Settlement Agreement During Sick Leave

You are on sick leave and your employer offers you a settlement agreement (vaststellingsovereenkomst or VSO). This is a situation that requires extreme caution, because as a sick employee you enjoy special statutory protection under Dutch law. Signing a settlement agreement during illness can have far-reaching consequences for your income, your benefit entitlements and your reintegration. In this comprehensive article you can read everything you need to know before making a decision.

Table of Contents

The dismissal ban during illness (Article 7:670 BW)

In the Netherlands, a dismissal ban during illness applies. This is one of the most important protective mechanisms in Dutch employment law. The dismissal ban is laid down in Article 7:670 paragraph 1 of the Dutch Civil Code (Burgerlijk Wetboek, BW) and means that your employer may not unilaterally terminate the employment contract during the first two years of your illness.

The rationale behind this legislation is clear: a sick employee is in a vulnerable position and must be protected against dismissal. During the period of the dismissal ban, your employer has two key obligations:

  • Continued payment of wages: your employer must pay at least 70% of your salary during the first two years of illness (Article 7:629 BW). In the first year of illness, this may not be less than the minimum wage. Many collective labour agreements (CAOs) provide for higher continued payment, often 100% in the first year and 70% in the second year.
  • Reintegration obligations: under the Gatekeeper Improvement Act (Wet verbetering poortwachter), your employer must actively work to facilitate your reintegration, either in your own position (first track) or with another employer (second track).

Important to know

The dismissal ban applies to unilateral dismissal by your employer. However, a settlement agreement is a termination by mutual consent — you sign voluntarily. By signing, your employment contract ends, which means your employer's obligation to continue paying your wages and providing reintegration support ceases. It is therefore essential to carefully map out the consequences before you sign.

Exceptions to the dismissal ban

The dismissal ban during illness is not absolute. In the following situations, an employer may proceed with dismissal, even if you are ill:

  • During the probationary period (Article 7:676 BW): during the probationary period, the employer may terminate the employment immediately, even during illness. The dismissal ban does not apply during the probationary period.
  • Summary dismissal (Article 7:677 BW): when there is an urgent reason, such as theft or fraud, the dismissal ban does not apply.
  • After two years of illness: after 104 weeks of incapacity for work, the dismissal ban ends and the employer can apply for a dismissal permit at the UWV (Employee Insurance Agency).
  • Complete closure of the business (Article 7:670a paragraph 2 sub d BW): if the entire business closes, the dismissal ban can be overridden.
  • Illness after the start of dismissal proceedings: if you became ill after the employer had already submitted a dismissal request to the UWV, the dismissal ban may not apply in certain cases. The exact application depends on the type of procedure, the timing of your sick report and the dismissal ground. This is legally complex and always requires an individual assessment.

Outside these exceptions, the dismissal ban provides you with strong protection as a sick employee against unilateral dismissal. It is therefore vital to understand that by signing a settlement agreement, you are voluntarily consenting to termination of the employment, thereby effectively giving up the protection of the dismissal ban.

Why does your employer offer a settlement agreement during your illness?

It is a frequently asked question: why would an employer offer a settlement agreement during illness, when a dismissal ban is in force? There are various reasons, and it is important to understand your employer's motivation, as it affects your negotiating position.

1. Disrupted working relationship

In practice, it regularly occurs that alongside the illness, the working relationship has also become disrupted. Think of conflicts that already existed before the sick report, or disagreements about the reintegration process. An employer may then conclude that further cooperation is no longer possible and seeks a way out through a settlement agreement. In this situation, you generally have a strong negotiating position, because the employer can barely dismiss you through the courts as long as you are ill.

2. Reorganisation or restructuring

If your position is made redundant due to a reorganisation, your employer can apply for a dismissal permit at the UWV. However, the dismissal ban during illness can complicate or delay the actual dismissal, even though the procedure itself can proceed. The employer may therefore prefer a settlement agreement to settle the matter more quickly. Note: in a reorganisation, the employer must apply the reflection principle (afspiegelingsbeginsel). Verify whether you are actually redundant.

