It is with respect to the termination of contracts of employment that Netherlands’ employment law differs markedly from most foreign legal systems, in particular with respect to the high degree of protection against dismissal.
There are five ways in which contracts of employment may, in appropriate cases, be terminated under Netherlands law:
- At will during the trial period;
- By notice;
- By mutual consent;
- By summary dismissal;
- By judicial rescission.
Each of these methods will be discussed below.
I. Termination during trial period
During the trial period either party may terminate the contract of employment at will, that is, with immediate effect.
II. Termination by notice
With respect to termination by notice, a distinction must be made between contracts for a definite period and contracts for an indefinite period.
The original term of a contract of employment for a definite period terminates by operation of law at the end of this period. In principle, therefore, prior notice is not required, although an obligation to give notice may be stipulated in the contract. The same rule applies to a second and third contract of employment for a definite period which succeed the original contract of employment for a definite period provided that the total duration of all such contracts of employment does not exceed three years.
The second and third contracts, like the original contract, terminate by operation of law at the end of the respective definite periods. If a fourth successive contract of employment for a definite period is entered into or the three year limit is exceeded, the fourth or last contract of employment, as the case may be, is considered to have been entered into for an indefinite period and the above rule concerning termination by operation of law does not apply any more.
However, by way of exception, a contract for a definite period of three years or longer may be succeeded by a contract for a definite period not exceeding three months without the second contract being regarded as one for an indefinite period, unless otherwise agreed pursuant to a collective bargaining agreement. If the time span between contracts of employment for a definite period is three months or longer, they are not regarded as successive but rather as separate contracts of employment for a definite period which therefore terminate by operation of law at the end of the period.
Neither the original nor extended term of a contract for a definite period may be terminated by notice before the expiry of the period, unless agreed otherwise. This follows from the very nature of such a contract. (A contract for a definite period may, however, be terminated by mutual consent, summary dismissal or judicial rescission before the end of the period).
A contract for an indefinite period, as the name suggests, does not expire on a particular date but continues indefinitely until terminated by notice, or by one of the other methods discussed in this section.
Before notice to terminate may be given, permission from the director of the regional labor office (“UWV WERKbedrijf”) in the form of an UWV WERKbedrijf permit must be obtained. In the absence of such a permit, the notice will be voidable. This requirement is based upon Article 6 of the Decree on labor Relations of 1945, which provides that the permission of the Minister of Social Affairs and Employment must be obtained before an employment relationship may be ended. The authority to grant this permission has been delegated to the regional labor offices (UWV WERKbedrijf). Article 6 applies whenever the termination by notice of a contract of employment is deemed to affect the socio-economic interests of the Netherlands labor market, even if the contract of employment is not governed by Netherlands law.
In general, such interests will be deemed to be involved if the work is permanently performed in or from the Netherlands (and the employee is likely to claim unemployment benefits in the Netherlands as a result of the termination). It should be noted that a permit is not required in respect of termination I. during the trial period, II. by mutual consent, III. by (justified) summary dismissal, IV. in the event of the employer’s bankruptcy or V. in respect of the termination of the contract of employment of a managing director of a company with limited liability.
The UWV WERKbedrijf will only grant a permit if, in balancing the employer’s and employee’s interests, he deems the proposed termination reasonable. Consequently, the person who submits the request must indicate the grounds on which that request is based while the person against whom it is made may submit a defence. Thus, permission is not granted automatically. The procedure should, in principle, be completed within eight weeks although in practice it may take longer.
Once an UWV WERKbedrijf permit has been obtained, notice of termination may be given, subject to the prohibitions described below. The statutory notice period to be observed by an employer is equal to:
| 1 month | if the employment has lasted 5 years or less; |
| 2 months | if the employment has lasted between 5 and 10 years; |
| 3 months | if the employment has lasted between 10 and 15 years; |
| 4 months | if the employment has lasted for 15 years or longer. |
Only by means of a collective bargaining agreement may these statutory notice periods be shortened. They may be made longer either through a collective bargaining agreement or an individual contract of employment.
The statutory notice period to be observed by an employee is one month. An employee must observe a notice period of one month. This statutory period may be increased or decreased in his individual contract of employment. In the former case, the maximum period which the employee can be required to observe is six months and the notice period to be observed by the employer must be at least twice as long as the period to be observed by the employee, unless otherwise agreed in a collective bargaining agreement.
If notice is given after an UWV WERKbedrijf permit has been obtained, the statutory notice period to be observed by the employer is reduced by one month, provided that a minimum period of one month is observed, unless otherwise agreed in a collective bargaining agreement.
Even after an UWV WERKbedrijf permit has been obtained, the giving of notice is prohibited by law in certain situations, such as while the employee is unable to perform his work due to illness, unless the employee has been ill for at least two years or the employee has reported being ill after the UWV WERKbedrijf received the request for a permit. Nor may a contract of employment be terminated by notice while an employee is pregnant or doing military service.
Notice of termination may not be given to an employee who is a member of a works council or to an employee on account of his membership in a trade union or his activities in connection with a trade union, unless carried out during working hours without the employer’s permission.
Furthermore, an employer must first obtain the permission of the court (“kantonrechter”) if he wishes to terminate by notice the employment of a candidate for election to a works council or an employee who was a member of a works council less than two years prior to the notice. The prohibitions or restrictions on giving notice discussed in this paragraph do not apply if the termination is on account of the business activities of the employer being discontinued.
