settlement agreement in labour law

In a settlement agreement an employer and an employee arrange how an employment agreement is terminated by mutual consent. This prevents unnecessary procedures.

As soon as parties have signed an settlement agreement, in principle a right of withdrawal period of 14 days comes into force. During this period an employee, that has agreed upon the termination of the employment, can withdraw his or her consent.

Content of a settlement agreement

In a settlement agreement several agreements can be arranged, but in most cases a settlement agreement contains agreements about:

• The end of termination;
• The dismissal / transitional compensation;
• An exemption of carrying out work duties;
• A final settlement
• Handing in company properties
• Confidentiality;
• Competition and solicitation clauses;
• A testimony
• A final discharge
• Compensation of legal costs

Transitional compensation

Since July 1 2015, an employee in principle has a right to a transitional compensation when the employment agreement is terminated after a request by the employer, unless in matters of serious or culpable actions or omissions by the employee. If an employee files a request, the employer only has to pay a transitional compensation in matters of serious culpable actions or omissions by the employer.

An employee has a right to a transitional compensation if the employment has lasted at least 24 months. The transitional compensation is calculated on basis of the length of the employment, the age of the employee and the personal circumstances of the employee. For this last point, one could think of his or her chances on the labour market.

Benefit under the Unemployment Insurance Act

Parties do not need permission of the UWV (the Dutch Unemployment Insurance Agency) or the subdistrict court judge to enter into a settlement agreement. Parties do need to take into account the points of attention the UWV uses for decisions on benefits under the Unemployment Insurance Act. Ask our attorneys about the demands of the UWV for securing your benefits.