3. Long-term illness without prospect of recovery

If the company doctor indicates that recovery is not expected in the short term, an employer may want to terminate the employment earlier through a settlement agreement. The dismissal ban does not permit unilateral dismissal in this situation, but the employer can present you with a settlement agreement. The employer is often willing to offer a higher compensation in this scenario, because they save significantly on the remaining wage payment obligation. This is an important consideration for your negotiating position.

4. Cost considerations

Two years of continued wage payment during illness represents a substantial financial burden for employers. On top of this come the costs of reintegration, the occupational health service and a potential WGA premium after two years. A settlement agreement with a one-off payment can work out cheaper for the employer than the full sick leave trajectory. This insight is important for your negotiation: calculate what the employer saves if you sign.

5. Dissatisfaction with reintegration efforts

Sometimes the employer is dissatisfied with the progress of the reintegration and wants to end the employment relationship rather than continue to invest. Note: if your employer has made insufficient reintegration efforts, the UWV can impose a wage penalty (loonsanctie). This significantly strengthens your position.

Please note

You are not obliged to sign a settlement agreement. Your employer cannot force you to agree. In fact, if you refuse to sign as a sick employee, your employer generally cannot dismiss you because of the dismissal ban. Always seek advice before you decide. You can have your settlement agreement checked for free by our lawyers.

Risks of a settlement agreement during sick leave

Signing a settlement agreement during illness carries considerable risks. These risks are greater than with a settlement agreement while you are healthy, because your social security position as a sick employee is fundamentally different.

1. Loss of continued wage payment

The most immediate risk is the loss of your right to continued wage payment during illness. Your employer is legally obliged to continue paying your wages for two years. If you sign a settlement agreement, your employment contract ends and with it this obligation. Depending on how long you have been ill, you could miss out on months to nearly two years of continued pay. This amount can run into tens of thousands of euros and must be factored in when assessing the offered compensation.

2. Problems with Sickness Benefits Act (Ziektewet) payments

After signing a settlement agreement while ill, you may under certain conditions apply for a Sickness Benefits Act (Ziektewet) payment from the UWV. Whether you actually qualify depends on your insurance position and the specific circumstances. The UWV critically assesses whether you justifiably agreed to the termination of your employment. The UWV can determine a so-called prejudicial act (benadelingshandeling) under Article 45 of the Sickness Benefits Act: you unnecessarily agreed to the end of your employment while you were protected by the dismissal ban. The sanction can range from a reduction in your benefit to a complete refusal.

Prejudicial act (benadelingshandeling)

The UWV can classify signing a settlement agreement during illness as a prejudicial act. Whether this happens depends on the specific circumstances: the UWV examines, among other things, the dismissal ground, the question of whether the dismissal would have been inevitable without your consent, the medical and occupational context, and the reintegration process. A careful formulation of the settlement agreement (with the initiative attributed to the employer and a ground other than illness) can reduce the risk, but offers no guarantee. Always have this assessed by a lawyer.

3. No entitlement to unemployment benefits (WW)

To qualify for unemployment benefits (WW), you must be available for the labour market. As long as you are ill, you are in principle not eligible for unemployment benefits. In practice, this means that as a sick employee after a settlement agreement, you primarily depend on the Sickness Benefits Act. If both the Sickness Benefits Act payment and unemployment benefits are inaccessible, you can find yourself in a financial gap. This risk must be explicitly factored into your decision.

4. Consequences for your WIA assessment

If you are ill for an extended period, you may be entitled to a WIA benefit (WGA or IVA) after two years of illness. If you sign a settlement agreement and your employment ends earlier, this can practically complicate the WIA assessment. Although the statutory waiting period of 104 weeks does not change in principle, administrative and procedural effects can occur that influence your WIA trajectory. Always have this assessed by a lawyer.

5. Loss of reintegration support

As long as you are employed, your employer has the obligation to facilitate and fund your reintegration. After signing a settlement agreement, this support falls away. You then depend on the UWV for your reintegration, and the support there is generally less intensive.

Unemployment benefits and Sickness Benefits Act after a settlement agreement

The consequences of a settlement agreement during illness for your benefit entitlements depend on your health situation on the end date of the employment. Below you will find a detailed overview.

