Netherlands: Can a Fixed-term Employment Contract be Terminated Prematurely?

In principle, a fixed-term employment agreement cannot be terminated before the end of the contract, by either the employer or the employee. The contract ends by operation of law after the agreed period. Only if an interim termination clause has been agreed upon, will premature termination be possible. In this article, we will discuss the termination of a fixed-term employment contract with and without an interim termination clause.

The interim termination clause

The interim termination clause makes premature termination of a fixed-term employment contract possible. The clause has to meet a number of formal requirements:

• the clause must be agreed upon in writing;
• the clause must be agreed upon before or during the term of the employment contract (the clause can also be agreed upon after the start of employment);
• the clause must apply to both parties.

With an interim termination clause

If a fixed-term employment contract contains an interim termination clause, the contract may be terminated prematurely by both the employer and the employee. The employer must, however, ask the UWV or the subdistrict court (depending on the reason for dismissal) for permission to terminate the employment contract. In addition, there may not be any prohibition on giving notice (e.g. incapacity for work) and the notice period must be observed. The employee may terminate the employment contract by simply invoking the interim termination clause. However, the employee must observe the notice period.

Without an interim termination clause

If no interim termination clause has been agreed upon in the fixed-term employment contract, then, in principle, the contract cannot be terminated prematurely. This is only different in the case of termination during the trial period or a valid summary dismissal (in Dutch: ontslag op staande voet). Without an interim termination clause, both parties may ask the subdistrict court to dissolve the employment contract prematurely.

Compensation for damages

If termination takes place without an interim termination clause, the terminating party is liable for damages. This compensation is equal to the amount of the salary for the remaining duration of the employment contract. The judge can moderate the amount of compensation, but not to less than the salary for three months.

Premature termination by mutual consent

If there is no interim termination clause agreed upon, the fixed-term employment contract can be terminated prematurely by mutual consent. This can be done by concluding a termination agreement (in Dutch: beëindigingsovereenkomst) between both parties.