CMS Expert Guide to Dismissals

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1. Dismissal of employees

1.1 Reasons for dismissal

An employee may give notice of termination without providing cause. An employer, on the other hand, is only permitted to give notice of termination for one of the reasons explicitly stated in the Labour Code, which are as follows:

  1. organisational reasons – the employer’s enterprise shuts down or relocates, or the employee is made redundant; or
  2. health reasons − the employee no longer has the capacity to carry out his present work in a satisfactory manner; this must be confirmed with a medical certificate issued by the occupational medical services provider or under a ruling of the competent administrative agency having duly reviewed the medical certificate; or
  3. an employee no longer meets the requirements outlined for the work they are carrying out; or
  4. there are reasons for immediate termination of the employment relationship − the employee has committed a gross breach of duty or has been lawfully sentenced to prison for a crime; or
  5. the employee has seriously, or less seriously but repeatedly, breached a statutory duty relating to their work performance; or
  6. the employee breaches their obligation to observe the prescribed regime of an insured person being temporarily unfit for work in the first 14 calendar days of temporary incapacity for work due to sickness in an especially gross manner.

In order to unilaterally terminate an employment agreement for an indefinite period of time, other than termination during the probationary period or an urgent reason for immediate dismissal, the employer requires a statutory dismissal ground to realise a termination. The employer can appeal to the following (limitative) statutory dismissal grounds under Dutch law:

  1. Economic grounds
  2. Long-term illness or disability
  3. Regularly not being able to perform work due to illness or disability
  4. Underperformance
  5. Culpable acts or omissions
  6. Conscientious objection
  7. Disturbed working relationship
  8. Other grounds than those mentioned above
  9. Cumulated dismissal grounds based on more than two dismissal grounds as mentioned under C – H combined

Depending on the statutory dismissal ground, the Employee Insurance Agency (UWV) or the Court is competent to assess whether the termination is allowed or granted. The employer should request the UWV for permission to terminate the employment agreement in case it appeals to dismissal reasons A or B. The employer should request the Court to terminate the employment agreement in case it appeals to dismissal reasons C to I.

1.2 Form

Written form is necessary; must be delivered to the other party (both employer and employee may terminate the employment relationship by notice of termination). Under certain circumstances a fiction of delivery applies (e.g. if the employee refuses to accept the notice when it is delivered personally to them or when delivered by a postal worker). Under specific and strict conditions, it is also possible to deliver the termination documents electronically.

Depending on the kind of termination, different form requirements apply.

Unilateral termination:

  • Employee Insurance Agency: the employer needs to give notice in writing after approval has been given by the Employee Insurance Agency (UWV) to terminate the employment agreement.
  • Court: if the employer has pursued termination based on legal proceedings, the court will terminate the employment agreement. Meaning that no further notice needs to be given by the employer.
  • Probationary period: there is no formal requirement to give notice during the probationary period in writing. In case the employee asks for the reasons of termination, the employer is however obliged to confirm the reasons in writing. Moreover, it is highly recommend that notice be given in writing in order to create evidence that notice during the probationary period was given in a timely fashion.
  • Summary dismissal: there is no formal requirement to give immediate dismissal in writing. However, when the immediate dismissal is given, the employer needs to directly inform the employee of the urgent cause(s) of immediate dismissal. Therefore, it is common practice – and highly recommended – to give the immediate dismissal in writing in which the urgent cause(s) for immediate dismissal are set out thoroughly. 

Mutual agreement:

  • Settlement agreement: Parties can also agree to terminate the settlement agreement based on mutual consent, which needs to be concluded in writing.

1.3 Notice period

The statutory minimum notice period is set at two months, the period starting on the first day of the month after the month in which the notice of termination was delivered. 

It is possible to agree upon a probationary period of a maximum of three months (six months for managerial employees) with no statutory notice period. There is no notice period in cases of immediate termination of the employment relationship (i.e. in particular if an employee has committed a gross breach of duty or has been lawfully sentenced to prison for a crime).

