Take timely measures with regard to your employees at the end of the franchise agreement

If you decide to terminate your franchise agreement and the franchise agreement comes to an end, it is important that the current employment contracts are also terminated. This can be done by separating by mutual consent after consultation with the employee. This should then be recorded in writing to prevent problems in the future. This is obviously the easiest way to end an employment contract.

In many cases, however, the employee will not agree with his or her ‘dismissal’. That changes things. If the latter is the case, it must first be checked whether the employment contract with the employee has been entered into for a definite or an indefinite period in order to know what action needs to be taken. If there is an employment contract for a definite period of time, it is generally possible to wait until the contract ends by operation of law when the time has elapsed.

In itself it is not necessary to cancel this agreement, but it is nice to let the employee know in advance that the agreement will not be extended. All the more so because the employee should not go to work one day after the termination of the employment contract, because then there is a risk that the employment contract is tacitly extended for the same duration.

This will not easily be the case if it has already been indicated that the employment contract will not be extended. Termination of the employment contract in connection with the end of the franchise agreement will generally be well accepted. Whether it is possible to terminate earlier, i.e. before the official end of the employment contract, depends on whether or not there is a clause in the contract that allows early termination.

In that case, a notice period is often included in the provision, which must in principle be adhered to. If an employment contract has been entered into for an indefinite period, it cannot simply be terminated. This requires a permit from the CWI (Centre for Work and Income). When the license is obtained from the CWI, it may be terminated with due observance of a notice period. Often the duration of the notice period is one month towards the end of the month. However, the duration of the notice period is related to what has been agreed with the employee and the duration of employment until then. It is therefore necessary to check what the notice period is in an individual case. Because the procedure at the CWI also takes about six to eight weeks, this means that action must be taken in good time before the end of the franchise agreement with regard to terminating the employment contract(s).

Incidentally, in principle no severance payment needs to be paid on termination of the employment contract with a dismissal permit from the CWI, unless this is manifestly unreasonable. Even if the option of terminating the employment contract through the subdistrict court is chosen, a certain duration must also be taken into account. In general, the procedure for dissolution of the employment contract by the subdistrict court is faster. Perhaps the subdistrict court judge will agree more quickly with the termination of the employment contract, because compensation is often awarded to the employee on the basis of the so-called subdistrict court formula.

It will be clear that when, other than in the event of bankruptcy, the franchise agreement is terminated, action must often also be taken in good time (often 6 months before the end of the franchise agreement) with regard to current employment contracts.

Ludwig & Van Dam franchise attorneys, franchise legal advice