i Sources of employment law
In the Netherlands, employment is regulated by three main sources: legislation, collective bargaining agreements (CBAs) and individual employment contracts.
The most important labour law regulations are set forth in Book 7 of the Dutch Civil Code. Various aspects of Dutch labour law are also governed in a number of specific acts, such as the Works Council Act and the Collective Dismissal Act.
International law, in particular European Community law, greatly impacts Dutch labour law. Under Article 153 of the Treaty on the Functioning of the European Union, the European Union issues directives that impose minimum requirements concerning terms of employment, working conditions, and informing and consulting with employees, which are generally incorporated into the local statutes. If they so wish, EU Member States may offer better protection to the employees than the directives require.
A CBA is an agreement between one or more employers or employers' organisations and one or more employees' organisations that mainly or exclusively regulates terms of employment that must be observed in employment contracts. It regulates many different aspects of the employment relationship between an employer and its employees. As a general rule, in the event of inconsistencies between the provisions of an applicable CBA and the provisions of an employment contract, the CBA will prevail.
Generally, an individual contract between an employee and an employer cannot deviate from statutory employment law and CBAs to the detriment of the employee. Thus, the freedom of contract is limited. An employment contract may also regulate aspects of the employment relationship that are governed by other sources of law, provided that the clauses agreed upon are more favourable for the employee.
ii Relevant courts and government authorities
There are three distinct courts in the Netherlands for civil and commercial matters: district courts, including the sub-district courts; courts of appeal; and the Supreme Court. In the public sector, individual labour disputes are regarded as administrative disputes and are consequently handled by a single judge of the administrative law sector of the court. In cases involving civil servants and social security issues, appeal is taken to the Central Appeals Tribunal, which is a special appeals tribunal.
The Employee Insurance Agency (UWV) is the government authority responsible for administering employee benefits (such as social security and welfare) and helping unemployed persons find work. In addition, the UWV determines the eligibility for work permits and processes requests for permission to terminate employment contracts on economic grounds or on the grounds of long-term disability (more than 104 weeks).
The Data Protection Authority oversees compliance with personal data protection laws.
The Netherlands Institute for Human Rights explains, monitors and protects human rights; promotes respect for human rights (including equal treatment) in practice, policy and legislation; and increases the awareness of human rights in the Netherlands.
II YEAR IN REVIEW
In November 2018, the legislative proposal for the Balanced Labour Market Act, which includes measures that will lead to major changes in employment law, was submitted to the House of Representatives. The Act is intended to enter into force on 1 January 2020. The most important changes resulting from this legislative proposal are outlined below.
At present, a request to terminate an employment contract submitted to the competent court must be based on a specific dismissal ground (e.g., inadequate performance or a damaged working relationship), which must be fully substantiated. The legislative proposal introduces a 'cumulative dismissal ground', which can be used for dismissal in cases where the facts and circumstances are not sufficient to fully substantiate one of the dismissal grounds stated in the law. If the court rescinds the employment contract on the basis of a cumulative dismissal ground, it may award the employee additional compensation of up to half the transition payment on top of the regular transition payment. Every termination, other than following retirement or for an urgent cause, will give rise to an obligation to pay the departing employee a transition payment. The payment is made up of one-sixth of the employee's gross monthly salary for each period of six months the employee has worked for the employer, with the total amount depending on the number of years in employment (e.g., the portion of monthly salary increases after 10 years' employment). The proposed amendments regarding the calculation of the payment will affect employees employed for more than 10 years and employees employed for less than two years.
Furthermore, at present, employers cannot offer their employees more than three consecutive fixed-term employment contracts over two years, without that contract being converted into an open-ended contract, unless the two-year period is interrupted for six months or more. Based on the legislative proposal for the Balanced Labour Market Act, the two-year period will be extended to three years.
Amendments to the current probationary period rules have also been proposed. Employers and employees would be allowed to agree to a probationary period of up to five months for open-ended employment contracts, as opposed to two months. With regard to fixed-term employment contracts concluded for two years or more, the legislative proposal seeks to increase the maximum probationary period from two months to three months.
