Below is a discussion in outline of the following topics:
- Notice periods
- Duty of notification of the employer in the event of fixed-term employment contracts
- Special clauses, more specifically the clauses on probationary period and non-competition
- Provisions on succession of fixed-term employment contracts (when is a fixed-term contract converted by law into a contract for an indefinite term)
Termination or setting aside of the employment contract is only possible if:
- there is a reasonable ground, and
- reassignment of the employee to another suitable position within a reasonable period, whether or not after training, is not possible or reasonable (what is known as the ‘reassignment duty’); and
- no prohibitions on termination apply.
The parties must observe the statutory or contractual notice period, subject to payment of a fixed compensation of up to one month’s salary.
The law provides an exhaustive list of reasonable grounds for dismissal. Other grounds than those listed below can therefore not be regarded as ‘reasonable grounds’ for dismissal. The following grounds are prescribed:
- commercial reasons;
- long-term incapacity for work;
- frequent sickness absence;
- inadequate performance;
- imputable acts or omissions;
- conscientious objection;
- damaged working relationship;
- conditions other than those listed in a up to and including g, which are such that the employer cannot reasonably be required to continue the employment contract (‘catchall ground’);
- combination of one or more of the above.
Which procedure for dismissal must be followed, depends on the ground for dismissal. In the event of a reorganization or a dismissal for commercial reasons (ground a) and dismissal for long-term incapacity for work (ground b), permission from the UWV (Employee Insurance Agency) is required.
If the ground for dismissal is associated with the person of the employee (grounds c up to and including i), the matter must be submitted to the subdistrict court.
In by far the most cases, the employment contract ends by mutual consent. In that case, both parties declare that they want to terminate the employment contract. This results in an agreement, which is called a termination agreement or settlement agreement. In the event of termination by mutual consent, permission from the UWV or the subdistrict court is not required.
Both the employer and the employee must observe the statutory notice period in the event of dismissal. The duration of the statutory notice period depends on the total duration of the employment.
- In the event of notice of termination by the employee: 1 month;
- In the event of dismissal by the employer:
- employment less than 5 years 1 month;
- employment 5 years or longer 2 months;
- employment 10 years or longer 3 months;
- employment 15 years or longer 4 months.
The period to be observed by the employee (1 month) can be deviated from in writing. On renewal, however, this period may not be longer than 6 months and, for the employer, not shorter than twice the period to be observed by the employee. For example, if the parties agree a notice period of 3 months for the employee, the notice period for the employer must be at least 6 months.
The statutory notice period to be observed by the employer may only be shortened in that case by a collective bargaining agreement (CBA) or by regulations issued by or on behalf of an authorised administrative body, provided that the period is not shorter than the period to be observed by the employee. In short, it can be agreed in the CBA that the employer and the employee must observe the same notice period (e.g. both 3 months).
Duty of notification in the event of a fixed-term employment contract
The employer that has concluded a fixed-term employment contract with an employee with a term of six months or longer, must no later than one month before the end of the employment contract (provided that the end is set on a calendar date) inform the employee in writing (i) whether or not it wants to continue the contract and if it wants to continue the contract, (ii) on what conditions. This duty also applies in the event of successive fixed-term contracts with a term of six months or longer.
A failure to comply with the duty of notification, or late or incomplete compliance, is subject to various sanctions:
- if the employer has not informed the employee in any way at all of whether it wants to continue the contract (under i), it must pay the employee one month’s salary;
- if the employer informs the employee late, it must pay the employee one day’s salary for each day it is late with this information;
- if the employment contract is continued without the employer having fully complied with its duty of notification (under i or ii), then contract is continued for the same term, but no longer than one year, on the old conditions. So if an employer wants to continue an employment contract, but on changed employment conditions, it is important that it communicates this in good time.
If an employer fails to comply with the duty of notification, the employee can bring a claim for payment of the salary due before the subdistrict court within two months after expiry of the employment contract. The duty of notification does not apply to fixed-term employment contracts that do not stipulate a fixed end date (for example, an employment contract to replace a sick employee or for the duration of a project).
Employees are entitled to the statutory transition payment if:
their employment contract was terminated the employer’s initiative, unless the termination was the result of seriously culpable by the employee, or
at the employee’s initiative as a result of seriously culpable by the employer.
This applies to both termination by notice (with the employee’s consent or with permission from the Employee Insurance Agency UWV), by dissolution (by a Subdistrict Court) and discontinuation of a fixed-term employment contract.
The transition compensation consists of 1/3 monthly salary per full year of service (up to a maximum of € 86,000 gross in 2022 or one full year’s salary). The Subdistrict Court may decide to increase the transition payment by a factor of 1.5 if the employment contract is dissolved on the basis of the ‘i-ground’ (Article 7:669(3)(i) of the Dutch Civil Code, also known as the ‘cumulation ground’).
In addition, employers are compensated for paying the transition payment if they dismiss an employee following two years of sickness.
The employer must pay the transition payment to the employee no later than one month after the date on which the employment contract is terminated. From that time, statutory interest will be owed on the amount of the payment. If the employer does not pay the payment or the payment is too low, the employee may apply to the Subdistrict Court within three months after the date on which the employment contract was terminated to claim the transition payment.
A fair compensation may be owed in addition to the transition payment. This is the case if the employer engaged in seriously culpable conduct.
It is no longer possible to include a non-competition clause in fixed-term employment contracts concluded on 1 January 2015 or a later date, unless the clause is necessary because of substantial business or service interests.
If an employer nevertheless wants to include a non-competition clause in a fixed-term employment contract, then it must explain in writing which interests are at stake and why those (substantial) interests make it necessary to include the non-competition clause. Case law shows that the employer cannot confine itself to general generic wording, but must tailor the explanation to the person and position of the employee. The same applies to the inclusion of a non-solicitation clause.
This can lead to the following scenarios:
- the substantiation of substantial interests is lacking: the clause is void (not valid);
- the substantiation is included, but the court finds that the clause is not necessary in view of the interests stated by the employer: the court sets aside the whole clause;
- the substantiation is included, but the court finds that the employee is unduly prejudiced by the non-competition clause relative to the employer’s interest in maintaining the clause: the court sets aside the whole or part of the clause.
Provisions on succession of fixed-term employment contracts
The provisions on succession of fixed-term employment contracts regulate when the last fixed-term contract in a series must be converted into an employment contract for an indefinite term.
The current provisions on succession of fixed-term employment contracts provide that a fixed-term contract can be extended twice (so three fixed-term contracts in total), but the total duration of the series is limited to 3 years. A new series starts only after there has been an interruption of six months (or longer). If the employer remains within these limits, the fixed-term employment contracts always end automatically. However, a contract automatically becomes a contract for an indefinite term:
- when the successive fixed-term contracts exceed the period of 3 years; or
- when a 4th fixed-term contract is concluded.
The provisions on succession of fixed-term employment contracts also apply in the event of what is known as a successive term of employment, on the understanding that in that situation not only fixed-term contracts are counted for the series, but also contracts for an indefinite term. There is question of a successive term of employment, if the employee concludes an employment contract with another employer for (virtually) the same work, requiring the same skills and responsibilities from the employee. If the employee enters the employment of a new employer entirely on his own initiative, then according to the Minister, there is no question of a successive term of employment.