Employees in the Netherlands enjoy strong legal rights. They can only be dismissed for a limited number of reasons (grounds). One such reason for dismissal is redundancy for business economic reasons, for example during a company reorganisation. This article explains the process employers must follow and why a settlement agreement can be easier than dismissal via UWV procedure.
Ask permission first
Employers cannot simply dismiss an employee due to redundancy for business economic reasons. First, they must request permission from the UWV (Employee Insurance Agency) to terminate the employment contract.
When the employer applies to the UWV for permission to dismiss, they must submit all the relevant information about the employer and the employee. The employer must also explain why the reorganisation is necessary, for example due to reduced work, business relocation, organisational redesign, or a combination of factors.
Justify the request
The employer is also required to detail the measures they wish to take, why it is necessary to dismiss employees, and why they cannot achieve this goal without redundancy. They must also be able to justify their request for dismissal.
As part of this, employers must be able to demonstrate that they cannot reassign the employee to another position within the organisation in a reasonable time. Reassignment could be to a similar function or to another function within the organisation if that is suitable for the employee.
Dismissal due to business economic reasons is only justified when the reorganisation applies to a duration of at least 26 weeks. An employer therefore cannot apply for a dismissal from the UWV if there is only a temporary reduction in work.
Process of the UWV application
- The employer submits an application for permission to terminate the employment contract.
- UWV forwards this information to the employee.
- The employee has two weeks to respond to the request.
- UWV forwards the response from the employee to the employer.
- (If needed, the UWV will ask the employer to respond to points made in the employee’s answer. If this occurs, the employee is given a chance to respond again too.)
At this point, the UWV will make its decision, resulting in one of two scenarios:
- If the UWV grants permission, the employer can give notice to terminate the employment contract. The employer must observe the legal notice period. However, the duration of the UWV procedure can be deducted from the notice period. In any case, at least one month’s notice should be obtained. If the contract is terminated, the employer should pay the employee the outstanding holidays, transition allowance, etc. If the employee disagrees with the decision, they can go to court.
- Sometimes the UWV does not grant the employer permission, for instance because they have provided incorrect information or because they have not (entirely) followed the legal process. This may also occur if there is a prohibition of termination, for example if the employee is pregnant or has been ill for less than two years. In this situation, the employer may not legally terminate the employment contract. If the employer does not agree with the decision of the UWV, they can go to court.
The procedure outlined above for dismissal via UWV procedure for business economic reasons takes time and incurs costs. Also, the outcome of the procedure is uncertain for both parties. As a result, employers may prefer to reach a settlement agreement, also known as termination by mutual consent. The UWV is not involved in a settlement agreement; negotiations take place between the employer and employee. Frequently, both parties will be assisted by a lawyer during negotiations.
Such an arrangement is not only to the benefit of the employer, depending on the situation a settlement agreement can be to the advantage of the employee.
When to call a lawyer about redundancy
Employers are wise to seek legal advice if they are facing a reorganisation that will require redundancies. A lawyer is uniquely positioned to advise an employer on their chances of receiving UWV permission for dismissal or if a settlement agreement would be more beneficial, and to assist in negotiations.
Employees should contact a lawyer quickly if they are confronted with a dismissal application or if they are offered a settlement agreement. A lawyer can check the settlement agreement and advise you if it is fair and in keeping with your rights.
If you have already agreed to a termination agreement, you have 14 days to withdraw your consent.
If you have a question about reorganisation, dismissal, or another related subject, please feel free to contact me on 070 361 5048 or use our online contact form to submit your question.
Daniëlle van den Heuvel works in property law and employment law at GMW lawyers.
Within property law, Daniëlle is mainly involved in rental disputes and procedures concerning real estate transactions, representing real estate entrepreneurs, project developers, housing corporations and private individuals. Within her employment law practice, Daniëlle is often called in to draw up or advise about settlement agreements between employers and employees. She represents both parties.
Empathetic and dedicated to giving the best possible service, Daniëlle combines a responsive attitude with a clear, analytical and personal approach. In every case, Daniëlle tries to make a difference and really help her client.
Daniëlle also gives regular advice on non-competition clauses, and publishes monthly in the legal magazine Rendement.