Dutch employment law is very protective of the employee and applies to all employees. Thus, in the Netherlands, there is no distinction between blue- and white-collar workers.

An employment contract is in place when work, salary and authority are present. Whether or not an employment contract exists depends not only on what the parties agree to, but also on how the parties choose to implement that agreement. The courts and the tax authorities will verify whether the three components (work, salary and authority) are present. If these are present, there is an employment contract and all the provisions of employment law will apply (even if the parties explicitly agree that a particular agreement does not qualify as an employment contract, the court and the tax authorities may decide that it does, if work, salary and authority are present).

The rules of employment law apply to all employees and almost all of them are mandatory, so there cannot be deviation. There are, however, a number of rules that an employer can deviate from on the basis of a collective agreement. In addition, some rules are more flexible for employees earning more than three times the minimum wage (for example holiday pay and working hours). In addition, the rules on dismissal are less strict in the case of temporary agency workers.

General Terms and Conditions

In the context of Dutch employment law, an employment contract can be established either orally or in writing. However, according to Article 7:655 of the Dutch Civil Code, the employer has an obligation to inform the employee in writing about various essential terms and conditions. These terms and conditions include the identification of the parties involved, stating their names and residences. Additionally, the contract must specify the location where the work will be carried out. In cases where the work location is not fixed, it should be mentioned that the employee may need to work at different places. Furthermore, the employment contract should clearly state the position offered to the employee, along with a detailed job description to define the scope of responsibilities.

Duration and Conditions

The contract must also indicate the hiring date and, if applicable, the duration and conditions of any probationary period. When the employment contract has a fixed term, the specific period should be specified. To ensure clarity on the termination process, the contract should include the duration of the notice periods to be observed by both parties, or the method used for calculating these periods. It is essential to be aware that there are limits on the number of fixed-term contracts that can be agreed upon between an employer and employee. These contracts will typically convert into indefinite employment contracts if they fall under certain conditions. For instance, if a chain of temporary employment contracts covers a period of 36 months or more, it must be converted into an indefinite contract. Similarly, a chain of three fixed-term employment contracts, with no more than six months in between, will also result in an indefinite contract. These rules apply not only to consecutive contracts within the same company but also to contracts with different employers, where there is reasonable continuity of work performed. It is worth noting that the period of time for these conditions can be shortened if there is a relevant provision in a collective labour agreement.

Leave

When it comes to leave entitlements, the vacation rights and the method of calculating them need to be outlined. Additionally, any other paid leave and the corresponding calculation method should be clearly communicated.

Remuneration

Financial aspects play a crucial role, and the salary details must be specified. This includes specific elements of the remuneration, payment intervals, method of payment, and, if applicable, how the remuneration is tied to the work’s results. In such cases, the amount of work expected per day or week and the time involved in performing the work should be explicitly stated. If the employee will be participating in a pension scheme, this must be clearly stated, along with any associated conditions.

Working Hours

The customary number of working hours per day or week should also be mentioned in the contract. For situations involving overtime work, the contract should define the conditions and payment terms. Additionally, if the customary working hours per day or week are unpredictable, the contract should mention the adjustability of working hours, the guaranteed hours, and the payment for work beyond those guaranteed hours. The days and hours on which the employee may be obliged to work should be specified.

Other Aspects

Moreover, if the employment contract is through a temporary employment agency or an on-call contract, these details should be mentioned, as well as the identity of the user undertaking.

In cases where there is a collective labour agreement (CLA) applicable to the employment, the contract should refer to its provisions. Similarly, if the employer offers any training opportunities, this right should be mentioned in the contract.

The legislation on working hours and working conditions is based on the Working Hours Act (Arbeidstijdenwet). The number of working hours depends upon the sector of industry and the kind of labour performed. In general, an employee is only allowed to work a maximum of 12 hours per day, and a maximum of 60 hours per week. Over a period of four weeks, the maximum number of working hours per week is 55. Over a period of 16 weeks, the maximum number of working hours per week is 48 hours. Arrangements on working hours included in an individual employment contract, which are not in conformity with the Working Hours Act, can be declared null and void. The Working Hours Decree (Arbeidstijdenbesluit) provides exceptions and additional measures for certain industries (inter alia, the care sector). It is possible to deviate from this by collective labour agreement.

Minimum Wage

In principle, the parties are free to agree to the wages to which an employee is entitled. However, the Act on Minimum Wages and Minimum Holiday Allowances (Wet minimumloon en minimumvakantiebijslag) specifies certain minimum wages and minimum holiday allowances, which are normally adjusted each year. A collective labour agreement, if applicable, may also specify salary scales that are binding.

