When it comes to a settlement agreement, the details matter enormously, and the reason for dismissal is perhaps the most important detail of all. A neutral reason for dismissal protects both your unemployment benefit entitlement and your reputation in the job market. Yet this element is underestimated or overlooked by many employees.
What do we mean by a reason for dismissal in a settlement agreement?
A settlement agreement always states why the employment relationship is ending. This can range from a business-economic reason to an irreparably broken working relationship or a disagreement about the direction of the company. The way in which that reason is worded has significant consequences for what happens after the dismissal.
A neutral reason for dismissal is a formulation that places no blame on the employee. Think of phrases such as: ’the employment is ending due to a difference of opinion regarding the future scope of the role’ or ’the parties have concluded that the working relationship no longer aligns with their mutual expectations’. Such formulations are professional, factual, and carry no value judgement.
Why is the reason for dismissal so decisive for your unemployment benefit?
When assessing an unemployment benefit claim, the UWV considers whether you became unemployed through your own fault. If the settlement agreement contains anything that resembles underperformance, misconduct, or serious negligence, the UWV may conclude that you are to blame for the loss of your job. The result? A partial or complete refusal of your unemployment benefit.
Even if the actual reason for the dismissal was a conflict, that does not necessarily mean you were the guilty party. Nevertheless, an unfortunate formulation in the settlement agreement can easily give that impression. It is therefore essential that the reason for dismissal is worded carefully and neutrally.
What are examples of non-neutral formulations?
Employers sometimes write formulations that sound logical to them but can prove damaging to you as an employee. Pay particular attention to the following types of wording:
- References to ‘inadequate performance’ or ‘repeated warnings’
- Phrases such as ’the employee failed to comply with company rules’
- Descriptions that suggest you yourself requested or desired the dismissal
- Vague terms such as ‘irreparable breakdown of trust caused by the employee’
- References to previous improvement plans or PIP procedures
Any of these formulations can raise suspicion at the UWV and negatively influence the assessment of your unemployment benefit claim.
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Plan a conversationWhat effect does it have on your next job?
Beyond the unemployment benefit, the reason for dismissal also plays a role when applying for jobs. Although you are generally not required to show a settlement agreement to a new employer, during a job interview you will almost always be asked why your previous employment ended. A neutral reason gives you the freedom to steer that conversation yourself and come across professionally.
Furthermore, some employers request references from your previous employer. If the settlement agreement has a negative tone, there is a greater chance that the reference will lean in the same direction. A neutral formulation in the agreement sets the tone for how the conclusion of the employment relationship is perceived.
How do you ensure a neutral reason for dismissal?
Negotiating the reason for dismissal is a legitimate and sensible part of the settlement agreement process. You do not have to simply accept the first draft your employer draws up. Practical tips:
- Always read the reason for dismissal carefully before signing anything
- Ask your employer to amend the wording if it sounds too specific or negative
- Use the fourteen-day cooling-off period to have the wording reviewed at your leisure
- Have the formulation checked by an employment lawyer who is familiar with the UWV’s unemployment benefit assessment process
- Ask whether an addition such as ‘no fault attributable to the employee’ can be explicitly included
For broader context on everything that should be included in a settlement agreement during a dispute, it is worth consulting the page Settlement agreement in a dispute: your rights and approach.
Frequently asked questions
Can I still change the reason for dismissal after I have signed?
In principle, no — unless both parties agree and sign a new version. This makes it all the more important to negotiate thoroughly before signing.
What if my employer refuses a neutral formulation?
In that case, this is an important point for negotiation. An employment lawyer can help you put forward arguments and find a formulation that both parties can accept, without you putting your unemployment benefit rights at risk.
We're happy to help you brainstorm ideas. For advice tailored to your specific situation, we'd be happy to sit down with you. No rights can be derived from the content of this page and it may contain inaccuracies.