III Significant CASES
On 23 July 2018, the Amsterdam court delivered a ruling on the question of whether the contract for services that Deliveroo (a food delivery company that works only with self-employed individuals) had concluded with one of its couriers should not in fact be regarded as an employment contract. In this highly casuistic case, the court found that no employment contract existed under the circumstances, and examined not only the parties' intention when they entered into the contract, but also the way in which they had shaped their relationship. Case law has established that no single factor is determinative, but the relevant factors that persuaded the court to rule in favour of a contract for services were the following:
- the average Deliveroo courier works for approximately four months for Deliveroo and desires maximum flexibility;
- the courier knowingly agreed to the conclusion of a contract for services, which offered him great flexibility;
- the courier could state his availability for work at any desired time and turn down any order;
- the courier could work in his own clothes, including the clothes of Deliveroo's competitors; and
- the courier could have someone else stand in for him, as long as Deliveroo's safety regulations were met.
The fact that Deliveroo employs a ranking system that rewards good performance with priority access enabling couriers to book a time slot and delivery zone first, was insufficient for the court to conclude that a relationship of authority existed between parties. Deliveroo's invoicing process, in which it records when a courier has worked and how many meals were delivered, also failed to establish the requisite authority. Nor was it sufficient that Deliveroo sets the rates, as market forces would have to play a role.
On 22 June 2018, the Supreme Court provided some guidance on the question of when an employer's specific non-contractual course of conduct results in an acquired employee benefit. Although no clear answer was given in this ruling, the Supreme Court did formulate six points of view, which are required to be taken into account in order to assess this question:
- the content of the course of conduct;
- the nature of the employment contract, and the employer's and employee's position towards each other;
- the length of time that the employer followed the specific course of conduct;
- everything the employer and employee have declared, or have not declared, to one another in respect of the course of conduct;
- the nature of the advantages and disadvantages associated with the specific course of conduct for both the employer and employee; and
- the nature and size of the group of employees in respect of which the employer followed the course of conduct.
In 2018, the Supreme Court also rendered an important judgment on the potential entitlement to a transition payment in the event of a justified instant dismissal. Under Dutch law, an employer does not, in principle, owe any transition payment if the employee commits a serious imputable act. On 30 March 2018, the Supreme Court ruled that a justified instant dismissal does not automatically imply that serious imputable acts have been committed. In the case in question, the employer instantly dismissed the employee because he came to work inebriated several times, which was not allowed under the employer's alcohol policy. The employee argued that he could not be blamed for his alcohol addiction, or that he was only partly to blame. The Supreme Court stated that a legally valid instant dismissal did not automatically disqualify the employee for a transition payment. Furthermore, the establishment of urgent cause does not mean that the dismissal is the result of serious imputable acts or omissions on the part of the employee.
IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
The law does not prescribe that employment contracts take a specific form; they may be either written or oral and can be agreed upon for a fixed term or an indeterminate period of time. This means that parties can, in principle, start an employment relationship without signing an employment contract. However, within one month of commencement of the employment, the employer is obligated to provide the employee with a written or electronic statement listing the following employment details:
- name and address of the parties;
- place where the work will be performed;
- position of the employee or nature of the work;
- date of commencement of employment;
- if the contract is concluded for a fixed term, the duration of the contract;
- the holiday entitlement or the manner in which holiday entitlement is calculated;
- remuneration and the periodic frequency of payment;
- usual daily or weekly number of hours of work;
- whether the employee will join a pension plan;
- any applicable CBA or scheme made by or on behalf of a competent authority;
- whether the employment contract is a secondment contract as defined in Section 690 of Book 7 of the Dutch Civil Code; and
- if the employee will work outside the Netherlands for a period in excess of one month, more information is required.
A non-compete clause, a probationary period and a unilateral amendment clause must be formalised in writing in order to be valid.
