Dutch dismissal law will undergo a dramatic change with effect from 1 July 2015. If you are considering individual dismissals or a reorganisation with lay-offs, the legal changes will not only have a financial impact, but are also expected to complicate effecting dismissals. If your proposals do not comply with the new law any dismissals are likely to be ineffective. Taking legal advice at the very start of the matter becomes ever more crucial. The main elements of the new dismissal law are included below. All changes will come into force on 1 July 2015.

  1. Introduction of a statutory severance

All employees who have been employed for at least 24 months will be entitled to a statutory severance payment, the so-called transition allowance. This will also apply to employees who have been employed under a fixed term employment agreement.

The amount of transition allowance is based on the duration of employment:

  • 1/6 of monthly salary will be payable for each six months of employment during the first ten years of employment;
  • after ten years this will increase to 1/4 of monthly salary for each six months of employment.

The maximum transition allowance payable is EUR 75,000, unless the annual salary of the employee is higher. In that case the annual salary will be the maximum amount payable. Transitional arrangements apply to employees over 50 years old and small sized employers.

  1. Ground for dismissal decisive for type of dismissal procedure (UWV or subdistrict court)

In effecting the dismissal the employer will no longer be able to choose between the Employee Insurance Agency (UWV) route and the subdistrict court route. The route to take will depend on the ground for dismissal:

  • dismissal for business economic reasons or long term illness à UWV;
  • dismissal for personal or other reasons à subdistrict court.

Both UWV and the court will assess the dismissal request in full. Only if the dismissal request is fully compliant with the governing policy rules will a dismissal be granted.

  1. Additional compensation

An additional reasonable (billijke) amount of compensation can be granted by the court in the case of severe imputable acts or negligence by the employer or if the termination is (largely) attributable to the employer. This additional compensation is uncapped.

Possible circumstances that could lead to additional compensation on the basis of the first ground are misconduct, discrimination, failing to meet rehabilitation obligations, insufficient care for safe working conditions etc. The second ground is very broadly formulated; termination will very often be (largely) attributable to the employer. It is to be expected that courts will often use this ground to grant additional compensation.

  1. Reflection period when entering into a settlement agreement

When an employment agreement is ended by a settlement agreement, the employee has the right to change his mind within 14 days after entering into the settlement. The employer needs to notify the employee of the reflection period in writing. During this reflection period, the employee can dissolve the settlement agreement, without giving reasons, by sending a written statement to the employer. The possibility to reconsider will lead to more uncertainty for the employer. Only after the two- week reflection period, can the employer be sure that an agreement has been reached. In addition, the employee might try to misuse this process in order to obtain a higher severance payment.

  1. Introduction of appeal and appeal to the Supreme Court against dismissal decisions

Employees will be entitled to request the court for an annulment of the notice to terminate the agreement. The court decision on the annulment will be open to appeal and appeal to the Supreme Court (cassation). Dissolution decisions of the court can also be fully appealed against and can even be subject to cassation. The courts of appeal can decide to restore the employment. In such event the court will also have to decide on measures regarding the interruption of the employment. This can substantially lengthen the dismissal procedure and result in years of uncertainty.

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