The statutory-notice period for the employee is one month, regardless of the number of years of employment. The statutory-notice period for the employer depends on the length of service as per the termination date. An applicable collective bargaining agreement may stipulate otherwise, but the statutory-notice period to be observed by the employer is equal to:

  • One month if the employment has lasted five years or less;
  • Two months if the employment has lasted between five and ten years;
  • Three months if the employment has lasted between ten and 15 years;
  • Four months if the employment has lasted for 15 years or longer.

The period of notice may, for the employee, be extended contractually up to a maximum of six months. If the employee’s period of notice is extended, however, the period of notice for the employer may not be less than twice that of the employee.

1.4 Involvement of works council

No involvement in termination process except in collective redundancies.

The works council (if any) must be offered the opportunity to advise on any considered decision to terminate a number of employment agreements, which terminations have a significant impact on the organisation.

1.5 Involvement of a union

Employer must discuss in advance any notices of termination and any immediate termination of the employment relationship with the trade union. Trade union approval is only required where the employee is a trade union officer. Such approval can be substituted by a court decision if the approval was withheld and the employer cannot be justifiably required to continue employing the trade union officer.

Under Dutch law, an employer is obligated to notify unions and the Employee Insurance Agency (UWV) and discuss the consequences of any reorganisation with the trade unions, when more than 20 employees are being dismissed within a three-month period.

The employer can also be obligated to involve or inform the unions under other circumstances based on the collective bargaining agreement (if applicable).

1.6 Approval of state authorities necessary

Approval of the state authorities is not required. The Labour Office need only be notified of a collective redundancy or the dismissal of a disabled person or of an employee who is not a Czech citizen.

Not applicable.

1.7 Collective redundancies

Collective redundancies are defined as dismissals within a 30-day period of:

  1. more than ten employees in an establishment of 20 − 100 employees; or
  2. 10% or more of the employees in an establishment of 101 − 300 employees; or
  3. at least 30 employees in an establishment of 300 or more employees. The total number of employees also includes those employees whose employment relationship was terminated by agreement between the employee and the employer based on the same grounds for which other employees are being dismissed, if at least 5 employees were dismissed by notice of termination.

The employer must inform the works council and trade union (or directly affected employees if there is no works council or trade union) of its intentions at least 30 days prior to giving notice of termination, and must enter into negotiations to reach a compromise or reduce the number of affected employees, etc.

The employer must simultaneously inform the Labour Office in writing:

  1. that it has discussed the collective redundancies and its implications (i.e. the later results of these discussions) with the trade union, works council or affected employees; and
  2. of the actions it has taken in cooperation with the trade union / works council in relation to the collective redundancies; and
  3. of the number, characteristics, professional qualification, etc. of the employees to be made redundant.

If more than 20 employees are being dismissed within a three-month period, the employer must notify the Employee Insurance Agency (UWV), the unions and the works council (if any) and discuss the consequences of any reorganisation with the trade unions.

For the purpose of determining whether this threshold of 20 employees in three months has been reached, employment agreement terminated by mutual consent also counts towards the total. 

Generally, if more than 20 employees are involved, the employer offers a social plan, which may be negotiated with trade unions (if applicable) or the works council. Unless a collective bargaining agreement stipulates differently, there is no statutory obligation to offer a social plan although it is very common to do so.

The works council (if any) must be offered the opportunity to advise on any mass redundancy being contemplated. 

1.8 Summary dismissals

Immediate termination (without notice period) of employment by the employer is possible only if the employee has breached a statutory duty in an especially gross manner or for a lawful conviction of the employee, following the employee intentionally committing a crime which leads to unconditional imprisonment for a duration longer than one year (or six months in the case of crimes committed in connection with exercising their job).

The employer may immediately (with effect upon delivery to the employee) terminate the employment within a period of two months of learning the reason for immediate termination, but not later than one year from the date of occurrence of the respective reason for termination.

An employer cannot dismiss with immediate effect any employee who is pregnant or during the employee's maternity or parental leave.

An immediate termination must be made in writing and be delivered to the employee in accordance with the Labour Code, with the reasons for immediate termination being specified in such a way that prevents confusion with any other reason(s) for termination.