The employment contract or terms of employment can be amended with the employee's consent. The employer may unilaterally amend the contract only in a select number of cases. If the employment contract contains a unilateral amendment clause, this could facilitate a unilateral amendment, although to be able to implement an amendment, it must outweigh the employee's interest in keeping the terms of employment unchanged. If the parties have not agreed on a unilateral amendment clause, an amendment could be based on the obligation to be a good employer or employee, or on the principle of reasonableness and fairness.
ii Probationary periods
Probationary periods are only allowed in employment contracts with a duration of more than six months. Probationary periods in employment contracts with a term of six months or less are null and void. For the remainder, employers and employees are free to agree on a probationary period, as long as it is agreed in writing. The permissible duration of the probationary period depends on the duration of the employment contract. For example, the probationary period in employment contracts with a duration of less than two years may not be more than one month; the probationary period for employment contracts for two years or more may be two months at most.
If a probationary period is agreed to in violation of the rules, it will be null and void. During the probationary period, either party may terminate the employment contract with immediate effect without notice and without stating the reasons for termination.
As explained in Section II, the Balanced Labour Market Act introduces longer probationary periods of up to five months for open-ended employment contracts and three months for fixed-term employment contracts of two years or more.
iii Establishing a presence
Foreign companies can hire employees in the Netherlands without being officially registered in the country, although they may be required to register with the Dutch tax authorities if Dutch social security contributions are due.
Under certain circumstances, a foreign company may be required to or may voluntarily register with the Dutch tax authorities as a withholding agent. Registration is mandatory if a foreign company has a permanent establishment (PE) in the Netherlands. A PE is defined as a fixed place of business in the Netherlands through which the business of an enterprise is wholly or partly carried on. In principle, if a Dutch employee of a foreign company acts on behalf of that company, is authorised to conclude contracts in the Netherlands in the name of the foreign company and habitually exercises that right, then the foreign company is deemed to have a PE with respect to any activities undertaken by that person (permanent representative). Furthermore, a PE is deemed to exist if the foreign company makes employees available on the Dutch labour market or if the employee works on or above the Dutch part of the continental shelf for a consecutive period of at least 30 days.
If employees are hired through an agency or another third party, no registration will be required, provided that the agency or third party qualifies as an employer or withholding agent.
A foreign company can engage an independent contractor without being officially registered, although it should be carefully checked whether the tax authorities consider that relationship to be a de facto employment relationship. If an employment relationship is deemed to exist, that will result in a withholding obligation for the foreign company (see above). Effective 1 May 2016, a company is required to determine itself whether or not it has a withholding obligation for wage tax and social security contributions in relation to independent contractors. In 2017, the government published plans for the introduction of new legislation on the withholding of wage tax and social security contributions for independent contractors. The new legislation, which is scheduled to be introduced on 1 January 2021, will determine on the basis of two elements – the hourly rate and the duration of the contract – whether a working relationship qualifies as an employment contract or an independent contractor agreement. Until 1 January 2020, the Dutch tax authorities will pursue a lenient enforcement policy regarding the use of independent contractors, except in cases involving deliberate fraud or deception.
Companies must pay their employees a statutory minimum wage. The minimum wage amount depends on the employee's age.
All employees are entitled to a statutory minimum holiday that is calculated by multiplying the number of hours they work per week by four. This comes to 20 days in the case of full-time employment and is in addition to public holidays. Furthermore, employers must pay all employees a statutory holiday allowance of 8 per cent of the employee's gross annual salary, which may be included in an employee's salary provided that it is agreed in writing and the employee concerned earns more than three times the minimum wage.
V RESTRICTIVE COVENANTS
A non-compete clause can, in principle, only be agreed to in writing in an open-ended employment contract and if the contract is concluded with adult employees. An exception for the first mentioned rule is made for fixed-term employment contracts if it appears from a written statement included in the contract that the non-compete clause has been included by reason of substantial business interests. This necessity must exist not only when the employment contract is concluded, but also if and when the employer enforces the non-compete clause. A court may decide whether a non-compete clause is legally valid and should remain in force in its original form. It is ultimately up to the court to limit or even wholly or partially annul a non-compete clause if the employee's interest in having a free choice of work prevails over the employer's interests sought to be protected by the clause.
A generally accepted term for a non-compete clause is one year. The parties can agree that a penalty will be forfeited if the obligations arising from a non-compete clause are not fulfilled. An employer cannot rely on a non-compete clause in the case of serious imputable acts or omissions on the part of the employer.
