Reorganisation and redundancy in the Netherlands
Employees in the Netherlands have strong legal rights. They can only be fired for a limited number of reasons (grounds). One of the reasons for dismissal is dismissal for financial reasons, such as in the case of a company reorganization. This article explains the procedure employers must follow and why a settlement agreement is easier than dismissal through the UWV procedure.
Apply for permission first
Employers cannot simply dismiss employees for economic reasons. To terminate an employment contract, they must first request permission from the UWV. When an employer applies to the UWV for permission to dismiss an employee, he must provide all the relevant information about the employer and the employee. Employers must also explain why reorganization is necessary, for example, because of reduced workload, company relocation, organizational reorganization or a combination of several factors.
Proof of request
The employer must also specify the measures he intends to take, why he needs to lay off employees and why he cannot achieve this goal without laying off. He must also be able to justify his dismissal request. In doing so, the employer must be able to demonstrate that he cannot reassign the employee to another position within the organization within a reasonable period of time. The reassignment may be to a comparable position or another position within the organization that suits the employee.
Dismissal for economic reasons is only reasonable if the reorganization lasts at least 26 weeks. Therefore, the employer cannot apply for dismissal at UWV if the position is only temporarily eliminated.
UWV application process
- The employer submits an application for permission to terminate the employment contract.
- UWV passes this information on to employees. The employee has two weeks to respond to the request.
- UWV forwards the employee's response to the employer.
- (If necessary, UWV will ask the employer to respond to the employee's score in the response. If this happens, the employee will be given the opportunity to respond again).
At that point, UWV makes a decision, which leads to one of two things:
- If the UWV gives permission, the employer can terminate the employment contract. Employers must adhere to the statutory notice period. However, the duration of the UWV procedure can be deducted from the notice period. In any case, a notice period of at least one month must be observed. If the contract is terminated, the employer must pay the employee backdated vacation days, transition compensation, etc. If the employee does not agree with the decision, he can go to court.
- Sometimes the UWV does not grant the employer permission, for instance because they have provided incorrect information or because they have not (entirely) followed the legal process. This may also occur if there is a prohibition of termination, for example if the employee is pregnant or has been ill for less than two years. In this situation, the employer may not legally terminate the employment contract. If the employer does not agree with the decision of the UWV, they can go to court.
The procedure outlined above for dismissal through the UWV procedure for economic reasons takes time and involves costs. The outcome of the procedure is also uncertain for both parties. Employers may therefore prefer to use a settlement agreement, also known as a termination by mutual consent. In a settlement agreement, the UWV is not involved; negotiations take place between the employer and the employee. Often both parties will be assisted by a lawyer during the negotiations.
Such a settlement is not only in favor of the employer, depending on the situation a settlement agreement can also be in favor of the employee.
When to call a lawyer about dismissal
Employers are well advised to seek legal advice when they are faced with a reorganization that will involve redundancies. A lawyer is in an excellent position to advise an employer on the chances of obtaining permission for dismissal from the UWV or whether a settlement agreement is more advantageous, and to assist in negotiations.
If you have already agreed to a termination agreement, you have 14 days to withdraw your agreement.
Employees should contact an attorney quickly if they are faced with a termination request or are offered a settlement agreement. An attorney can review the settlement agreement and advise you whether it is fair and in accordance with your rights. Contact the Legal Expat Desk
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