Scenario 1: you are still ill on the end date

  • You can apply for a Sickness Benefits Act (Ziektewet) payment from the UWV. You must do this on the first day after the end of your employment.
  • The UWV carries out an assessment: was it reasonable that you agreed to the dismissal? The UWV looks at the dismissal ground, the compensation and the question of whether a dismissal ban applied.
  • The Sickness Benefits Act payment amounts to in principle 70% of your daily wage, subject to a maximum daily wage.
  • Only after full recovery can you switch to unemployment benefits (WW). You must then register as a jobseeker with the UWV.
  • The duration of the Sickness Benefits Act payment is in many cases linked to the waiting period of 104 weeks (calculated from your first day of illness), but the exact duration can vary per situation.

Scenario 2: you have recovered before the end date

  • You can directly apply for unemployment benefits (WW) after the end date of your employment.
  • The settlement agreement must meet the unemployment benefits conditions: the initiative came from the employer, no urgent reason is stated, and the correct notice period has been observed (the so-called fictitious notice period).
  • Register as a jobseeker with the UWV no later than the first working day after the end of your contract.

Procedure at the UWV

If you apply for a Sickness Benefits Act payment after a settlement agreement during illness, you go through the following steps:

  1. Submit your application: report yourself as ill to the UWV on the first day after the end of your employment. As a (former) employee, you do this by telephone or via the UWV portal (not via the employer portal).
  2. Assessment by insurance physician: the UWV may call you for a consultation with an insurance physician to establish your incapacity for work.
  3. Prejudicial act assessment: the UWV assesses whether you acted culpably by agreeing to the settlement agreement. Make sure you can substantiate that the dismissal was inevitable, even without your consent.
  4. Decision: you receive a decision in which the UWV indicates whether you are entitled to a Sickness Benefits Act payment and if so, at what percentage.

Fictitious notice period

Pay close attention to the end date in the settlement agreement. If the fictitious notice period is not correctly processed, the UWV can impose a waiting period during which you receive no benefit. The calculation of the fictitious notice period is linked to the statutory notice period and the moment at which valid notice could have been given. This is not always the same as the date of signing and can depend on the applicable notice rules (for example, notice against the end of the month). Always have this checked by a lawyer.

What compensation to expect during sick leave

One of the most important components of a settlement agreement during illness is the financial compensation. Because as a sick employee you are giving up significant rights, it is justified to expect a higher compensation than the statutory severance pay (transitievergoeding) alone.

The statutory severance pay as a starting point

With a settlement agreement, there is legally no automatic right to the statutory severance pay — the compensation is negotiable. In practice, however, the severance pay (1/3 monthly salary per year of service, Article 7:673 BW) is often used as a reference and minimum. For a settlement agreement during illness, this reference amount is usually insufficient, because you also suffer the following financial damage:

  • Missed continued wage payment: calculate the wages you would still receive until the end of the two illness years. This can amount to thousands or tens of thousands of euros.
  • Lower benefit: a Sickness Benefits Act payment (70% of your daily wage) is generally lower than your salary with the employer, especially if your collective labour agreement provides for higher continued payment.
  • Risk of benefit refusal: the risk that the UWV refuses your Sickness Benefits Act claim must be factored into the compensation.
  • Loss of reintegration support: the costs of reintegration that you now have to bear yourself.

Rule of thumb for compensation during illness

In practice, settlement agreements during illness often involve a compensation that is considerably higher than the statutory severance pay. A compensation of the severance pay plus the remaining wages over the illness period (or a substantial part thereof) is a reasonable starting point for negotiations. The exact amount depends on your specific situation, the length of your employment and the reason for dismissal.

Contribution to legal costs

It is customary for the employer to include a contribution for your legal costs in the settlement agreement. Many employers offer an amount of EUR 750 to EUR 2,500 excluding VAT for legal advice. Particularly with a settlement agreement during illness, where the subject matter is complex, an adequate contribution to legal costs is reasonable and negotiable.

The 14-day cooling-off period

After signing a settlement agreement, you always have a statutory cooling-off period of 14 days under Article 7:670b paragraph 2 BW. This also applies to a settlement agreement during illness. Within this period, you can dissolve the agreement in writing, without giving reasons. This right cannot be contractually excluded or limited.