An employer can terminate an employment agreement (definite and indefinite) with immediate effect for an ‘urgent’ cause, such as theft, fraud, or other very serious misconduct. One of the formalities to strictly take into account is that notice must be given very shortly after the employer has become aware of relevant findings and (ideally) after the employee has been confronted with these findings. In case of an urgent cause, there is no requirement for a mutual agreement, or court action or procedure at the Employee Insurance Agency (UWV). 

Case law shows that in the event of an urgent cause, the employer can also decide to confront the employee with the findings and then give the employee a conditional immediate dismissal. When the employer opts for this possibility, the employee is offered a settlement agreement that can be accepted within a couple of days. If the employee fails to do so in a timely fashion, then the employment agreement ends based on urgent cause. The benefit of this procedure is that it allows the employer to know usually within a week whether the matter can be closed by means of a final settlement instead of being confronted with lengthy and costly procedures initiated by the employee.

1.9 Consequences if requirements are not met

Termination may be held invalid by the court and the employment relationship reinstated if the employee files a claim to the court no later than two months after the date of the purported termination of the employment relationship, and the court finds the termination to be invalid.

A wrongful dismissal – meaning that the statutory reason cannot be sufficiently substantiated or other requirements have not been met such as the redeployment obligation – can lead to the restoration of the employment contract or to additional compensation (i.e. "fair compensation").

In case of collective redundancies, if trade unions are not consulted and the employer proceeds with the termination of the employment agreements based on a consensual agreement that determines the legal relationship between both parties, these agreements are subject to annulment. This may have far-reaching consequences, since redundancy pay will have to be paid back in the event of annulment and the employment agreement will have remained valid throughout.

1.10 Severance pay

Minimum statutory severance pay depends on the reason for dismissal and  /  or the length of employment, and ranges from one average monthly salary for any dismissals for organisational reasons (including collective redundancies) of employees whose employment lasted less than one year, to 12 times the average monthly salary for dismissals for health reasons. The parties may negotiate a larger severance payment, or the payment of severance pay in the case of dismissal for other reasons.

When the employment agreement is terminated via the Employee Insurance Agency (UWV) or the court, a mandatory severance payment (i.e. transition payment) is due. The amount of the transition payment depends on the seniority of the employee and is equal to:

  • One-third of the monthly salary for each calendar year.

In 2020, the maximum transition payment is EUR 83,000 gross and for employees who earn more than EUR 83,000 gross a year, the transition payment is maximised at one annual gross salary.

In the situation where an employment agreement is terminated on the basis of the cumulated dismissal ground, the sub-district court can grant, in addition to the transition payment, a severance of up to half of the transition payment.

The employee is entitled to additional (reasonable) compensation if the employer has acted in a seriously culpable way. In that case, the remuneration is not subject to a maximum amount and is determined by the court. Case law shows an increase in the amounts awarded to employees.

If the agreed or statutory notice period is not observed, the termination of the employment agreement is deemed ‘irregular’. An irregular termination does not affect the validity of the termination itself, but it entitles the other party to claim statutory damages or compensation for the damages actually incurred.

1.11 Non-competition clauses

A post-contractual non-competition clause may be agreed upon between the employer and the employee and, if agreed, it must be in written form and must not last for more than one year. The agreement may be included in the employment agreement. Monetary compensation from the employer must, as a minimum, equal half the employee’s average monthly salary (i.e. of the wage / salary that the employee had prior to termination of the employment relationship) for each month during which the employee met the obligation not to compete stated in the clause. If the agreement sets out a financial penalty for breach of the clause by the employee, the employee’s obligation not to compete is discharged upon the payment of the penalty sum. The agreement is automatically terminated if the employer fails to pay the monetary compensation to the employee when it falls due. An employer may only withdraw from the non-competition clause during the term of employment. As far as case law is concerned, the withdrawal is only effective if it has been explicitly agreed upon, and such a provision is only enforceable if it contains reasons for the withdrawal, provided, in addition, such reasons are legitimate.

A non-competition clause may be inserted into the employment contract, but it will only be valid if it was set out in writing with an adult employee. If a non-competition clause is inserted into a definite term employment agreement, the compelling reasons that such a clause is necessary must be specified in writing in the employment agreement.