Under the Balanced Labour Market Act, an employer can only enforce a non-compete clause where it terminates an open-ended employment contract during the probationary period and if it substantiates its major business interests in writing to the employee.
i Working time
Under the Working Hours Act, employees are allowed to work a maximum of 12 hours per day or 60 hours per week, although any given working week may not exceed an average of 48 hours over a 16-week period or an average of 55 hours over a four-week period. However, it is possible to deviate from the latter requirement in a CBA. Generally, employees must have 11 hours of rest each day, which may be brought back to no less than eight hours, and 36 consecutive hours of rest once every week or 72 hours every two weeks.
Night work is allowed subject to a maximum of 10 hours per shift, which may be extended by two hours for a maximum of five times per two weeks and 22 times per year. After an extended night shift, employees should get a minimum of 12 hours' rest. In each period of 16 weeks, an employee can work a maximum of 36 night shifts that end after 2am. If a shift ends after 2am, employees may not, in principle, work for 14 hours. In the case of 16 night shifts in 16 consecutive weeks, employees may only work for a maximum of 40 hours a week.
Overtime pay is not regulated. The question of whether overtime is payable or if a threshold applies depends on the contractual arrangements between the parties or in the CBA if one is in place. In most cases, the applicable CBA will contain rules stating when overtime must be paid, for example by means of extra salary payments or time off in lieu.
Similarly, there are no statutory rates for overtime pay. The maximum working hours mentioned above also govern the maximum overtime.
VII FOREIGN WORKERS
Employers are not required to keep records of foreign workers. However, they are obliged to verify the authenticity of their workers' identification documents and must keep copies on file for each employee. Copies of these documents may be kept for a maximum of five years after the termination of employment. The law does not limit the number of foreign workers in a workplace or company.
Under the Employment of Foreigners Act, a work permit and residence permit is required for workers from outside the European Union. These permits are issued by the Immigration and Naturalisation Service, in some cases based on advice obtained from the UWV. Employers must apply for these permits. As a rule, an employer will only be granted a permit if it proves that no EU workers are available for the job. Workers from outside the European Union who have legally worked in the Netherlands for at least five years no longer need a work permit.
When a work permit and residence permit has been approved, the foreign worker must first obtain a temporary residence permit (MVV) before coming to the Netherlands. Foreigners from a number of countries (Australia, Canada, New Zealand, the United States, Japan and South Korea) are exempt from this MVV requirement. After the foreign worker has travelled to the Netherlands with an MVV, the work permit and residence permit are granted automatically.
A work and residence permit is required for a stay of more than 90 days in the Netherlands. Shorter work assignments can be covered by a work permit, combined with a Schengen visa (unless the applicant is from a visa waiver country). Generally, the holder of a residence permit is under the same obligations as Dutch nationals (i.e., taxes, social security contributions and customs duties). Residence permits are issued for the period of the work permit. Foreign workers become eligible for a permanent residence permit if the Netherlands has been their principal country of residence for five years, if they work on a regular basis and if they earn sufficient income. Since 1 January 2010, all foreigners are required to pass an integration test to be eligible for a permanent residence permit.
The most common work and residence permit for highly skilled workers is the knowledge migrant permit (KMR). The only requirement to obtain a KMR permit is that the employee must earn a salary of at least €4,500 gross per month, exclusive of 8 per cent statutory holiday allowance or, if the employee is younger than 30, at least €3,299 gross per month (these amounts apply for 2019). Furthermore, the employer must have obtained recognised sponsor status from the Immigration and Naturalisation Service.
Since 2016, foreign workers who are transferred to the Netherlands as intra-corporate transferees and who fall under the scope of the Intra-corporate Transferees (ICT) Directive (Directive 2014/66/EU), must apply for an ICT permit. The Directive's scope covers employees transferred by a company based outside the European Union to an establishment of the same company or group of companies in the European Union, and having a contract with the home entity. The requirements for an ICT permit are largely the same as for a KMR permit, although the salary thresholds are applied slightly less strictly. An ICT permit is valid for a maximum of three years, after which it can be converted into a KMR permit, regardless of whether the contract is transferred to the host entity. The salary thresholds will, however, be applied strictly.
