Transition compensation and settlement agreement

Mutual agreement

When an employer wants to terminate the employment of an employee, he can do so via the district judge or the EIEI. He can also come to an agreement with the employee. The first option in this respect entails that the employee agrees to the termination of the contract, the second option entails the agreement of a settlement agreement in which the terms of termination are obtained.

Conservation unemployment benefit

When from the settlement agreement can be derived that the initiative of the termination lies with the employer, without an urgent need for the termination, the employee keeps his entitlement to an unemployment benefit.

Right to a transition compensation

Since the adoption of the WSA an employee always has a right to a transition compensation with the termination of an employment (when no severe culpability can be established on the side of the employee. The height of this compensation is fixed, but the question is raised whether the height of this compensation can be altered through a settlement agreement.

No accord on a settlement agreement: what now?

The district court of Middle-Netherlands had a case in which a settlement agreement was accorded between an employer and employee. This agreement did not entail any transition compensation, which led to the employee to go to court to enforce such a compensation anyway. The reason was that the employee claimed that the labour agreement was terminated in fact by the employer and that a transition compensation was obliged. Furthermore the employee claimed that such a compensation can be derived from the concept of being a good employer. From that principle it can at least be derived that employer gives his employee notice of this obligation to awarding a transition compensation.

No approval with the termination, but termination agreement

In this case the judge ruled that no mutual termination took place. A settlement agreement was concluded however. This could have been derived from the fact that this agreement obtained the legal ground (art. 7:900 DCC). During the session the employer was also questioned on the background of the termination, from which it could be concluded that it was the employee who wanted to leave in order to start his own business. He also had applied for a job at another company as well.

No unconditional right – arrange it explicitly!

On the basis of this information the judge concluded that the agreement was only meant to secure the right to an unemployment benefit for the employee. A termination of the agreement by the employer was not the case, because both parties agreed that the employee would leave the company. In such a case they can agree on a possible transition compensation. Because nothing was agreed in this case the employee did not have a right to this compensation in the end.

Duty of the employer

The district judge also did not find that the employer was obliged to notify the employee to his right to ask for a transition compensation. He decided this because, since the adoption of the WSA, every employer has a reflection period. That period must be used by the employee to consult a legal expert and to think about the consequences of signing a settlement agreement. (especially with regards to the financial conditions)

When you would like more information or want to have a legal expert check your settlement agreement, please contact Suzanne van Dijsseldonk LLM.