1.12 Miscellaneous

The employer may not give notice of termination during a ‘protection period’ (i.e. where an employee is temporarily unfit for work, a night-shift employee is temporarily unfit to perform night work, an employee is conscripted or released from work to exercise a public office, or during pregnancy, maternity or parental leave), unless the termination is for organisational reasons due to the closure or relocation of the enterprise. There are several exceptions to this rule.

Dutch employment law prohibits giving notice to certain categories of employees, such as pregnant women, members and former members of a works council and employees who are absent due to illness (at least during the first two years).

In cases where the illness commences after the employer files his application for dismissal to the UWV, the employer will still be allowed to give a notice of dismissal to the employee.

The rules for special protection do not apply to cases of termination of employment by the court. However, the court will assess whether the request for termination involves a prohibition to terminate and will refuse the termination if the reason for termination directly results from a prohibition to terminate.

If a collective bargaining agreement (CBA) applies, the employment conditions will be governed by the CBA. The CBA may also provide for an alternative dismissal route in case of redundancy, but that is uncommon.

2. Dismissal of managing directors

2.1 Reasons for dismissal

In the Czech Republic managing directors are not considered employees, therefore labour law protection does not apply to them. The relationship between the managing director and the company is of a commercial nature, not an employment one. An appointment as managing director (as a statutory body or a member of a statutory body of an entity, i.e. not as an employee) may be revoked without stating any reason.

In the Netherlands, the statutory director who is appointed by the shareholder of a private or public limited company has a special legal status. The statutory director has a dual position: a corporate position and an employment agreement with the company. The statutory director does not enjoy the same dismissal protection as regular employees.

In all circumstances, the employer must ensure that there are one or more reasonable grounds based on which the employment agreement would end. Usually, lack of trust is presented as the main reasonable ground for termination. The possible (limitative) statutory reasonable grounds under Dutch law are as follows:

  1. Economic grounds
  2. Long-term illness or disability
  3. Regularly not being able to perform work due to illness or disability
  4. Underperformance
  5. Culpable acts or omissions
  6. Conscientious objection
  7. Disturbed working relationship
  8. Other grounds than those mentioned above
  9. Cumulated dismissal grounds based on more than two dismissal grounds as mentioned under C – H combined

2.2 Form

A valid shareholder resolution at a general meeting is required. There must be a simple majority of shareholders present, unless stated otherwise in the relevant company’s statutory documents. Apart from cases when entities have a sole shareholder, revocation of an appointment as managing director must be on the programme of the invitation to the general meeting. If not, the appointment may only be revoked, if all shareholders are present and agree to change the programme to include the revocation.

Before being able, exceptions excluded, to terminate the corporate position of the statutory director by means of a shareholders' resolution, certain procedural steps must be taken. These steps are set out in the articles of association of the company. The manner in which the statutory director is invited in writing, the wording of the invitation (which should not only include the reasonable grounds but also explicitly state that the statutory director has the right to render advice about the contemplated decision and be heard) and the timing of the shareholders' meeting are essential to ensure that the corporate termination cannot be legally challenged.

It is also important to ensure that the discussion held during the shareholders' meeting and the resolution are well documented in case the statutory director decides to initiate court proceedings afterwards to claim damages. Once the corporate position has been terminated validly, the employment agreement will end automatically after expiration of the notice period.

2.3 Notice period

Not applicable.

The statutory-notice period for the statutory director is one month, regardless of the number of years of employment. The statutory notice period for the employer depends on the length of service as per the termination date. An applicable collective bargaining agreement may stipulate otherwise, but the statutory notice period to be observed by the employer is equal to:

  • One month if the employment has lasted five years or less;
  • Two months if the employment has lasted between five and ten years;
  • Three months if the employment has lasted between ten and 15 years;
  • Four months if the employment has lasted for 15 years or longer.

The period of notice may, for the statutory director, be extended contractually up  to a maximum of six months. If the statutory director's period of notice is extended, however, the period of notice for the employer may not be less than twice that of the statutory director.

2.4 Involvement of works council

No involvement.