VIII GLOBAL POLICIES
An employer may choose to adopt a global policy or code of conduct, but is generally not required to do so. Notwithstanding the lack of a formal requirement, many companies, both publicly and privately held, have opted to issue codes of ethics or conduct that identify the principles by which employees are expected to conduct themselves. Doing so is not only a way of attempting to ensure that their employees will act in an honest and ethical manner, but can also help defend against an action for improper conduct. If the company can point to the existence of, and internal adherence to, a well-drafted code of conduct, it may assist the company in demonstrating that unethical conduct ran counter to the company's directives and operating culture. Although difficult to generalise because the sector or industry in which the company operates will influence the substance of its code of conduct, the following topics are often included:
- compliance with laws and regulations;
- preventing conflicts of interests;
- attention to people and environment;
- fairness in financial reporting;
- protecting the company's assets; and
- commitments relating to human rights, freedom of association, elimination of forced or child labour and elimination of discrimination and harassment.
Some companies have extended the application of codes of conduct to their interaction with suppliers.
Codes of conduct do not have to be written in Dutch and employees do not have to confirm their acceptance and compliance with the code. The only requirement is that companies must ensure that the employees who are bound by the code understand its contents. However, the company's position will improve if its employees acknowledge in writing that they have received and will comply with the code of conduct. Most companies will include such acknowledgments in employment contracts with their employees. Some companies require their employees to acknowledge receipt and understanding of the code, including its updates, on an annual basis.
The law does not contain any statutory provisions that prescribe the language in which employment-related documents, such as job offers, employment contracts, confidentiality agreements and restrictive covenants, must be drafted. The employee must, however, be able to understand the contents of these documents and employers should cooperate with an employee's request to have the documents translated. It is advisable that employers translate the employment documents of non-skilled employees into the employees' native languages. Documents not drafted in Dutch are often drafted in English.
X EMPLOYEE REPRESENTATION
Workers have freedom of association and representation, based on the European Social Charter and the Dutch Constitution. Under the Works Council Act, workers can furthermore be represented by a works council or an employee representative body. Trade union membership is voluntary. A worker must submit an application to a trade union to become a member.
i Works council
A company that employs 50 or more employees must establish a works council, which represents the employees of the company in relation to the company's management. If a company does not fulfil the obligation to create a works council where required, any interested party can ask the court to order the company to establish one.
To represent the employees as best as possible, a works council has various rights and obligations, including:
- the right to be consulted on the company's important financial, economic and organisational decisions;
- the right to approve regulations concerning the social policy pursued by the company; and
- the right to be consulted on the appointment and dismissal of the company's managing board.
If management violates these rights, the works council may seek redress in court.
Works councils consists of between five and 25 members, depending on the number of persons employed. The election procedure is established in the Works Council Act. The membership term is three years, unless the works council itself determines that the term will be two or four years. Members of the works council are protected against dismissal and discrimination.
Companies must give their works council members a specified number of hours to meet and discuss works council matters with other members during working hours, for which hours the members will receive full pay.
Companies that employ between 10 and 50 employees may be under an obligation to establish an employee representative body.
ii Trade union
A trade union represents the interests of individual employees and groups of employees and of other members. In practice, this means that the work of trade unions predominantly involves representing the collective interests of employees in a particular industry or sector. This includes:
- assisting in the negotiations regarding the collective terms of employment in connection with the formation of CBAs;
- drafting redundancy plans; and
- providing guidance in the event of forced redundancy in organisations.
CBAs dominate at industry level. Negotiations normally take place between the trade unions and a company (if a CBA is in place) or the trade union and the employers' association (if a single industry-wide CBA is in place). The main purpose of CBAs is to set fixed wages. Additionally, they cover issues such as working hours, holiday entitlements, pension and pre-pension plans, and social matters. At the company level, the employer's representatives bargain directly with the workers' representatives.
XI DATA PROTECTION
i Requirements for registration
The General Data Protection Regulation (GDPR) was implemented in all European countries on 25 May 2018 to harmonise data privacy laws across Europe. The GDPR replaces the Dutch Personal Data Protection Act and is accompanied by the General Data Protection Regulation (Implementation) Act.