Government Intervention in Compensation

The Standards for the Remuneration of Top Officials in the Public and Semi-public Sector Act (Wet nomering top inkomens or WNT) regulates the income and severance payments of top officials in the (semi-)public sector. As of 2015, they are not allowed to earn more than the salary of a minister, which is also known as the “Balkenendenorm”. The Act also applies to semi-public organisations such as hospitals and schools. For 2024, the maximum salary for top civil servants is set at EUR233,000 gross (including holiday pay, end-of-year bonus, pension contribution and taxed expense allowances).

In addition, bonuses in the financial sector are subject to the rules of the Financial Supervision Act (Wet financieel toezicht or WFT). These rules include the following:

• a variable bonus cannot exceed 20% of the fixed salary;
• a severance payment cannot exceed one year’s salary; and
• guaranteed bonuses are not permitted.

Bonuses

Employees are not legally entitled to receive a bonus. However, it may be agreed in an employment contract or be mandatory under a collective labour agreement. There are a number of rules which are relevant to the payment of bonuses.

• The General Treatment Act prohibits an employer from discriminating on the basis of race, sex, religion, nationality, sexual orientation or marital status. When an employer gives bonuses, it is therefore important that it does not (even if unintentionally) give bonuses only to a certain group of employees, eg, only men or excluding people of a certain religion.
• In addition, the principle of being a good employer applies when awarding bonuses. This means that the employer should act with care, avoid arbitrariness and comply with the established rules on bonuses. If an employer awards bonuses on a completely discretionary basis, this can lead to unfair situations where employees can claim them (possibly through the courts). If necessary, employers should justify why one employee does not receive a bonus while another employee does.
• Based on case law, there is a doctrine of “acquired rights”. If an employer pays a structural bonus without reservation, an employee may be confident that they will receive it again in the future. To prevent this, an employer can state in writing when paying such bonuses that they are discretionary bonuses which are given once and from which no rights can be derived in the future.
• Finally, temporary agency workers are entitled to the same remuneration as employees of the hirer. This includes a year-end bonus.

Vacation

Pursuant to Article 7:634 of the Dutch Civil Code, employees are entitled to a statutory minimum number of vacation days equivalent to four times the weekly working hours. For example, an employee with a full-time work week of 40 hours is statutorily entitled to a minimum of 20 vacation days per year. Vacation days accrued in addition to the statutory entitlement are referred to as “non-statutory vacation days”. This is not mandatory but may be agreed upon in the employment contract or collective labour agreement.

Statutory vacation days will in general lapse if they are not taken within six months after the year in which they were accrued. Non-statutory vacation days will in general lapse five years after the end of the year in which the vacation days were accrued. The expiration of these statutory vacation days only occurs under the condition that the employer has fulfilled the obligation of effort and has informed the employee about the expiration of the vacation days. This means that the employer must encourage and enable the employee to take the vacation days. Additionally, the employee must be informed that the vacation days will otherwise expire on 1 July. If the employer fails to do this, the vacation days will not expire. On 26 June 2023, the Dutch Supreme Court confirmed that this principle also applies to non-statutory vacation days.

In addition, employees who are ill will be entitled to accrue the same full number of vacation days as employees who are not ill.

In general, the vacation period is fixed according to the employee’s wishes. If compelling business reasons will not allow the employee to take vacation during that specific period, the employer should inform the employee (in writing) within two weeks after the employee’s request (in writing), in default of which, the period is fixed according to the employee’s wishes.

In addition to vacation days, employees are entitled to a holiday allowance, which, in general, equals 8% of the annual salary, in so far as the annual salary does not exceed three times the annual equivalent of the minimum wage.

Maternity and Birth Leave

Female employees have the right to (at least) 16 weeks of maternity leave. During this maternity leave, the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen or UWV) will pay 100% of the daily wage, not to exceed the maximum daily wage. The maximum daily wage in the Netherlands is currently EUR282.95 gross.

Partners will have five days of birth leave at full pay after the birth of their child (based on full-time employment). Partners can choose to take this leave immediately after the birth of their child, or to spread the leave over the first four weeks after the birth. 

Parental Leave

An employee with a child under eight years old in their care, is entitled to parental leave. The employee can take at most 26 times the number of weekly contractual hours as parental leave. The right of parental leave ends when the child becomes eight years old. Parental leave is unpaid leave, and no holiday entitlements can be built up during the hours of parental leave.

An employee is entitled to nine weeks of partly paid parental leave. The parental leave must be taken within the first year of the baby’s life and can be split. The employee receives 70% of their salary during this parental leave. The other 17 weeks of the 26 weeks of parental leave remain unpaid. The aforementioned applies to both parents. However, partners of the parent who gave birth, must take the five days of birth leave (based on full-time employment).

During the partly paid parental leave, the employee is entitled to 70% of their salary (increased up to the maximum daily wages). The partly paid parental leave must be taken within one year after the child’s birth.

