How final is the final discharge in termination agreements?
If employer and employee wish to terminate an employment contract by mutual agreement, they sign a termination agreement. A termination agreement often includes a final discharge clause. A final discharge clause ensures that parties do not have to renegotiate rights and compensation after the execution of the termination agreement. But how final is the final discharge clause in a termination agreement?
This article first discusses the importance of a final discharge clause in the termination agreement. It then discusses when a claim falls under the final discharge and the best way to formulate a final discharge clause. Finally, an illustrative reference is made to a judgment of the Court of Appeal of Den Bosch.
The importance of the final discharge in a termination agreement
Once employer and employee have decided to part company by mutual agreement, it is undesirable to have to renegotiate rights and obligations at a later date. The final discharge agreed in a termination agreement is intended to ensure that the parties have nothing more to claim from each other.
However, the final discharge in the termination agreement is not always final in practice. There are situations in which a discussion can arise about the question whether a claim does or does not fall under the final discharge, for example in the case of a “forgotten” claim.
What is covered by the final discharge in a termination agreement?
To determine whether a claim is subject to final discharge, the circumstances of the case must be considered. When interpreting the termination agreement the Haviltex-criterion is applied, which means that a judge not only interprets the final discharge clause linguistically, but also looks at the intentions of the parties and what they were entitled to understand between themselves. Various circumstances will be assessed, such as: the extensiveness of the negotiations, assistance by an agent, the knowledge and position of the parties and whether reservations were made.
Formulation of final discharge in a termination agreement
The discussion about which claims are subject to final discharge should therefore be limited as much as possible. This can be done first of all by recording in the stipulation what the parties have discussed. In other words, record all subjects which, according to the parties, are covered by the final discharge. This way the stipulation can be explained. In addition, specific subjects can also be excluded, so that there need not be any discussion about them.
Court of Appeal on the question: Does immaterial damage as a result of burn-out fall under the final discharge?
The Court of Appeal of Den Bosch ruled on the question whether immaterial damage as a result of an employee’s burn-out was covered by the final discharge clause. Employer and employee had entered into a termination agreement to end two proceedings. In 2015, employee fell on the job, after which she had to reintegrate. Later, after her full reintegration, a disrupted employment relationship arose and proceedings followed regarding the dissolution of the employment contract. The employee also instituted preliminary relief proceedings. During the hearing the parties agreed on an amicable settlement. The parties concluded a final discharge and only excluded personal injury. After concluding the termination agreement, the employee claimed non-material damages as a result of burnout. The Court of Appeal ruled that the damage relating to the burn-out was not part of the concept of injury as expressed in the final discharge clause. The reason was the background and contents of the two proceedings. For instance, the parties agreed that the ban on giving notice due to illness did not apply, there were no medical limitations according to the company doctor and furthermore, the employee had indicated that her stress-related complaints were no longer an issue. Furthermore, there was no evidence of negotiations on this point prior to the conclusion of the termination agreement.
Need advice from a lawyer in Rotterdam regarding final discharge of termination agreement?
As has become clear in this article, it is important to think carefully about the wording of a final discharge clause. The parties can limit the discussion as much as possible by formulating it correctly and appropriate to the circumstances.
Are you involved in negotiations about a termination agreement and do you want to know how to formulate the final discharge or are you having a discussion about a claim while you have agreed on a final discharge? Contact Lisa Kloot, an employment lawyer at LVH Advocaten in Rotterdam.