The data protection officer (if available) has the obligation to inform the data subjects, among other things, about the identity and contact details of the data controller, the contact details of the data protection officer, the purpose of processing data, the recipients of the data and the retention period.
The data controller must implement appropriate technical as well as organisational measures to secure personal data against loss or against any form of unlawful processing. These measures will guarantee the appropriate level of security given the risks associated with the processing and the nature of the data being protected. The measures must also aim to prevent unnecessary collection and further processing of personal data.
In principle, the data should be accessible to the data subjects. Consequently, data subjects may ask, at reasonable intervals, whether (and what) personal data relating to them is processed. Furthermore, data subjects can, under certain circumstances, request the employer to rectify, supplement or erase personal data, or can object to certain processing of personal data.
The Dutch Data Protection Authority supervises compliance with legislation on the use of personal data. This data may be processed in a personnel file if it is necessary in connection with the performance of the employment contract. The obligations arising from the Data Protection Authority include the following:
- Employers are responsible for ensuring that the data in their personnel records are correct and accurate.
- Data in personnel files must be sufficient, serve the purpose at hand and not be excessive, given the purpose for which they are processed.
- Employers must inform their employees about the purposes for which they are collecting the employees' data.
- Employers must take suitable technical and organisational measures to secure personal data against loss because of any form of unlawful processing.
- Personal data may not be stored any longer than is necessary to achieve the purposes for which they are collected and subsequently used.
- Employers must afford their employees the opportunity to inspect their personal data and to correct them. This right of inspection generally applies to the entire personnel file.
The Dutch Data Leaks (Reporting Obligation) Act took effect on 1 January 2016. This Act imposes an obligation on organisations (both businesses and government bodies) to immediately notify the Data Protection Authority in the event of a serious data breach.
ii Cross-border data transfers
Personal data may not be exported to countries outside the European Union, unless the receiving country guarantees an adequate level of protection. No exceptions apply to transmitting personal data to group companies. The party responsible must assess whether the receiving country provides an adequate level of protection. For example, such an assessment might be made by checking whether the European Commission (EC) or the Dutch Minister of Justice has issued an opinion about the level of protection in the third country. The EC has decided that the following countries provide adequate levels of protection: Jersey, Andorra, Argentina, Canada (the parts that fall under the Canadian Personal Information Protection and Electronic Documents Act), Faeroe Islands, Guernsey, Isle of Man, Switzerland and Uruguay. The countries belonging to the European Economic Area also are deemed to guarantee an adequate level of protection.
Given that no general federal legislation on the protection of personal data exists in the United States, it is difficult to assess whether an adequate level of protection exists. On 12 July 2016, the EC adopted the EU–US Privacy Shield adequacy decision. Every organisation in the United States that is certified by the privacy shield has an appropriate level of protection (for the duration of the certification).
iii Sensitive data
The processing of special personal data, such as data regarding race or ethnic origin, political opinions, religious or personal beliefs, membership of a union, genetic or biometric identification data, health, sexual preferences or criminal record is, in principle, prohibited. The GDPR provides circumstances where the processing of sensitive personal data is allowed, for example, if the data subject has given his or her explicit consent, or if he or she has manifestly made the data public.
iv Background checks
It is common for companies to conduct a background check when they intend to hire a new employee. This background check may include asking the job applicant for additional background information, researching public resources (the internet, social media) or checking references. From a privacy law perspective, it is important to tailor screening activities to the position and qualifications needed. In this respect, the interest of the future employer should be weighed against the applicant's privacy interest. Furthermore, discrimination on the grounds of age, race, gender, religion, belief, political conviction, nationality, sexual orientation, marital status, disability or chronic disease is prohibited.
Employers may only obtain information about credit records through the applicant or employee through a public source or with his or her permission. Applicants and employees are not obligated to answer questions about their credit record, unless it is relevant to the performance of the job. Whether processing these data is permitted will depend on the position. Information about criminal records of applicants and employees qualifies as sensitive personal data. Processing these data is prohibited unless a statutory exception applies. If, however, criminal records are relevant for the performance of a job, applicants and employees must inform the employer about them (e.g., an accountant who has been convicted of fraud or a primary school teacher who has been convicted of child abuse). The employer may ask an applicant or employee to provide a certificate of conduct issued by the Judicial Agency for Testing, Integrity and Screening of the Ministry of Security and Justice if the certificate is relevant for the position.