Sickness Leave

Pursuant to Article 7:629 of the Dutch Civil Code, employers are obliged to continue to pay the salaries of sick employees for the first two years of illness. The employer is obliged to pay 70% of the employee’s salary. The salary paid by the employer during the first year of sickness cannot be less than the minimum wage. For the second year, the minimum wage limit does not apply. The 70% is not calculated on the amount of salary that exceeds the maximum daily wage. Most employees in the Netherlands are bound to a diverging clause laid down in either an individual employment contract or a collective labour agreement (such clauses are often more favourable to the employee).

Non-disclosure

A good employee can be expected not to divulge confidential information or to try to damage the employer’s image. Even if the employer and employee have not expressly agreed to this, case law has shown that this obligation continues after the employment relationship has ended.

Employments contracts can also contain a secrecy clause, which is designed to prevent employees from disclosing specific, often sensitive, information to third parties, thus allowing the employer to safeguard its confidential business information. There are no legal requirements for a non-disclosure clause. As long as it is clear what the non-disclosure clause applies to (eg, with respect to the work, organisation, customers, activities and market position). It is also wise to include a penalty for breach of the clause. However, the penalty clause must meet a number of legal requirements, namely, it must be entered into in writing, and there must be a penalty ceiling based on the employee’s salary. The purpose of the penalty must also be narrowly defined. A confidentiality clause cannot be used by an employer as a disincentive to an employee’s whistle-blowing.

Furthermore, the employee may not denounce their (former) employer on the grounds of being a good employer. If the employer suffers loss as a result of negative comments made by an employee, the employer can reclaim the loss from the employee.

Employee Liability

The general principle governing employee liability can be found in Article 7:661 of the Dutch Civil Code. According to this provision, an employee will not be held liable to the employer or a third party, whom the employer is obliged to compensate, for any damage caused while carrying out their employment duties, unless such damage resulted from the employee’s intentional actions or deliberate recklessness.

To gain a comprehensive understanding of the matter, it is essential to consider Article 6:170 of the Dutch Civil Code in conjunction with Article 7:661. Article 6:170 states that the employer assumes liability for the actions of its subordinates, leading to damage to a third party, as long as those actions were carried out within the scope of their employment duties.

In principle, it is prohibited to include a non-compete clause in a fixed-term employment contract, unless the employer has a substantial business interest in including such a clause (which must be substantiated in the employment contract).

Non-compete clauses, effective for a certain scope of activities, a certain geographical area and/or for a certain number of years, must be agreed upon in writing. Furthermore, the employee must be at least 18 years old at the time of signature.

The restriction must be limited to what is reasonably necessary to protect the employer’s business interests. Typically, a duration of one year is considered reasonable. Limitations as to territory and the nature of activities depend on the branch in which the employer operates and the position of the employee. According to case law, the non-competition clause cannot be used to bind employees to the company.

The employer can enforce the non-compete clause in court and claim damages from the employee. In practice, a penalty clause is usually agreed upon between the parties on the basis of which the employee has to pay an agreed amount to the employer, if the employee breaches the non-compete clause. The employer might also take the employee’s new employer to court if the new employer acts unlawfully by hiring an employee while knowing that the employee breached the non-compete clause with the previous employer.

On 4 March 2024, a bill was introduced to tighten the regulations concerning non-compete clauses. If enacted, the bill will limit the effective length of a non-compete clause to a maximum of one year. In addition, the geographical scope of the clause must be clearly defined and justified. Employers will also need to substantiate the “compelling business interest” for the clause, even in indefinite employment contracts. Additionally, employers will be required to provide compensation equal to 50% of the employee’s last earned monthly salary for each month in which the non-complete clause is enforced. The bill’s provisions also apply to non-solicitation clauses.

Enforcement

Enforcement of the non-compete clause can also be mitigated or denied by a court. A non-compete clause may become (in whole or partly) invalid if the responsibilities ensuing from the employee’s position are substantially amended. If the non-compete clause prevents the employee from being employed elsewhere, the court may order that the employer has to compensate the employee during the period in which the employer holds the employee to the non-compete clause. The employer can unilaterally release the employee from their obligations under the non-compete clause, in which case the employer will no longer be required to pay any compensation.

Employment contracts can also contain a non-solicitation clause, which stipulates that the employee is not allowed to solicit their employer’s customers or employees during or after their employment. The clause has to be in a language the employee understands. There are no other requirements as to form.

The employer can enforce the non-solicitation clause in court and claim damages from the employee. In practice, a penalty clause is usually agreed upon between the parties on the basis of which the employee has to pay an agreed amount to the employer, if the employee breaches the non-solicitation clause. Enforcement of a non-solicitation clause can be mitigated or denied by a court.