If the company has a works council, then both the dismissal and the hiring of a statutory director (in light of the Works Councils Act, this person is defined as the individual who, alone or jointly with others, exercises the highest direct authority in managing work within an enterprise) are subject to the prior advice of the works council. The involvement of the works council must be initiated at such a stage when the decision is still being contemplated. In practice, the handing over of the invitation to the shareholders meeting, which handles the corporate dismissal, may hold an element of surprise, but the works council is usually involved shortly after the invitation has been handed over.

2.5 Involvement of a union

No involvement.

No involvement.

2.6 Approval of state authorities necessary

Not required.

However, revocation of a managing director from his/her office must be filed in the Commercial Register without undue delay. The appropriate court managing the Commercial Register may review the revocation in order to verify whether the revocation was done in accordance with applicable laws and the relevant entity’s statutory documents.

Not applicable.

2.7 Collective redundancies

Not applicable.

Not applicable.

2.8 Summary dismissals

Not applicable.

An employer can terminate an employment agreement (definite and indefinite) with immediate effect for an ‘urgent’ cause, such as theft, fraud, or other serious misconduct. One of the formalities to take into account is that notice must be given shortly after the employer has become aware of relevant findings. Due to the fact that the statutory director also holds a corporate position, a shareholders meeting should be convened as soon as possible – in accordance with the articles of association – in which the immediate dismissal is put on the agenda. 

Until the shareholders meeting takes place, parties have the opportunity to negotiate a settlement agreement. The benefit of reaching a settlement agreement is that it allows the employer to know usually within a week whether the matter can be closed by means of a final settlement instead of being confronted with lengthy and costly procedures initiated by the statutory director.

If no settlement agreement is reached, the shareholders' meeting will take place. In this meeting, the statutory director will be given the opportunity to be heard and will be given an advisory vote as a statutory director. In the shareholders' meeting, the decision will be made to terminate the corporate and employment position with immediate effect. 

2.9 Consequences if requirements are not met

Invalidity of revocation.

If there is no reasonable ground and/or if redeployment (within the group) is reasonable, but the statutory director has been dismissed anyway, the requirements for dismissal are not met. If these requirements have been violated, the court may grant the statutory director fair compensation.

2.10 Severance pay

No statutory severance pay.

When the statutory director’s employment agreement is terminated, the mandatory transition payment is due. The amount of the transition payment depends on the seniority of the employee and is equal to:

  • One-third of the monthly salary for each calendar year.

In 2020, the maximum transition payment is EUR 83,000 gross and for employees who earn more than EUR 83,000 gross a year, the transition payment is maximised at one annual gross salary.

In case parties have agreed to a contractual severance, one should verify whether the statutory director is entitled to both the contractual severance (i.e. a golden parachute) as the statutory severance.

The statutory director may be entitled to an additional (reasonable) compensation, if the employer has acted in a seriously culpable manner. This could apply if the dismissal is not based on any of the statutory reasonable grounds. In that case, the additional compensation, damages, remuneration is not subjected to a specific maximum amount and will be determined by the court. If the statutory director wishes to challenge the decision of the shareholder, he should initiate court proceedings within three months after termination of his employment.

2.11 Non-competition clauses

May be agreed in a performance agreement usually concluded with a member of a statutory body. The requirements set out in the Labour Code do not apply to managing directors unless explicitly agreed.

A non-competition clause may be inserted into the employment contract, but it will only be valid if it was set out in writing with an adult employee. If a non-competition clause is inserted into a definite-term employment agreement, the compelling reasons that such a clause is necessary must be specified in writing in the employment agreement.

2.12 Miscellaneous

Managing directors shall not enter into employment contracts with companies, unless the type of work performed under the employment contract is materially different from the role of managing director. Instead, they should conclude an agreement on the performance of the office of the managing director. Such an agreement will not be governed by Czech Labour Code. 

The termination prohibitions that apply to employees also apply in the relationship with the managing director. Dutch employment law prohibits giving notice to certain categories of employees, such as pregnant women, members and former members of a works council (which will probably not be statutory directors), and employees who are absent due to illness (at least during the first two years).

If the statutory director falls ill before actually receiving the invitation to the shareholders' meeting, the employment agreement will not end automatically, but will remain in place. The statutory director will in that case be protected against termination of his employment agreement whereas his corporate position can end.