In addition to the above, it is generally prohibited to request medical tests, ask questions about the use of illegal narcotics (in spare time) and to process health data. Drug or alcohol tests are considered medical tests and the related data is health data.
XII DISCONTINUING EMPLOYMENT
Employees may be dismissed only if the employer has a reasonable ground for dismissal. Depending on the grounds for dismissal, an employment contract can be terminated by proper notice, with prior permission from the UWV, or if it is rescinded by the sub-district court. In addition, the parties may terminate an employment contract by mutual consent and memorialise their terms in a settlement agreement.
Termination by mutual consent
Settlement agreements are valid only if they are concluded in writing. Employees have the option to terminate settlement agreements within 14 days, either by withdrawing their consent (without giving a reason) or by rescinding the settlement agreement out of court. Employers are obliged to point out this option to employees; failure to do so extends the 14-day period to three weeks.
Notice after permission from the UWV
Employers have to request permission from the UWV to terminate an employment contract on economic grounds or on the ground of an employee's long-term illness (more than 104 weeks).
If permission is granted, the employer may deduct the time the UWV or the collective dismissal committee needed to process the application from the applicable notice period to a minimum of one month. In employment contracts, the parties often refer to the statutory notice period, which is one month for the employee. The employer's statutory notice period depends on the length of the employment and is one month for employment contracts with a duration of less than five years, two months for contracts with a duration of between five and 10 years, three months for contracts with a duration of 10 to 15 years, and four months for contracts with a duration of more than 15 years. The parties can also agree on a different notice period, with a maximum of six months for the employee, but in that case the employer's notice period must be twice as long as the employee's notice period. Payment in lieu of notice is not allowed.
If an employer acts in violation of the rules for giving notice of termination, the employee may seek annulment of the notice of termination, or ask for fair compensation. If the UWV or the collective dismissal committee has given the employer permission to terminate the employment contract and the employer has done so, the employee may also request the sub-district court to restore the employment contract or to award fair compensation. These proceedings are initiated by submitting an application.
Even if a dismissal permit has been granted, a dismissal will be prohibited if it occurs during the first two years of illness, concerns an employee who is pregnant or on maternity leave or ill due to pregnancy or childbirth, is based on the employee's membership of a trade union, is based on the employee's attendance of meetings of political organisations, is based on the employee exercising his or her right to parental leave, or involves any discrimination.
Requesting the sub-district court to rescind the employment agreement
The sub-district court is designated to review the other grounds for dismissal in termination proceedings. In these cases, employers are not entitled to follow the UWV procedure. The requests concern termination on the grounds of, among other things, the employee repeatedly calling in sick, unsuitability, imputable acts, refusal to perform work and damaged working relationships. Furthermore, the sub-district court is the designated dismissal route in situations involving fixed-term employment contracts that do not include a clause on giving early notice of termination, if the employment contract is terminated on economic or long-term illness grounds. Employers can also apply to the sub-district court if the UWV has refused to grant permission to give notice of termination.
The application on which a termination request is based must fully substantiate at least one of the reasonable grounds in order for the court to rescind the employment contract, which will be terminated on the date ordered by the court. When terminating the contract, the court will take the applicable notice period into account and deduct the time the court proceedings took. After these court proceedings, it is possible to file an appeal with the appeal court and subsequently with the Supreme Court.
Employers must substantiate that it is not possible to reassign the employee – even after training – to a suitable alternative position within the company or the group. If a suitable alternative position is available, the employer must offer it to the employee. In such a case, the employer does not have the right to terminate the employment contract.
Transition payment and fair compensation
All employees employed for two years or more and whose employment contracts end, or employees with fixed-term employment contacts that are not renewed, are generally entitled to a transition payment. As a rule, employees are not entitled to a transition payment if their employment contracts are terminated by mutual consent, but this will naturally play a role when arrangements are made regarding the termination. In addition, employees are not entitled to a transition payment (1) if the employment contract is terminated on the employee's initiative (except in the event of serious imputable acts or omissions on the part of the employer), (2) if the employee has committed serious imputable acts or omissions, or (3) in the case of termination on or after the employee has reached state retirement age or a different retirement age.