The General Date Protection Regulation (GDPR) is applicable to the handling of personal data when a data controller or data processor operates within the EU. In the Netherlands, there are additional national deviations that stem from the GDPR Implementation Act (Uitvoeringswet AVG or UAVG).

Article 88 of the GDPR allows member states to establish specific privacy rules concerning employment matters. However, the Dutch legislators have not yet taken advantage of this provision. While it was anticipated that a bill including such provisions would be introduced, none of the provisions were included in the draft bill amending the UAVG, published on 20 May 2020.

Accountable processing of personal data is a core requirement of the GDPR. The controller must be able to demonstrate compliance with the GDPR through various means, including policies, agreements, and other documentation. Article 5 of the GDPR outlines key principles that must be followed when processing personal data, including lawfulness, fairness, transparency, purpose limitation, data minimisation, accuracy, storage limitation, and integrity and confidentiality.

Compliance with the GDPR and the UAVG is overseen by the Dutch Data Protection Authority (the Dutch DPA), which has the authority to impose administrative measures and fines for non-compliance. The maximum fines under the GDPR can reach up to EUR20 million or 4% of the annual worldwide turnover, whichever amount is higher.

Regarding fines, the Dutch DPA has adopted Fining Guidelines, categorising fines into four levels with varying ranges, with a maximum fine of EUR1 million. However, the Dutch DPA may deviate from these guidelines under justified circumstances. Apart from administrative enforcement and fines, breaching the GDPR or UAVG may also lead to (collective) civil claims and damages.

Compliance with the GDPR and the UAVG is contingent on the specific circumstances of each case and relies on relevant documents, procedures, and organisational practices. It is an ongoing process that must be addressed on a case-by-case basis.

A work authorisation is not required for nationals from the European Economic Area (EEA) and Switzerland. People from outside the EEA and Switzerland often need a work permit (for less than three months) or a combined residence and work permit, known as a single permit (for more than three months). The employer applies to the Employee Insurance Agency (in the Netherlands, the UWV) for a work permit and has to meet several conditions, such as meeting the Dutch Working Conditions Act (Arbeidsomstandighedenwet), and the employee must have a residence permit. Where the employee will stay in the Netherlands for longer than three months and does not have a residence permit, the employer needs to apply for a single permit at the Immigration and Naturalisation Service (Immigratie- en Naturalisatiedienst or IND). Simplified procedures apply to skilled and highly educated foreign nationals and other categories, such as students, artists and employees transferred within an enterprise to the Netherlands, that is, someone who is considered highly skilled or educated, primarily on the basis of their salary or education.

The application forms are only available in Dutch. Before the application process, all the documentation must be translated into Dutch, English, French or German. Permit application procedures require extensive preparation, which can easily take several weeks (aside from the time it takes the authorities to process the application). The IND has three months to process the application for a single permit.

When a foreign employee commences work in the Netherlands, the employing company from abroad is generally obliged to register as a withholding agent with the tax authorities for wage taxes and, if applicable, social security contributions, which also include the employer’s contribution to healthcare insurance. However, if none of the employees are subject to wage taxes and/or none of them fall under Dutch social security legislation, such registration is not necessary.

Before an employee starts working, the employer must comply with the following conditions:

• Set up a payroll administration that handles the deduction of wage taxes and, if applicable, social security contributions from the employee’s earnings.
• Register the employee with the salary administration.
• Record the employee’s citizen service number (burgerservicenummer or BSN) with the salary administration.
• Identify the employee through their passport or ID card and keep a copy of the passport or card with the salary administration.
• Complete and have the employee sign the “wage tax declaration”, which must be kept with the salary administration.
• Verify the tax residency of the employee.
• If applicable, verify and register the employee’s residency or employment status. Keep a copy of the permit(s) with the salary administration, and in case of permit renewal, forward a copy to the salary administration.
• If applicable, both the employer and employee must apply for the 30% ruling with the foreign office of the tax authorities in Heerlen. If the application is submitted within four months of starting employment, the ruling will be effective retrospectively from the date of the first employment with the Dutch employer.

In the Netherlands, working from home is not a legal right. However, employees have the option to submit a written request to work (partially) from home, for instance, due to health concerns. Employers must, if they choose to decline such a request, provide valid reasons for doing so. Acceptable reasons for refusal may include:

• disruption to the work schedule caused by working remotely;
• the nature of the job necessitates on-site presence; and/or
• the home workspace does not meet safety or suitability standards.

Additionally, specific conditions apply to employees seeking to work from home:

• the company must have a minimum of ten employees;
• the employee must have completed at least six months of employment; and
• a written request must be submitted by the employee no later than two months before the desired work-from-home start date.

