Earlier this year, the Central Appeals Tribunal decided that if an employment agreement does not contain an interim termination clause, the employer and the employee can still include the clause in a settlement agreement. Once the termination clause has been incorporated in the settlement agreement, the employee will not be considered 'voluntarily unemployed' from the agreed end date and can simply claim unemployment benefits.

Interim termination clause

Under Article 7:667(3) of the Dutch Civil Code, notice of interim termination of a fixed-term employment agreement (i.e. before the end of its term) can only be given if this has been agreed in writing. In other words, if a fixed-term employment agreement does not contain an interim termination clause, the employer cannot give notice of termination before the employment agreement's end date. An employer who is dissatisfied with an employee employed under a fixed-term employment agreement without an interim termination clause will therefore have to keep the employee in their employ until the end of the employment agreement and continue paying the employee's wages until the end date.

Settlement agreement

Of course, the employer and the employee can also agree to end a fixed-term employment agreement before the stated end date. The parties will usually conclude a termination agreement (also referred to as a settlement agreement) to that end. However, if an employee agrees to a settlement agreement but their employment agreement does not contain an interim termination clause, they will not be entitled to unemployment benefits for the period until the date on which the fixed-term employment agreement would have expired (Article 19(4) of the Unemployment Insurance Act (Werkloosheidswet)). The rationale behind this is that if the employee had not agreed to the settlement agreement, the employer could not have given notice of termination of the employment agreement before the end of its term and the employee would have been assured of their wages until the end date. By consenting to a settlement agreement, the employee will be considered 'voluntarily unemployed', thereby 'forfeiting' the right to unemployment benefits.

But how should one judge a situation where a fixed-term employment agreement does not contain an interim termination clause, yet this clause is included in the settlement agreement between the employer and employee? It was long unclear whether an employee could still claim unemployment benefits from the end date agreed in the settlement agreement in the event of such a construct. After all, Article 19(4) of the Unemployment Insurance Act applies the criterion that the option of giving interim notice of termination must be stated in writing in the employment agreement, whereas Article 7:667(3) of the Dutch Civil Code provides that written agreement on an interim termination clause will be sufficient (without setting any further requirements as to the document to be used for this purpose).

Central appeals tribunal resolves the issue: interim termination clause can also be included in settlement agreeement

Earlier this year, the Central Appeals Tribunal resolved this issue. It decided that the only requirement for an interim termination clause is that it must be agreed between the parties in writing. Article 7:667(3) of the Dutch Civil Code says nothing about when the interim termination clause must be agreed and does not provide that an interim termination clause must be included in the original employment agreement or in an addendum to this agreement. Accordingly, if an employer and employee only agree on an interim termination clause for the first time in a settlement agreement, this will be sufficient to enable the employee to claim unemployment benefits with effect from the agreed end date. The employee will therefore not be voluntarily unemployed in that case and will be entitled to unemployment benefits from the end date agreed in the settlement agreement.

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