Settlement agreement during sickness: what does it mean?

A settlement agreement during sickness in the Netherlands means that employer and employee mutually agree to terminate the employment contract while the employee is or has recently been unfit for work. The arrangements are laid down in a written document called a vaststellingsovereenkomst (VSO). Because Dutch law offers extra protection during sickness, such an agreement must be carefully drafted to avoid jeopardising rights to unemployment benefits and to respect reintegration obligations.

Legal framework: protection during sickness and reintegration

Under Dutch labour law, an employer may not unilaterally dismiss an employee due to sickness during the first two years of incapacity for work. This is called the dismissal prohibition during sickness. However, both parties are allowed to end the contract by mutual consent through a settlement agreement. UWV, the public body responsible for social security benefits, will later assess whether the agreement was reasonable and whether the employee is not considered culpably unemployed.

At the same time, both employer and employee have a legal duty to cooperate in reintegration. Reintegration is the process of trying to bring an employee back to work, either in the original job or in suitable alternative work. This may involve internal options first and, if that is not possible, a track towards another employer. A settlement agreement during sickness should therefore not be used to bypass reintegration duties, but rather be aligned with what has already been tried and assessed.

When does a settlement agreement during sickness make sense?

In practice, a settlement agreement during sickness is usually considered when it has become clear that returning to the original job is no longer realistic. Medical reports and occupational health advice may show that the employee’s capacity is structurally limited in a way that no longer fits the job. If there are no suitable positions available within the organisation, both parties may decide that a well-arranged departure, combined with an outplacement programme, offers more perspective than continuing a deadlocked situation.

Another common situation is a seriously disturbed working relationship after a long period of sickness. Even if the medical situation improves, mutual trust may have been damaged. In such cases, a settlement agreement that includes professional career support can help shift the focus from conflict to future opportunities on the labour market.

Key elements in a VSO during sickness

Important elements in a settlement agreement during sickness include a neutral description of the reason for termination, a correct notice period, and clear arrangements regarding salary, holidays and the end date. The wording of the reason for termination is particularly relevant for UWV when assessing unemployment benefit (WW) claims. Typically, parties refer to a difference of opinion, organisational reasons or a disturbed relationship, rather than dismissal because of sickness itself.

In addition, the agreement should address financial aspects such as the statutory transition payment and any additional compensation. It can be wise to explicitly link part of the compensation to an outplacement programme, especially when the employee needs guidance to find new, suitable work. Making this link explicit clarifies that the payment is intended to support a sustainable return to the labour market.

The role of outplacement after a VSO during sickness

Outplacement is structured support for employees who have to leave their employer and want to find new work. After a settlement agreement during sickness, outplacement can be particularly valuable. The combination of health limitations, a period of absence and a changing labour market often requires tailored guidance. A coach helps the employee to gain insight into realistic options, taking into account medical restrictions, skills and personal preferences.

Care4Careers specialises in such guidance and frequently works with employees who cannot return to their previous role due to health reasons. By combining career coaching, labour market orientation and practical application support, the outplacement process increases the chance of a sustainable match with a new employer.

Summary

A settlement agreement during sickness is a sensitive instrument within Dutch labour law. It can offer a constructive solution when return to the original job is no longer feasible, provided that reintegration obligations have been taken seriously and the agreement is drafted carefully. Outplacement support can then form the bridge between ending the current employment and building a new, sustainable career elsewhere.