Employers must fulfil their duty of care, which involves providing a good and safe home workplace for their employees. This obligation extends to a reasonable and practical extent, including the possibility of reimbursing or providing necessary resources like ergonomic office chairs or additional computer screens. To prevent (physical) complaints, employers must engage in discussions with their employees to ascertain their needs. The home workplaces of employees must be designed to be ergonomically sound, ensuring safety, health, comfort, and functionality. Employers should consider providing ergonomic accessories such as an ergonomic mouse, good lighting, or special keyboards. The employer has the option to provide, supply, or reimburse the cost of the necessary equipment (up to a certain amount) tax-free.

Employees who work from home must receive education on how to perform their tasks safely and healthily. This includes information on arranging their home workplace appropriately and maintaining good posture during work. Employers must also inform employees about the potential risks they face while working from home, such as musculoskeletal complaints or work-related stress. Moreover, they should explain the rules for computer work.

Employers must incorporate the concept of working from home into their risk inventory and evaluation (RI&E), which forms the basis of their mandatory health and safety policy. This entails addressing any unique risks that may arise when employees work remotely, including mental pressure due to combining work and other obligations at home. Employers should consider implementing policies to counter the psycho-social workload.

Employees have the option to take unpaid leave, either on a full- or part-time basis, following consultation with the employer. There are no rules regarding the duration of sabbaticals that employees may take. However, it is important to note that unpaid leave is not a legal entitlement for employees. Employers are thus allowed to deny such a request for a sabbatical, bearing in mind that the collective labour agreement may contain provisions or arrangements concerning sabbaticals.

As there is no statutory regime for sabbaticals, parties can make their own arrangements (preferably in writing). The following aspects can be subject to agreement:

• the duration of the leave;
• the position the employee will return to after the sabbatical;
• the applicable employment conditions, such as arrangements regarding the use of a company car or a company phone and whether the employee can retain or should return these; and
• how to handle a situation where an employee falls ill during the sabbatical – generally, the employee is not entitled to continued salary payments unless explicitly agreed otherwise.

All of the above can also be formalised in a sabbatical policy. However, creating such a policy is not obligatory.

The Work Where You Want Act was rejected by the Senate in September 2023. If passed, the bill will would have made it easier for employees to file a request to work from their own workplace. These requests were to be made in writing two months before the intended date of implementation, and employers were going to be obliged to respond in writing one month before the planned date of implementation. If they had failed to do so, the employment contract would have been adapted to the employee’s request.

The requested location would have had to be one that was a “suitable place of work” from which work was normally carried out for the employer, or the employee’s home address, as long as it was within the EU. Small employers with fewer than ten employees were to be exempt from the rule and employees were going to be obliged to provide a sound justification for their request.

Despite this rejection, employers in the Netherlands are still obliged to consider employees’ request to work from home in a timely manner under the Flexible Working Act (Wet Flexibel Werken).

Trade unions play a crucial role in representing the interests of individual employees or groups of employees. Their significance lies in advocating for the collective interests of workers within specific industries or sectors. Trade unions engage in negotiations with either a particular large employer or multiple employers’ associations, and sometimes with other trade unions, to establish collective terms and conditions of employment, leading to the formation of a collective labour agreement. These agreements can apply at a company level or extend across an entire industry.

Furthermore, trade unions offer assistance in negotiating redundancy schemes and providing guidance on forced redundancies within organisations. They also have the authority to deviate from certain statutory employment laws through collective labour agreements.

Works Council

In accordance with the law, companies with 50 or more employees must establish a works council composed of elected employees. Failure to comply with this legal requirement allows any interested party, whether an employee or a trade union, to initiate court proceedings to ensure the establishment of a works council.

The works council is endowed with several essential rights and obligations, including:

• the right to provide advice on significant financial, economic, and organisational decisions proposed by the company; and
• the right to give consent to proposed decisions by the company regarding the establishment, modification, or revocation of regulations concerning, in a broad sense, the company’s social policies.

If a company has established two or more works councils, it has the option to set up either a central works council or a group works council. This decision must contribute to the proper application of the Works Councils Act (Wet op de ondernemingsraden) concerning those enterprises.

Employee Representative Body

In cases where a company employs at least ten but fewer than 50 individuals and does not have a works council in place, there may be a requirement to establish an employee representative body (personeelsvertegenwoordiging or PVT). This body must consist of at least three persons directly elected through a secret voting process.

The Collective Agreements Act (Wet CAO) defines the concept of a collective labour agreement and specifies the parties authorised to engage in such agreements. Collective labour agreements are contractual arrangements established between one or more trade unions and one or more employer organisations. These agreements encompass various aspects of the employment relationship, including wages, working hours, pension schemes, holiday entitlements, and social issues.