Practical points regarding the cooling-off period:

  • Start date: the cooling-off period starts when the settlement agreement has been concluded, usually the moment of signing by both parties. The exact calculation in calendar days can vary per situation.
  • No reason required: you do not have to explain to your employer why you are dissolving the settlement agreement. A simple notification suffices.
  • In writing: a letter or email is sufficient. Preferably send a registered letter and an email, so you have proof of timely receipt.
  • Extension if omitted: if the cooling-off period is not mentioned in the settlement agreement, it is automatically extended to 21 days (Article 7:670b paragraph 3 BW).
  • One-time use: the law provides that if you invoke the cooling-off period and subsequently enter into a new settlement agreement with the same employer within six months, you generally do not have a second cooling-off period (Article 7:670b paragraph 4 BW).

Strategic use of the cooling-off period

The cooling-off period gives you the opportunity to seek legal advice after signing. If a lawyer determines that the terms are unfavourable, you can dissolve the settlement agreement within the deadline. You can have your settlement agreement checked for free by one of our lawyers.

What if you already signed?

Have you already signed a settlement agreement during illness and are you worried? There may still be options, depending on your situation.

Within the cooling-off period

If fewer than 14 days have passed since the signing (or 21 days if the cooling-off period was not included in the agreement), you can still dissolve the agreement. Send a written declaration to your employer immediately stating that you are invoking your statutory cooling-off period. Do this by registered letter and by email. No reason is required — you can simply state that you are dissolving the agreement pursuant to Article 7:670b paragraph 2 BW.

After the cooling-off period

If the cooling-off period has expired, it becomes more difficult, but not necessarily impossible. In exceptional cases, you may invoke:

  • Error (dwaling, Article 6:228 BW): if you signed the settlement agreement based on incorrect or incomplete information. For example, if the employer downplayed your illness or failed to inform you about the consequences for your Sickness Benefits Act claim.
  • Abuse of circumstances (Article 3:44 paragraph 4 BW): if the employer took advantage of your vulnerable position as a sick employee, for example by exerting strong pressure or threatening summary dismissal without a valid ground.
  • Fraud (Article 3:44 paragraph 3 BW): if the employer deliberately provided false information to persuade you to sign the settlement agreement.

Act quickly

If you have doubts about a settlement agreement you have already signed, seek legal advice as soon as possible. The longer you wait, the harder it becomes to challenge the agreement. The limitation period for annulment on grounds of error or abuse of circumstances is three years, but the starting point differs per ground (for example, the moment of discovery in the case of error). Acting sooner significantly increases your chances.

Checklist: what to watch for with a settlement agreement during sick leave

If you are ill and receive a settlement agreement, it is essential to carefully check every component. Below you will find a comprehensive checklist with an explanation for each point.

  • Employer's initiative: the settlement agreement must unambiguously state that the initiative for termination lies with the employer. This is crucial for your entitlement to benefits. If this is missing or unclearly formulated, the UWV can refuse your application.
  • Dismissal ground: the stated reason for the dismissal may not be your illness. Another ground must be listed, such as a disrupted working relationship, a reorganisation or business economic reasons. The UWV checks this when assessing a Sickness Benefits Act application.
  • Compensation: is the severance payment appropriate for your situation? During illness, a compensation that is considerably higher than the statutory severance pay is justified. Take into account the missed continued wage payment, the lower benefit amount and the risk of your Sickness Benefits Act claim being refused.
  • End date and fictitious notice period: is the notice period correctly processed in the end date? The calculation of the fictitious notice period depends on the statutory notice period and the moment at which valid notice could have been given. An incorrect end date can lead to a waiting period without any benefit. Always have this checked by a lawyer.
  • Sickness Benefits Act provisions: have agreements been made about support for your Sickness Benefits Act application? Some employers include a provision in which they undertake to inform the UWV about the dismissal ground, which can support your application.
  • Non-compete clause: is any non-compete or non-solicitation clause being lifted? As a sick employee who may eventually return to work, it is important that you are not restricted in your future employment opportunities.
  • Certificate of employment: has it been agreed that you will receive a positive or neutral certificate of employment? This is important for your future job applications.
  • Release from duties: are you released from work with continued pay until the end date? This is common with a settlement agreement during illness and can give you peace of mind to focus on your recovery. It is not a statutory right, but a negotiable point.
  • Cooling-off period: is the 14-day cooling-off period correctly stated in the agreement? If not, the cooling-off period is automatically extended to 21 days.
  • Final discharge: check what the final discharge clause precisely entails. Ensure that any outstanding claims (such as unpaid holiday allowance or a bonus) are explicitly excluded or settled in the compensation.
  • Legal costs contribution: is a contribution included for your legal advice costs? For a settlement agreement during illness, the legal review is particularly important and it is reasonable for the employer to contribute to this.
  • Outplacement or reintegration budget: is a budget included for outplacement or reintegration after the end of the employment? This can be valuable for your return to the labour market.

