III. Mutual consent
Contracts of employment for definite and indefinite periods may be terminated by mutual consent, in which case no notice is required. However, case law has established certain strict requirements with respect to the validity of the termination of a contract of employment by mutual consent since this often has detrimental consequences for the employee (for example, loss of entitlement to unemployment benefits).
If an urgent cause exists, an employer may summarily dismiss an employee. In such a case, the contract of employment is not terminated by notice and consequently the provisions which apply to termination by notice do not have to be observed. An urgent cause is a circumstance or set of circumstances which are such that the employer cannot in all reasonableness be expected to allow the contract to continue. An urgent cause may exist, inter alia, if an employee is guilty of theft or embezzlement or divulges confidential information.
In reality, however, whether an urgent cause actually exists will depend on the specific circumstances of the case. It goes without saying that an urgent cause for summary dismissal will only exist very rarely. If an employer is hesitant in effecting a summary dismissal, it will be void regardless of whether an urgent cause did actually exist.
If an employee who has been summarily dismissed wishes to contest the existence of an urgent cause, he may, in principle, take two courses of action. He may claim that the termination was void since no UWV WERKbedrijf permit was obtained or he may acquiesce in the termination but seek to recover damages on the grounds that it was unlawful. These damages are limited to the amount of salary which the employee would have received during the notice period had it been properly observed, or to the actual damages directly resulting from the dismissal. In most cases, the employee claims that the termination was void, especially if he has become unemployed as a result. If the contract of employment contains a non-competition clause, however, the employee may prefer to recover damages, since, as a consequence of this liability, the employer is precluded from invoking such a clause.
Both employers and employees may request that the court rescind a contract of employment on the grounds of “serious cause”. A serious cause will be deemed to exist if either: I. the circumstances are such that they would have amounted to an “urgent cause” for summary dismissal if the contract had been terminated instantly; or II. there is a change of circumstances of such a nature that the contract should in all reasonableness be terminated instantly or on short notice.
The party against whom the request for rescission is directed, generally the employee, may submit a defence. If the court deems that serious cause does indeed exist, it will rescind the contract. If rescission is granted on the basis of serious cause due to a change in circumstances, the court may award one of the parties, generally the employee, compensation in an amount which it deems reasonable under the circumstances.
Compensation is generally calculated according to the following formula: A x B x C.
For the purpose of this formula: A is equal to the employee’s years of service. Years of service before the age of 35 count for 0,5 years of service; between the ages of 35 and 45 count for 1, years of service between the ages of 45 and 55 count for 1,5 and years of service after the employee has reached the age of 55 count for 2;
B is equal to the employee’s salary, including his holiday allowance, and, depending on the circumstances, other benefits such as a bonus;
C is the correction factor, which in most cases will be set at 1. Depending on the circumstances – who is at fault and to what degree C may be adjusted upwards or downwards.
If an employer who has requested rescission is not willing to pay the amount of compensation which he has been ordered to pay to the employee, the court will grant him a certain number of days within which to withdraw his request. Conversely, an employee may withdraw his request for rescission if he deems the compensation awarded by the court to be too low. If a request is withdrawn, the contract of employment will not be rescinded but will continue.
If it is not withdrawn, however, the contract will be definitively rescinded and there will be an obligation to pay compensation in the amount awarded by the court. Appeal from the court’s decision is not possible, except in the rare event that a fundamental legal principle has been violated in such a manner that the matter cannot have been handled fairly and impartially.
If a contract of employment is terminated unilaterally by the employer, even if an UWV WERKbedrijf permit has been obtained and the proper notice period observed, the employee may file a legal action alleging that the termination was “obviously unreasonable”. Termination will be deemed obviously unreasonable if either no reason, a mere pretext, or a false reason is given, or if the hardship endured by the employee is disproportionate to the employer’s interests.
In such an event, the employee may claim reinstatement or compensation in an amount to be determined by the court. This compensation differs from that which is paid when a contract of employment is rescinded. It is not determined in accordance with the formula mentioned before under V.