Two types of collective labour agreements exist. In the case of a collective labour agreement with a minimum character, deviations that benefit the employee are permissible when compared to a company scheme or individual employment agreement. However, any deviating provisions that disadvantage the employee will be considered null and void. On the other hand, for collective labour agreements with a standard character, any terms that deviate from the agreement are invalid and thus null and void.

If an employer is a member of an employers’ union that has concluded a collective labour agreement, the employer is required to apply the terms of the collective labour agreement to its own employees. Additionally, a collective labour agreement can be declared binding by the Minister of Social Affairs and Employment upon request from the involved parties. This means that the collective labour agreement becomes applicable to the entire sector, regardless of whether the employer is a member of the employers’ association involved in the collective labour agreement. If the employer’s activities fall within the scope of the collective labour agreement, they are obliged to apply its terms within the company.

A fixed-term employment contract or a contract for a specific project ends by operation of law upon expiration of the term or completion of the project. However, an employer is obliged to notify the employee at least one month before the end of a fixed-term contract of six months or longer whether the employment contract will be extended and, if so, what terms and conditions apply. Furthermore, pursuant to Article 7:657 of the Dutch Civil Code, the employer is obliged to inform an employee who has a fixed-term contract about vacancies with an open-ended employment contract.

An open-ended employment contract can be terminated in the following ways:

• the employer gives notice after receiving permission from the UWV;
• the employee consents after the employer has given notice, without the above-mentioned permission;
• by court proceedings;
• by mutual consent;
• by dismissal because of an urgent reason; or
• by notice given by the employee.

Economic Grounds or Long-Term Incapacity to Work

In case of dismissal on economic grounds or because of long-term incapacity to work, an employer can terminate an employment contract by giving notice after the UWV has given permission to do so by a dismissal permit. The UWV will grant permission only if there is a reasonable ground for dismissal and redeployment within a reasonable period of time is (even after training) not possible or reasonable. The UWV procedure takes approximately four weeks, once it has received all the necessary information.

After permission has been granted, notice is to be given with due observance of the notice period. Due to the time involved in obtaining permission from the UWV, the employer can deduct the duration of the procedure from the notice period (provided that at least one month of notice remains).

Personal Grounds

The court can terminate an employment contract where a reasonable ground for dismissal exists and redeployment within a reasonable period of time is (even after training) not possible or reasonable. An employment contract can be terminated by decision of the court, by filing a petition for dissolution in case of:

• frequent and disruptive absence due to illness;
• unsuitability for the position/underperformance (other than because of illness);
• culpable acts or omissions of the employee;
• refusal to work due to a serious conscientious objection;
• an impaired working relationship as a result of which the employer cannot reasonably be required to continue the working relationship;
• dismissal based on the cumulative ground;
• other reasons and/or circumstances (by way of an exception); or
• a cumulation of multiple different grounds for dismissal, where these other grounds are, by themselves, insufficient to justify a dismissal.

The cumulative ground can only be applied for the dismissal motives mentioned above and cannot be employed for dismissals made on the grounds of business economics, or those that are due to long-term incapacity to work. Where employment is terminated on the basis of a cumulated dismissal, the court can grant an extra severance, equal to a maximum of half of the transition payment, in addition to the statutory transition payment that the employee is ordinarily entitled to receive.

After filing the petition with the competent court, the employee is offered the possibility to file a statement of defence. The court will then set a date for a hearing, during which the parties can explain their opinions. The court could grant the request for termination and dissolve the employment contract, or it could deny the request. The court must take into account the notice period in a case where the contract is dissolved. There is a possibility to appeal against the court’s judgment to the Court of Appeals.

Collective Dismissals

If an employer wants to dismiss 20 employees or more within a term of three months within one of the working areas of the UWV, it must, according to the Dutch Collective Redundancy (Notification) Act (Wet Melding Collectief Ontslag), notify and consult the relevant trade unions and notify the UWV of its intention to do so. It is also necessary to take into account all employment contracts that will be terminated by mutual consent and terminations due to a deterioration in essential conditions of employment imposed/proposed by the employer. If the employer fails to comply with its obligation under this Act, the employee has the right to nullify the termination of their employment contract.

Dutch law provides for the following statutory notice periods for an employer:

• fewer than five years of service – one month;
• more than five years, but fewer than ten years of service – two months;
• ten or more years of service, but fewer than 15 years of service – three months; and
• 15 or more years of service – four months.

The employee must take into account a notice period of one month. A longer notice period may be agreed upon if it is laid down in writing. In that case, the notice period the employer has to observe must be twice the notice period the employee has to observe.

The notice period may be reduced under a collective labour agreement, although any variance should be within statutory limitations, in default of which, the statutory notice period is applicable. Unless agreed otherwise, the notice period starts at the beginning of the month following the month in which notice is given.

