Received a settlement agreement? What you need to know

Your employer has presented you with a settlement agreement (vaststellingsovereenkomst, or VSO). What you do now will largely determine how your departure is handled and what you leave with. That is why we start with our most important advice: do not sign, do not commit to anything, and do not reject it either. Not in a meeting, not by email and not by text message. Not even if you have been given a short deadline.

Do not let a deadline rush you

Many employers give you a few days or a week to respond. That feels compelling, but in practice such a deadline is rarely binding. You are always entitled to ask for more time, for example because you first want the settlement agreement reviewed by a legal adviser. A reasonable employer will agree to that.

Be careful in conversations as well. A remark such as "that sounds reasonable" or "I can live with that" may seem harmless, but may later be construed as consent. Let your employer know that you have received the settlement agreement and are giving it serious consideration. At this stage, you do not need to say anything more.

The key question: is there a ground for dismissal?

This is the core of every settlement agreement. A fully substantiated ground for dismissal (voldragen ontslaggrond) is a legal term. It means that there is a statutory reason for dismissal that has been fully substantiated and that a court or the Employee Insurance Agency (UWV) would accept.

Do you have a permanent employment contract? In that case, your employer can only dismiss you against your will if such a ground for dismissal exists. Examples include:

• Economic reasons, for example a reorganisation in which your position is genuinely made redundant and redeployment is not possible.
• Underperformance, where your employer has warned you in good time and has given you a genuine opportunity to improve, for example through an improvement plan (PIP).
• An irretrievably damaged employment relationship, which is so serious that your employer cannot reasonably be expected to continue the employment.

Is that ground absent, or only partly present? Then your employer cannot simply terminate the employment through the court or the UWV. In that case, there is effectively only one route left: a settlement agreement. And for that, your employer needs your signature.

The stronger the ground for dismissal, the less room you have to negotiate

It comes down to this:

• Is there a ground for dismissal? Then your employer can dismiss you without a settlement agreement as well. Your room to negotiate is limited.
• Is there no ground, or only a weak ground, for dismissal? Then your employer needs you in order to bring about a termination. Your room to negotiate is considerable.

The less your employer has to go on, the better the terms you can achieve. Or you may choose to stay.

Example: limited room

Your employer is reorganising and 20% of the workforce has to leave. The plans have been discussed with the works council, the trade unions have been informed and a social plan has been drawn up. Unfortunately, you have been selected for dismissal.

In such a situation, there is a good chance that a genuine economic reason exists and that you have been selected in accordance with the rules. Moreover, terms have already been negotiated on your behalf through the social plan. In principle, the room to obtain more is therefore limited.

A review of the settlement agreement nevertheless remains important. Is the settlement agreement correct, have all the arrangements from the social plan been properly incorporated, and what are the consequences for your unemployment benefit, your non-compete clause and your termination date? In practice, things go wrong here more often than you might think.

Example: considerable room

Your employer refers to a reorganisation, but you also hear that there is a difference of opinion. Or that your performance is not really up to standard, although nothing about this has ever been documented. A bit of everything, but nothing conclusive.

In that case, there is no ground for dismissal. Your employer then has no real prospect of terminating the employment through the court. This means that your negotiating position is considerably stronger. In such a situation, a first offer is rarely the best offer.

What about a fixed-term contract?

The position is different. Your employer can allow your contract to expire at the end of its term, without a ground for dismissal. Early termination is only possible if this has been agreed in your contract. If your contract says nothing about this, your employer can only let you go before the end date with your consent. The further away the end date, the stronger your position.

What should I look out for in the settlement agreement?

• Termination date. Is it consistent with your notice period?
• Severance payment. The statutory transition payment is a minimum. Where the ground for dismissal is weak, a payment above that amount is readily achievable.
• Garden leave (vrijstelling van werk). This gives you time for your next step.
• Holiday entitlement. Will your accrued days be paid out?
• Non-compete and non-solicitation clauses. At senior level, often the most restrictive provision.
• Communication. How will your departure be announced internally and externally?
• Statement of employment and reference. Agree on a positive statement of employment (getuigschrift) and a good reference.
• Full and final discharge. Make sure all your entitlements up to that point have been properly settled.

Do you have a bonus, RSUs, stock options or an excess pension (excedentpensioen)? That is often where the greatest financial interest lies. Read more in Bonus, RSUs and stock options in a settlement agreement.

What if I find a new job sooner?

Have an early departure clause in the event of new employment included. This allows you to leave earlier at short notice, all arrangements in the settlement agreement remain in force, and you receive an additional payment based on the salary for the period by which you leave early. Your employer saves on those months' salary, so it is reasonable that you share in that benefit.

Will I receive unemployment benefit after a settlement agreement?

Yes, provided the settlement agreement has been properly drafted: the initiative lies with the employer, there is no urgent cause (dringende reden) and the notice period has been observed. At senior level too, it is advisable to safeguard your unemployment benefit (WW) entitlement. More in Will I receive unemployment benefit (WW) after a settlement agreement?.

I am on sick leave, what now?

Are you ill at the time you receive the settlement agreement? Then do not simply sign it. During illness you are protected against dismissal, and by signing you give up that protection. It may also affect your entitlement to benefits. More in On sick leave and your employer wants you gone: what now?.

Who pays the legal costs?

In 85% of cases, the employer reimburses the full legal costs. In almost all other cases, the employer pays at least a (substantial) part. More in Who pays my legal costs in a settlement agreement?.

What do I do now, in concrete terms?

1. Do not sign, do not commit to anything and do not reject it. Not verbally and not by email either.
2. Ask for more time if the deadline is short.
3. Gather your documents. Your employment contract, the settlement agreement, previous correspondence, performance reviews, your most recent payslips and, where applicable, your bonus or share plan.
4. Have it assessed whether there is a ground for dismissal. That determines your room to negotiate.