Have you received a settlement agreement (VSO) from your employer and are you wondering whether you should sign it? For many employees, this is a stressful moment. Signing sometimes seems the quickest way out, but it can have major legal and financial consequences.
In this article we explain in detail when you should or should not sign a settlement agreement, what risks are involved, and how you can prevent losing your rights.
This article belongs to our pillar: dismissal with settlement agreement.
What does signing a settlement agreement mean?
By signing a settlement agreement, you agree to the termination of your employment contract under the conditions stated in the agreement. No court or authority will be involved.
This means:
- you consent to the end of your employment;
- you accept the agreed compensation;
- you often waive further claims;
- you (co-)determine your own legal position.
Precisely for this reason, caution is advised.
When is it wise not to sign (yet)?
It is wise not to sign immediately when:
- you do not fully understand the content;
- it is unclear who initiated the dismissal;
- the compensation feels low;
- there is illness or a conflict;
- non-compete or non-solicitation clauses are included;
- you doubt your entitlement to unemployment benefits.
In these situations, legal assessment is essential.
Practical example: signed too quickly
An employee receives a settlement agreement with one month's salary as compensation and signs immediately out of fear of dismissal. It later turns out the employer had no file and a much higher compensation was achievable. Problems also arose with unemployment benefits.
Lesson: signing too quickly can cost you a lot of money.
When can it be wise to sign?
Signing can be wise when:
- the conditions are legally correct;
- your right to unemployment benefits is secured;
- the compensation is reasonable or favourable;
- no unfavourable clauses remain in effect;
- you consciously choose to settle.
Even then: have the proposal checked first.
Signing a settlement agreement and unemployment benefits
A common concern is: will I lose my right to unemployment benefits if I sign?
That does not have to be the case, provided the settlement agreement is correctly drafted. It is crucial that:
- the initiative lies with the employer;
- you are not at fault;
- the notice period is correctly applied.
More information about unemployment benefit conditions can be found at: uwv.nl – Unemployment benefits (WW)
Cooling-off period after signing
Have you already signed the settlement agreement? You then have a statutory 14-day cooling-off period. Within that period, you can dissolve the agreement without giving any reason.
This cooling-off period must be explicitly mentioned in the settlement agreement. If not, the cooling-off period is extended.
Pitfalls when signing a settlement agreement
Common pitfalls include:
- overly broad final discharge;
- forgotten bonus or overtime claims;
- continuing non-compete clause;
- unclear end date;
- incorrectly worded reason for dismissal.
These issues often only come to light after the agreement has been signed.
Step-by-step plan: settlement agreement received – what now?
- Do not sign immediately.
- Read the agreement completely.
- Check unemployment benefit security.
- Have the settlement agreement legally assessed.
- Negotiate where possible.
- Only then make a decision.
Read more about negotiating in: negotiating a settlement agreement
Frequently asked questions about signing a settlement agreement
Am I obliged to sign a settlement agreement?
No. You are never obliged to sign.
Can my employer force me?
No. Dismissal can only be enforced through a formal dismissal procedure.
What if I have already signed?
Then you can use the 14-day cooling-off period.
Is signing always bad?
No. A well-negotiated settlement agreement can actually be favourable.
Should I always hire a lawyer?
That is not mandatory, but strongly recommended.
Signing a settlement agreement? Have it assessed first
A settlement agreement determines your future. A brief check beforehand can prevent major problems afterwards.