Forced redundancy - key considerations

Voluntary departures, forced redundancy & settlement agreements 2021

The global impact of the pandemic continues as more and more companies cut their workforce. Whether you have been offered voluntary departure or a settlement agreement, or you have been forced into redundancy in 2021, here’s what you need to know.

Dismissal law

Under Dutch law, a permanent employee’s contract can only be terminated with prior permission from the court/UWV. An employer must justify their request to the court by using one of the 9 legal grounds for dismissal. This can be a time-consuming and expensive process.

As a result, many employers try to minimise such dismissals and instead turn to an alternate process called termination by mutual consent, either on a voluntary basis or on a forced basis. Employees are then asked to agree with the termination of their employment in exchange for a (financial) settlement.

However, when such voluntary departures are insufficient, the employer must then proceed to forced dismissals.

Voluntary departure during reorganisations

To minimise the number of forced redundancies, employers may offer a particular group of employees a voluntary leave programme (or voluntary departure scheme). In this programme, employers ask employees to leave the company voluntarily in exchange for a predefined settlement agreement, the contents of which may have been agreed in advance with the unions or works council. Critically, such a settlement package can deviate from standard employment law, and so may offer, for example, extra severance pay or other benefits.

Employees who indicate that they are interested in the company’s voluntary departure programme can then be offered the settlement agreement.

Employees who decline voluntary departure are unaffected; their employment continues.

Forced redundancy

If insufficient employees indicate interest, the employer can move to request permission to terminate the employment contracts of the remaining employees for business economic (redundancy) reasons. This is forced redundancy, and it is quite different to voluntary departure.

In forced redundancy, your job ceases to exist. If the employer can prove that they indeed have economic reasons which make a reorganisation necessary, and they can prove that it is you who should be leaving and not someone else (due to the reflection principle) and finally they can also prove that you cannot be relocated within the company/group, then you are left with only two options:

  1. Take the settlement package and leave the company OR
  2. Be made redundant via UWV proceedings and dismissal via notice thereafter and leave the company.

Critically, you cannot continue in your employment unless you can prove that a reorganisation is not necessary, and that it is not you but someone else who should be leaving (due to the reflection principle) and that there are actually other vacancies in which you could be relocated within the company/group.

While your choices may be limited, consent is key. Your employer cannot force or coerce you into accepting such an offer; an employee always has the right to refuse. However, if you reject the offer of a settlement agreement, the employer can still go to the courts and request termination, so you could still lose your job – but without any of the additional benefits that were detailed in the settlement package.

As such, it is worthwhile considering such a settlement offer thoroughly before making a decision. Employees are well protected under Dutch law, but depending on your specific individual situation, one option may offer significant advantages over the other.

Settlement agreement

The settlement agreement (or termination agreement) is a legal contract containing all the conditions for the dismissal/termination of employment. These can include the termination date, notice period, garden leave and post-contractual conditions such as confidentiality and non-competition clauses which will define your future employment rights. It also contains the financial conditions, such as payment of outstanding salary, vacation days, transitional allowance and/or any additional severance payments, golden handshakes, or other incentives that the employer is offering. The settlement agreement needs to be drafted in such a way that you will be entitled to unemployment benefits.

A settlement agreement is legally binding. When you sign it you are agreeing to all the conditions it contains. If you wish to negotiate any of the conditions, you must do so before you sign.

Remember that if you sign a settlement agreement, you have 14 days to reconsider your acceptance. You do not need to provide a reason for changing your mind.

It is important to understand that a settlement agreement can deviate from standard employment law. As such, it is critical to understand thoroughly whether or not acceptance is in your favour – and this is not always obvious.

Read more about settlement agreements and your rights

Legal budget

Due to the complexity of assessing a settlement agreement, many employers will offer a fixed sum for you to seek legal advice. If your settlement agreement includes a legal budget, take the opportunity to get legal advice before you sign or reject the offer.
An employment lawyer can review your documents and advise you on a number of subjects, including:

  • Your rights within the process
  • Legal validity of the termination process
  • Any alarm signals or “red flags”
  • What you should consider before accepting / rejecting the settlement agreement
  • Consequences of dismissal for your residence status
  • Calculation of your transitional payment
  • Impact on unemployment benefits

Your lawyer can also advise you on additional matters, such as the validity of a non-compete or relations clause, the 30% ruling, company shares and options, bonuses and pension.

Don’t get overwhelmed, get advice

The prospect of losing your job is stressful, and it is easy to miss a key consideration in your decision. Whether you have been offered a voluntary departure scheme, are assessing a settlement agreement or you are facing forced dismissal, getting expert advice on your specific situation can help you make the best decision.

We have a team of employment lawyers who can assist you in English, in person or via video conferencing. If you have a set legal budget, we can also assist you with a fixed fee solution.

If you have a question about these topics or you need legal assistance, please contact us.