The Bottom Line
- Unexpected Costs: A standard “final discharge” clause in a settlement agreement is not enough to waive an employee’s statutory right to severance pay (transition payment) in the Netherlands. This can lead to unforeseen liabilities even after an exit is finalized.
- Contract Review is Essential: Companies must now explicitly state in settlement agreements whether a transition payment is included, waived, or not applicable. Ambiguity will be interpreted in favor of the employee.
- Broader Risk for Statutory Rights: This ruling underscores a key principle: fundamental employee rights granted by law cannot be waived by general, boilerplate language. Waivers must be clear, specific, and unambiguous.
The Details
The case before the Amsterdam Court of Appeal involved a familiar scenario: an employer and a long-term sick employee parted ways via a settlement agreement. The agreement contained a standard “final discharge” clause, where both parties agreed they had no further claims against one another. The employer believed this closed the book on all financial obligations. However, the employee later successfully claimed their statutory transition payment (severance pay), arguing it was never explicitly waived. The Court was asked to rule on whether the general final discharge clause was sufficient to prevent this subsequent claim.
The Court’s reasoning is a critical warning for all businesses operating in the Netherlands. It held that the right to a transition payment is a fundamental statutory right for employees. To waive such a significant right, the waiver must be clear and unambiguous. A generic, all-encompassing final discharge clause is simply not specific enough. The Court determined that for the waiver to be valid, the settlement agreement must explicitly mention the transition payment and state what the parties have agreed upon regarding it—whether it is included in a lump sum, paid separately, or consciously waived by the employee. Without this specific language, the right remains intact.
Furthermore, the Court dismissed the employer’s argument that no transition payment was due because the employee had been unfit for work for over two years. While Dutch law has specific rules regarding termination after this period, the key distinction here was that the employment ended by mutual agreement (the settlement), not by a dismissal initiated by the employer due to long-term sickness. Because the termination route was a mutual settlement, the standard rules triggering the right to a transition payment still applied. This closes a potential loophole and reinforces that the nature of the termination is paramount.
Source
Amsterdam Court of Appeal
