Netherlands: Extrajudicial Annulment of a Settlement Agreement Due to Inaccurate Information from Employer About Benefit Implications (Summary Proceedings)

Author: Lisa Smit

Legal framework agreement under error

A settlement agreement that was concluded under an error and would not have been concluded if the facts had been correctly presented can be set aside if, among other things, the mistake was due to information provided by the other party, unless the other party could assume that the agreement would have been concluded even without the information.

 

Legal framework settlement agreement during illness

An employee who agrees to resign during illness is not entitled to an unemployment benefit. This is because during unemployment benefit, an employee has the obligation to apply for work and must, therefore, be able to work. In principle, an employee cannot fulfil this when he is ill.

A sick employee who agrees to his own dismissal is also not entitled to sickness benefit. After all, a sick employee is entitled to two years of wage payment from the employer. If the employee gives up this protection himself by agreeing to the dismissal, this is seen as detrimental action towards the Employee Insurance Agency (UWV), causing the employee to lose the right to sickness benefits.

 

The case

The employee previously attempted to report sick due to chronic back pain and hand pain. According to the employee, the employer refused the sick leave request and instead asked the employee to continue working until a replacement was found. The employer allegedly indicated that the employee would then be entitled to benefits from the UWV.

The employee signed the settlement agreement and left the company. The UWV subsequently denied the request for unemployment benefits, stating that the employee was sick and, therefore, not available for the labour market. The UWV also rejected the sickness benefit because the employee committed a detrimental action by agreeing to a settlement agreement during illness. The employee extrajudicially annulled the settlement agreement, arguing that he would not have agreed to it had he been correctly informed of the consequences.

The employer claims that it was unaware of the employee’s incapacity for work and denies that the employee attempted to report sick. The court found it credible that the employee was ill at the time of entering into the settlement agreement. The court also found it likely that, had the employee known he would not be entitled to benefits, he would not have agreed to the settlement agreement. The court ruled that there was mutual error, as the employer would have acted differently had it been aware of the employee’s incapacity. However, the error cannot be attributed to the employee.

The court decides that the employee is entitled to salary retroactively and the employer must reinstate the employee to perform the usual work or reintegration activities.

Key points HR:

• In summary, the following applies to benefit entitlements when leaving employment via a settlement agreement:
  • If an employee (whether incapacitated or not) resigns voluntarily, the employee is not entitled to unemployment or sickness benefits.
  • If an incapacitated employee agrees to a settlement agreement, they are generally not entitled to unemployment benefits and also not to sickness benefits.
  • If an employee who is not incapacitated leaves employment through a settlement agreement, they may be entitled to unemployment benefits, provided all the conditions are met.
  • When entering into a settlement agreement, it is crucial that the employee is aware of the consequences, particularly regarding benefit entitlements. Ensure the employee is well informed before signing to exclude later claims of error.
• Be cautious when entering into a settlement agreement with an ill employee due to the risks regarding benefit entitlements. While there are situations where it may be possible, ensure that legal advice is sought.
• Encourage the employee to seek legal advice when offering a settlement agreement, which can reduce the likelihood of a successful claim of error. Employers can also consider providing a budget for this purpose.