35-Point Review of the Settlement Agreement

Frequently Asked Questions

What is a settlement agreement?

A settlement agreement is a termination agreement if it pertains to the termination of an employment contract by mutual consent. In everyday language, these two terms are often used interchangeably and usually refer to the same type of agreement. However, a settlement agreement can also be used to reach agreements in other situations. For example, in the event of a dispute regarding a non-compete clause. The 35-point checklist for settlement agreements is intended for settlement agreements that pertain to the termination of an employment contract.

What is the 35-point inspection, and why is it important?

The 35-point review is a legal review conducted by an employment law attorney of the contents of the settlement agreement. This review is important to ensure that the agreement is legally sound and to prevent employees from facing risks, such as losing their unemployment benefits.

What if my employer doesn’t reimburse me for the cost of the checkup?

If your employer does not already reimburse these costs as a matter of course, you can ask them to include reimbursement in the settlement agreement. In our experience, employers reimburse the costs of reviewing the settlement agreement or the costs of legal assistance in more than 90% of cases.

Can Arbeidsadvocaat.nl also help me with negotiations?

Yes, we can also assist you in negotiating with your employer to reach a better settlement agreement. We also specialize in defending your interests in court. Feel free to contact us to discuss your case.

Am I required to agree to a settlement agreement?

No, you are not required to sign a settlement agreement if you do not want to. Such an agreement is based on voluntary consent: without your consent, the employer cannot terminate the employment contract by mutual agreement. If you do not accept the proposal, the employer may have to initiate a termination procedure through the UWV or the subdistrict court to terminate your contract. You are therefore free to refuse an offer, which puts you in a strong negotiating position. Only sign if the final terms are truly favorable and acceptable to you (if in doubt, you can always seek legal advice).

Am I entitled to a transition payment or severance pay under a settlement agreement?

If you are terminated by mutual agreement through a settlement agreement, you are not automatically entitled to the transition allowance under the law. This is because the termination is by mutual agreement; the transition allowance is legally required only in the case of termination initiated by the employer. In practice, however, a severance payment is almost always agreed upon in the settlement agreement. Usually, the employer offers at least the statutory transition allowance as a severance payment to encourage you to agree to the terms. Often, you can even negotiate a higher payment, depending on the circumstances. It is therefore customary that, under a settlement agreement, you receive at least the transition payment or a comparable severance payment, even though you are not formally entitled to it.

Am I still entitled to unemployment benefits after signing a settlement agreement?

You retain the right to unemployment benefits if the settlement agreement is drafted correctly. Among other things, it is important that the termination is not your fault and that this is clearly stated in the agreement (for example, that the termination is due to a neutral reason or at the employer’s initiative). In addition, the statutory or contractual notice period must have been observed when determining the end date in the settlement agreement. Please note: if the settlement agreement is not properly worded, you run the risk that the UWV will deny or delay your unemployment benefits. So always have the agreement reviewed.

How long is the cooling-off period after signing a settlement agreement?

After signing a settlement agreement, you, as an employee, have a statutory cooling-off period of 14 days. Within these 14 days, you may notify your employer in writing that you wish to reverse your decision (this is known as the right of withdrawal). You do not need to provide a reason; a simple statement that you are terminating the agreement is sufficient, provided your employer receives it within 14 days. Please note: If your employer did not inform you in writing of your cooling-off period at the time of signing, the cooling-off period is extended to 21 days. If you revoke the settlement agreement within the cooling-off period, the agreement is void and your employment contract remains in effect as if you had never signed it.

What topics should be included in a settlement agreement?

A good settlement agreement should always include the following key elements:

• End Date and Notice Period: The date on which the employment relationship ends. This must correspond to the statutory or contractual notice period so that your unemployment benefits are secured.
• Reason for termination: The reason for the termination, preferably phrased in neutral terms (such as a strained working relationship or, for example, business reasons). This makes it clear that the termination is not your fault.
• Severance pay / transition allowance: The payment you receive upon termination of employment. Typically, at least the statutory transition allowance is included, or a higher severance payment if agreed upon.
• Vacation Days and Vacation Pay: Agreements regarding the payment of outstanding vacation days and any vacation pay (as well as other outstanding wage components, such as bonuses or overtime).
• Non-Competition Clause (and Other Clauses): Specify whether any non-competition clause remains in effect or is (partially) terminated, and outline any agreements regarding other special clauses in your contract (such as a client retention clause or a confidentiality clause).
• Legal fees: Whether the employer will contribute to your legal fees for having the agreement reviewed, and if so, up to what amount.
• Final Release: A provision stating that, once the settlement agreement has been carried out, neither party may make any further claims against the other. This definitively concludes your employment relationship.

What does “final release” mean in the termination agreement?

A final release means that, once the settlement agreement has been carried out, neither the employer nor the employee can make any further claims against the other. Virtually every termination agreement includes such a final release clause at the end. By doing so, both parties agree that all outstanding rights and obligations between them have been settled. Once the agreed-upon severance pay has been paid and other amounts (such as vacation pay or bonuses) have been disbursed, you can no longer hold each other liable. A final release thus ensures (in principle) a definitive and clear settlement of the employment relationship, without the possibility of future claims arising.