Where the employee has reached retirement age during their employment, the applicable notice period for the employer is one month.

Severance Payment

Employees are entitled to a transition payment (transitievergoeding) from the first day of employment, as well as during probationary periods. An employee will receive a third of the monthly salary per calendar year. The transition payment is capped at EUR94,000 gross – or if the employee is entitled to a higher annual salary – then one annual salary. The transition payment is not due if the employee terminates the employment contract, unless this termination is as a result of seriously culpable actions on behalf of the employer.

It is possible for employers to apply for compensation for the transition payment if they dismiss an employee on the grounds of long-term occupational disability (after two years of sickness).

Moreover, in the event of closure of a business by an employer for reasons of illness or pension, the employer will be compensated. Employers must satisfy a number of narrowly circumscribed conditions in order to qualify for compensation. It is important to note that this option is only available to small-business employers (with less than 25 employees) who owe a transition payment incurred during a period of six months prior to the consent of the UWV, or termination of an employment contract.

For calculating the duration of an employment contract, one or more employment contracts between the same parties (or successors) that have followed each other with intervals lasting no longer than six months, will be counted together.

Pursuant to Article 7:677 of the Dutch Civil Code, the employer may summarily dismiss an employee if the employee has engaged in such misconduct that the employer cannot reasonably be expected to continue the employment relationship any longer. An urgent reason must exist, in which case the employment contract will be terminated with immediate effect. The urgent reason must be communicated to the other party immediately and the employment contract must be terminated without notice.

In the case of instant dismissal, the employer does not have to take into account the period of notice and, since the employee has given a reason for not complying with the notice period, the employer has a right to compensation for the period of notice.

If there is serious culpable conduct (which may be present in the case of instant dismissal, but this does not necessarily have to be the case), the employee will in most cases lose the right to transitional compensation. In addition, if an employee has become unemployed as a result of something they have or have not done, this may affect their entitlement to unemployment benefits, as per the Unemployment Act (Werkloosheidswet or WW).

In Dutch employment law, separation agreements are used when the employment contract will be terminated with mutual consent (a so-called settlement agreement). In this agreement, the employer and employee arrange under which conditions they may terminate the contract. A settlement agreement is not a legal requirement but is considered best practice (as an employee is also able to apply for unemployment benefits after concluding a (legally correct) settlement agreement).

The settlement agreement usually contains provisions including:

• the personal data of the parties involved;
• the current position and salary of the employee;
• the reason for termination;
• the dismissal payment (can be zero);
• the termination date;
• whether or not the employee will be exempt from work;
• payment of the remaining number of holidays (if any, or in derogation of the statutory provision);
• post-contractual obligations, such as a non-compete clause or a business relations clause;
• the right of the employee to dissolve the settlement agreement within 14 days after conclusion (if this is not included in the agreement, the reflection period will be extended to 21 days after conclusion); and
• full and final discharge when all the provisions of the settlement agreement are fulfilled.

An employer is restricted from giving notice of termination under the following circumstances:

• during pregnancy or maternity leave (and up until six weeks after the end of an employee’s maternity leave);
• while an employee is a member of an employee participation body, such as a works council;
• during prospective membership (eg, candidates) or within two years after termination of membership of an employee participation body;
• during the first two years of illness, unless the employee deliberately hinders their recovery;
• during compulsory military service;
• when the employee applies for or takes care leave, such as parental leave, adoption leave, short-term leave, or long-term leave;
• because the employee is a trade union member;
• due to leave for political activities;
• because of an employee’s refusal to work on Sundays; or
• because of the transfer of an undertaking.

These restrictions apply to both the UWV and sub-district court procedures. However, the “during” prohibitions do not apply if the employee’s contract is terminated by mutual agreement during the probationary period, due to an urgent cause, upon reaching retirement age or state pension age, and in specific, limited situations, for dismissals based on commercial reasons. The “because” prohibitions do not have any exceptions.

Additional Exceptions

In addition to the aforementioned general exceptions, the sub-district court may dissolve the employment agreement if:

• the termination request is unrelated to the circumstance covered by the prohibition; or
• the circumstances warrant the termination in the best interests of the employee (eg, for health reasons).

However, these specific exceptions only apply to the “during” prohibitions, such as pregnancy or membership in the works council. These exceptions are not applicable in cases of dismissals for economic reasons, unless this involves the complete termination of the company’s activities.