With a settlement agreement during illness, professional legal advice is not merely advisable — it is essentially indispensable. The risks are too great and the subject matter too complex to make a well-considered decision without expert guidance.

A specialised lawyer can do the following for you:

  • Map out your legal position: how strong is your position? Can the employer dismiss you in another way, or are you fully protected by the dismissal ban?
  • Calculate the compensation: what is a fair compensation, taking into account the missed continued wage payment, your years of service and the financial damage you suffer?
  • Safeguard benefit entitlements: formulate the settlement agreement so that your entitlement to Sickness Benefits Act payments and any unemployment benefits is maximally secured.
  • Negotiate with your employer: a lawyer can effectively negotiate better terms, higher compensation and additional arrangements.
  • Review the entire agreement: assess all provisions against the law and your interests, from the dismissal ground to the final discharge.
  • Advise on alternatives: in some cases, it is wiser not to sign. A lawyer can advise you objectively on this.

Free settlement agreement check

Many employers include a contribution for legal costs in the settlement agreement. In addition, you can also turn to OntslagLegal to have your settlement agreement checked for free. Our lawyers assess the agreement on all important points and advise you on your options within 1 business day.

Never sign in haste

Your employer may pressure you to sign quickly. Some employers set a short deadline or suggest that the offer is only valid for a limited time. Remember: you are under no obligation, you always have the statutory 14-day cooling-off period, and the dismissal ban protects you. Take your time, seek advice and only then make a well-considered decision about your future.

Frequently asked questions about settlement agreements during sick leave

Can my employer dismiss me while I am on sick leave?

No, in principle your employer cannot unilaterally dismiss you during the first two years of illness. This is the dismissal ban of Article 7:670 BW. However, your employer can offer you a settlement agreement. A settlement agreement is a termination by mutual consent — you are not being dismissed, but you are agreeing to end the employment. This is why it is so important to understand the consequences before you sign.

Do I have to sign a settlement agreement during sick leave?

No, you are never obliged to sign. As a sick employee, you are in a strong legal position due to the dismissal ban. If you refuse, your employer generally cannot dismiss you. Take your time, seek legal advice and make an informed decision.

Will I receive a Sickness Benefits Act (Ziektewet) payment after signing?

Possibly, but it is not guaranteed. If you are still ill on the end date, you can apply for a Sickness Benefits Act payment from the UWV. However, the UWV assesses whether signing was a prejudicial act. If the settlement agreement is not properly drafted, you risk a reduction or complete refusal of your benefit. Have the agreement checked by a lawyer to minimise this risk.

What compensation should I receive for a settlement agreement during sick leave?

A fair compensation during illness is typically higher than the statutory severance pay alone. You should factor in the remaining continued wage payment you are giving up, the lower benefit amount you will receive, the risk of benefit refusal and the loss of reintegration support. A compensation consisting of the severance pay plus a substantial portion of the remaining wages is a reasonable starting point.

What is a prejudicial act (benadelingshandeling)?

A prejudicial act occurs when the UWV determines that you unnecessarily agreed to the termination of your employment while you were protected by the dismissal ban. The UWV applies Article 45 of the Sickness Benefits Act and can impose sanctions ranging from a reduction in your benefit to a complete refusal. The assessment depends on the specific circumstances of your case.

Can I undo a settlement agreement I already signed?

Within the 14-day cooling-off period (or 21 days if the period was not mentioned in the agreement), you can dissolve the agreement in writing without giving reasons. After the cooling-off period has expired, it becomes significantly more difficult. In exceptional cases, you may invoke error, abuse of circumstances or fraud, but this requires legal proceedings. Act as quickly as possible and seek legal advice immediately.

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