Termination of employments by mutual consent according to Dutch law

Since the change of the unemployment insurance act in 2006, Dutch employment contracts can be terminated by mutual consent without loss of benefits. However, there are some conditions the termination contract needs to meet. Only under certain circumstances will it be desirable for the employee to accept such a termination.

To prevent the loss of unemployment benefits, the termination contract should (truthfully) mention:
1. That the initiative to terminate the employment contract comes from the employer. In case the employee terminates himself, or takes initiative to terminate by mutual consent, rights to benefits are lost. There is an exception though for the situation in which it cannot reasonably be expected from the employee to continue the employment. This is for instance the case when working conditions are detrimental to the employee’s health, when the company moved far away, etc.
2. That the termination of the employment is not based on an urgent cause, i.e. that the employee is not gravely culpable. Such an urgent cause could justify a summary dismissal in which situation rights to unemployment benefits are lost.

Also, during a period in which the employee is disabled to work, termination by mutual consent can lead to loss of benefits. In this situation an employee would need to apply for Health Law, i.e. sickness act, instead of unemployment insurance. The first still requires the employee to plea against termination, like the latter did as well till 2006. Therefore termination by mutual consent leads to refusal of Health Law benefits.

It can be desirable for the employee to agree to an offered termination contract if:
1. He wishes to leave himself due to reasons within his sphere of risks. Examples are when the employee wishes to move, start a study, etc. In this event the termination contract is a better substitute to handing in a resignation.
2. The employee wishes to make a career move and is able to start a better job soon. A termination contract can, if the employer agrees as well, set aside the notice period.
3. Parties have a labor dispute, or there are other circumstances that makes continuation of the employment undesirable. In this scenario it depends on the offered termination conditions whether it is desirable for the employee to agree to a termination by mutual consent or to have the judge decide on the case. In practice lawyers will usually try to settle the case ending up in a termination contract. In many cases they succeed in reaching such an amicable solution as legal certainty in these cases is generally rather high.

Subjects that are often handled in a termination contract are: the termination date, the obligation to work or be exempt from work till that date, the severance pay, the final payment including holiday allowances, possible dissolution of non-compete clauses, payments for legal costs and sometimes costs for coaching, study and outplacement, secrecy and discharge.

Under circumstances it can be desirable for an employee to agree to an offered termination of a Dutch employment contract. To prevent loss of unemployment benefits the termination contract vaststellingsovereenkomst needs to fulfill some requirements.