If an employee believes they have been subject to an unjust termination, they have several grounds on which they can take action, depending on the situation. Some examples of such grounds include:

• termination of the employment agreement without proper intervention from the UWV or the sub-district court, despite the requirement for such intervention;
• dismissal in violation of a prohibition on giving notice;
• failure to offer the dismissed employee their former job position, which was filled by someone else within 26 weeks of the termination date, in cases of economic, technical, or organisational reasons for dismissal;
• wrongful granting of termination permission by the UWV (eg, when there was no reasonable ground for the dismissal);
• incorrect dissolution of the employment agreement by the court (eg, when there was no reasonable ground for the dismissal); and
• unjustified immediate dismissal.

In the event of wrongful dismissal, the employee has two options for recourse:

• to file a request with the sub-district court to declare the termination null and void; or
• to request fair payment, also known as fair compensation, from the sub-district court.

The request must be filed within two months of the termination of the employment agreement. If the wrongful dismissal results from a breach of the reinstatement requirement, the limitation period will begin when the employee becomes aware or could reasonably have become aware of the situation, but it should not exceed eight months after the employment agreement’s termination.

Calculating fair compensation does not follow a standard formula. The amount is highly dependent on the specific circumstances of the case and the court’s evaluation. The Supreme Court has outlined various viewpoints that can be considered when determining fair payment, including the employee’s potential earnings if the employment agreement had continued, the degree of employer culpability, and whether the employee has secured alternative employment or is expected to do so in the future, along with the corresponding expected income.

According to Dutch legislation, discrimination on any ground whatsoever is prohibited. In the Dutch Equal Treatment Act (Algemene wet gelijke behandeling), discrimination on the following grounds is explicitly prohibited: religion, personal beliefs, political opinion, race, sex, nationality, sexual orientation, and civil status. In addition, under specific employment laws, discrimination on the following grounds is explicitly prohibited: age, sex, handicap and chronic disease, temporary/permanent employment contracts and working hours (part-time/full-time).

In principle, discrimination directly based on the grounds mentioned above is never permitted, except for certain situations in which discrimination is explicitly allowed by law.

The discrimination laws also cover indirect discrimination. Indirect discrimination occurs when a neutral behaviour (eg, a policy or practice) results in discrimination based on one of the grounds mentioned above.

Indirect discrimination – and direct discrimination with respect to age, temporary/permanent employment contracts and working hours – can be justified if objectively necessary to achieve a legitimate aim and if proportionate to the aim sought.

Agreements between employers and employees that are contrary to discrimination laws can be void or voidable. The employee can also hold the employer liable for damages resulting from discriminating behaviour of the employer.

Currently, it is not customary to conduct legal proceedings digitally in the Netherlands.

Employment Law Proceedings

Legal disputes arising from an employment relationship are initially resolved before the competent sub-district court (kantonrechter) and can be appealed before the appropriate Court of Appeal (gerechtshof). The case may further escalate to the Supreme Court (Hoge Raad) if it involves a point of law. Employers must also take into account that, in some cases, they need to obtain permission from the UWV before they can dismiss an employee. This applies, for example, to the termination of an employment contract after two years of illness, or for compelling business economic reasons within the company.

In the absence of an agreed-upon competent court, the court in the district where the work is primarily performed will be declared competent. Sub-district court judges handle cases individually, whereas appeal cases are heard by a panel of multiple judges.

Unlike in appeal proceedings, parties are not obliged to be represented by a lawyer before the sub-district court.

Regarding employee participation law, particularly the Works Councils Act, certain claims must be filed with the Netherlands Enterprise Court at the Amsterdam Court of Appeal (Ondernemingskamer).

Class Action Claims

The Dutch Civil Code allows an interest group to pursue a declaratory judgment in cases of mass damage caused by unlawful actions, known as collective action. If liability is established, and the parties cannot agree on compensation for the damage caused, a separate procedure will determine the extent of individual compensation.

In Dutch employment law, arbitration is a possible method for resolving employment disputes, although it has not been frequently utilised. Pre-dispute arbitration agreements are considered valid and enforceable. However, a critical condition for arbitration is the mutual agreement of both parties to submit the case to an arbitration court. If only one party seeks arbitration, the court will assess whether the other party is willing to participate in the arbitration process.

In instances where both parties agree to arbitration, the application becomes bilateral, and the arbitration proceedings can proceed accordingly. However, if one party is unwilling to co-operate in the arbitration proceedings, the applicant will be required to initiate regular legal proceedings instead.

The general principle in legal proceedings is that each party is responsible for its own attorneys’ fees, regardless of the outcome of the case. For example, if an employee loses a court case against their employer, they will bear their own legal costs but not the employer’s expenses. Similarly, if an employee prevails in a case, they typically will not be entitled to recover their legal fees.

However, the judge holds the authority to decide which party must cover the costs of the proceedings and may order the losing party to compensate the opposing side for court and attorneys’ fees. It is important to note that the attorneys’ fees are usually calculated based on fixed rates, which are generally much lower than the actual legal fees incurred during the proceedings.