral reason' for termination of the employment contract must be included in the settlement agreement. A neutral reason is usually filled in with the words 'difference of opinion about the manner in which the work is to be carried out' or, in the case of a dismissal for economic reasons, the employer's economic situation is (briefly) described.

Observe the notice period

In order to terminate an employment contract, the employee and the employer must – normally – observe a notice period. The length of the notice period can be contractually agreed between the parties in the employment contract. Therefore, the employment contract must first be examined. If the parties have not made any agreements about the notice period, the length of the notice period is based on the law, so that it is referred to as the 'legal notice period'. The length of the statutory notice period varies from 1 to 4 months and depends on the duration of the employment contract. See the diagram below:

Duration of employment contract, length of notice period

0 – 5 years 1 month

5-10 years 2 months

10-15 years 3 months

15 years and longer 4 months

In order to make a settlement agreement unemployment-safe in such a way that the unemployment benefit commences immediately after the end date of the employment contract (i.e. in line with the last salary payment), the settlement agreement must take into account the length of the notice period that the employer must observe. So look at the notice period for the employer in the employment contract, or if this is missing, the length of the employment relationship and the associated statutory notice period.

If the notice period has been determined, the length of that notice period must be observed by adhering to at least that period between the date of signing of the settlement agreement and the end date of the employment contract.

Example: if the employer's notice period is 2 months, the end date of the employment contract should be set on August 31 if an agreement on the settlement agreement is reached in June.

The UWV, the organization from which unemployment benefits must be applied for, frequently uses the term 'notional notice period'. This therefore refers to the notice period of the employer.

With a view to the timely commencement of the unemployment benefit, it is preferable to include the rule in the settlement agreement that the notional notice period has been observed.

NB: for fixed-term employment contracts without an interim termination clause, unemployment rights do not commence until after the term of the employment contract has expired.

The initiative for the settlement agreement must lie with the employer

It is essential that the settlement agreement shows that the initiative to terminate the employment contract comes from the employer. It is not the intention that the employee, for whatever reason, no longer has any interest in his work and is aiming for the end of his employment contract, after which he/she thinks he/she can claim unemployment benefits.

The fact that the initiative was taken by the employer should preferably be written down literally in the settlement agreement. But descriptions with the same meaning will also suffice.

Agreed settlement in case of illness

Entering into a settlement agreement is generally not recommended for a sick employee. This is especially true if the employee expects to still be ill after the end of the employment contract. In that case, he would have to claim Sickness Benefits. However, if the employment contract has been terminated through a settlement agreement - with a few exceptions - no right to Sickness Benefits Act will arise.

If the disability (illness) is related to a (conflict) situation at work and the employee expects to no longer be ill after the end of the employment contract, a settlement agreement may be opted for.

Contents of settlement agreement

Naturally, the content of the settlement agreement is important. After all, the content reflects the agreements that the employer and employee have made regarding the end of the employment contract. Let oor specialists advice about the content topics that a settlement agreement can and must contain.

Reflection period

Since July 1, 2015, a so-called reflection period for employees has been introduced. This means that an employee who signs a settlement agreement can revoke his agreement within fourteen days. To this end, the employee must notify the employer in writing that he is terminating the settlement agreement. This termination option must be stated in the settlement agreement. If it is not stated, the cooling-off period is even 21 days.

Assistance with dismissal and advice with the settlement agreement

Because dismissal is a major event with many 'pitfalls', it is important to ask for help from a specialized dismissal lawyer or dismissal lawyer.

Our lawyers have more than 20 years of experience with dismissal cases and in drawing up and negotiating the settlement agreement or termination agreement.

Higher severance pay possible?

If the employer offers you a severance package with severance pay, it is advisable to check whether the severance pay is high enough. Our experienced lawyers can help you with this. They can also negotiate a higher compensation for you. We are often successful in this.

Immediate action:

Call or email Dismissal Specialist for advice and legal assistance.

Call 0900 – 123 73 24 or or 020 6 160 120 or email us.

The first advice about the agreed settlement is FREE!