Can I sign a settlement agreement if I’m sick?

Although it is possible to enter into a settlement agreement while you are on sick leave, this is generally not recommended. After all, during the first two years of sick leave, a prohibition on termination often applies: your employer cannot fire you while you are on sick leave unless you consent to it through a settlement agreement. If you leave your job due to illness, you are not entitled to sickness benefits from the UWV because you voluntarily agreed to the termination. In principle, you are also not entitled to unemployment benefits because you are not available for the labor market. You therefore run the risk of being left without income while you are still sick. It is often wiser to wait until you are (nearly) recovered before signing a termination agreement, or to make special arrangements that protect your income. Consider, for example, a pro forma termination procedure that would allow you to remain eligible for sickness benefits. In any case, make sure to get thorough information if you’re considering a termination agreement while on sick leave, so you know exactly what the consequences will be.

Can I negotiate the terms of the settlement agreement?

Yes, virtually all settlement agreements are negotiable. Consider your employer’s initial proposal as a starting point: you can try to improve the terms for yourself. Common points of negotiation include, for example, a higher severance payment, a more favorable termination date (such as continued salary payments for a longer period), exemption from work during the notice period, a positive reference, or the removal or relaxation of a non-compete clause. You’re in a fairly strong position, because the employer needs your consent for termination by mutual agreement. So it’s definitely worth negotiating—the employer is often willing to make concessions to reach an agreement.

What happens to unused vacation days and vacation pay in the event of termination by mutual agreement?

Unused vacation days and accrued vacation pay must, in principle, be paid out at the end of your employment. The settlement agreement therefore usually specifies how many vacation days you have remaining and that these will be paid out as part of your final settlement. In the event of a long period of leave from work, the employer may refuse to pay out your remaining vacation days. You will, however, still receive the vacation pay (usually 8% of your salary) that you have accrued up to the termination date. The same applies to any other outstanding entitlements, such as a bonus or overtime pay: these should also be settled. It is important that the agreement clearly states that all these outstanding amounts will be paid to you, so that you do not miss out on anything.

What happens to my non-compete clause if I enter into a settlement agreement?

If your employment contract includes a non-compete clause, it generally remains in effect even if you leave the company through a settlement agreement—unless you make other arrangements. It is therefore wise to explicitly state in the settlement agreement what will happen to the non-compete clause. For example, you can agree that (parts of) the clause will be waived or that its duration or scope will be limited, making it easier for you to accept a new job. Many employers are willing to waive or relax the non-compete clause in the event of termination by mutual agreement, especially if you are not joining a direct competitor. If the settlement agreement does not mention the clause, you should assume that the original non-compete clause remains in effect as stated in your employment contract.

Will my legal fees be reimbursed if I have the settlement agreement reviewed?

Yes, in 90% of cases. The settlement agreement often includes a clause stating that the employer will reimburse you for (part of) the costs of legal advice. For example, employers may offer a sum (usually between €500 and €1,000, excluding VAT) that you can use to hire a legal advisor or attorney. This allows you to have the settlement agreement reviewed at virtually no cost. If such reimbursement isn’t included in the proposal, you can request it during negotiations. Employers often agree to this because it’s in their best interest for you to sign the agreement after seeking professional advice—that way, they can be sure the deal is final and there won’t be any disputes later on.

Why is it a good idea to have a legal professional or attorney review the settlement agreement?

A settlement agreement is an important legal document, so it’s wise to have an employment lawyer review it before you sign. Such an expert knows exactly what to look out for—from your right to unemployment benefits to the wording of the final release—and can verify that everything has been drafted fairly and correctly. This helps you avoid accidentally agreeing to unfavorable terms or running into problems later on (such as with your unemployment benefits). In addition, a legal expert can advise you on whether there is room to negotiate better terms and, if necessary, negotiate with the employer on your behalf. Since the costs of legal advice are often reimbursed by the employer, it costs you little to nothing to gain that extra peace of mind. With a professional review, you can be certain that you’re signing a fair and valid severance agreement. Feel free to contact us with no obligation.

What happens if I don’t agree to the settlement agreement?

If you do not agree to the settlement agreement, your employment will continue as usual. The employer cannot then terminate your employment by mutual agreement and will have to take a different route if they still wish to terminate your employment. This usually means that the employer will initiate a termination procedure with the UWV (for example, for business-related reasons) or file a petition for termination with the subdistrict court (if there is another, personal ground for termination). Such a process takes time and money, and the outcome is uncertain; the UWV or the court will assess whether there is a reasonable ground for termination. If termination is ultimately granted, you are in any case entitled to the statutory transition allowance (and sometimes an additional payment, depending on the situation). Refusing to sign may also prompt the employer to make a better offer in order to reach a settlement agreement after all. In short, you won’t lose your job immediately if you don’t sign—you’ll continue to receive your salary for the time being, and in the meantime, you may be able to renegotiate improved terms while the employer explores its alternatives.