The payment is not age-related and amounts to one-sixth of the monthly salary for each six months of service over the first 10 years of the employment contract. For each period of six months after that, the transition payment amounts to one-quarter of the monthly salary. Until 2020, a higher calculation standard applies to employees above the age of 50, except in the case of small employers (with 25 employees or fewer) where the dismissal was prompted by the small employer's poor financial situation. Monthly salary means one month's gross salary plus fixed wage components. The payment is set at a maximum of €81,000 gross or one annual salary for employees who earn more than this amount. When entering into an employment contract, employers and employees may agree on a higher payment, but not a lower payment.
If the employment contract was terminated on the grounds of serious imputable acts or omissions on the part of the employer, the sub-district court may award additional compensation to the employee.
Under the Balanced Labour Market Act, employees will be entitled to a transition payment from the first day of employment. Furthermore, the distinction between 10 or more years of service will be eliminated: the transition payment will amount to one-third of the monthly salary for each year of service. Moreover, if a termination is based on the cumulative dismissal ground, the court may grant the employee an additional payment of a maximum of 50 per cent of the transition payment.
Both employers and employees are entitled to terminate employment contracts with immediate effect for urgent cause, without having to observe the statutory or contractual notice period and without having to seek a permit from the UWV. Examples of urgent causes that may justify an instant dismissal include theft, fraud, embezzlement and physical abuse. In an adjudication to determine the existence of urgent cause for termination, all relevant circumstances of the situation, including the personal circumstances of the employee, must be considered. A court will ultimately determine whether the urgent cause has been shown. Instant dismissal is an extreme measure and courts are conservative in adopting an urgent cause.
It is possible to make employees redundant for economic reasons. In such cases employers must follow the UWV procedure or try to reach a settlement with the employee or employees in question. The rules (e.g., notification period, pay in lieu of notice, severance payment, categories of employees protected against dismissal) described in subsection i also apply to cases involving redundancy.
In the event of mass lay-offs, additional rules apply. A mass lay-off occurs when a company decides to dismiss 20 employees or more, within three months and within an area of activity of the UWV. Companies must notify both the UWV and the relevant trade unions of mass lay-offs, and state the following: the reasons for the lay-off; whether the works council was consulted; and the number of employees concerned, including details about the employees' functions, ages and years of service.
After it has notified the UWV accordingly, the employer can choose to follow the individual termination procedures with the UWV or try to settle with each individual employee concerned.
The UWV may not consider the request for a permit until one month after the date of notification, unless this statutory waiting period would hinder the re-employment possibilities of the employees who will be dismissed or the employment of other employees in the company. If a statement from the trade unions affirming that the employer consulted them on this matter is attached to the employer's notification to the UWV, the UWV will consider the request for a permit immediately, without observing the one-month waiting period.
If an employer does not give the required advance notification but ultimately requests permission from the UWV to dismiss 20 or more employees within three months, the aforementioned statutory waiting period is increased to two months. The purpose of the statutory waiting period is to facilitate consultations between the employer and the trade unions.
If a company has a works council, the works council should be given the opportunity to advise on the proposed decision to reorganise the organisation. The employer is obliged to submit its proposed decision in written form (a request for an advice) to the works council at such a moment that the works council can still have a significant impact on the proposed decision. A request for advice must, at a minimum, include a statement of the grounds for the proposed decision, the consequences anticipated for the persons who work for the company, and the proposed measures that will be taken in that respect. If and when requested by the works council, the employer is obliged to provide the works council with all information and data that it reasonably requires to perform its duties, in a timely fashion and in written form if so required. Generally speaking, the works council may decide what information is reasonably necessary for it to perform its duties.
Before it issues its advice, the works council and the employer will deliberate on the matter concerned at least once in a consultative meeting, which means that the employer is obliged to join the meeting and to provide the works council with the requested information. The employer has to give the works council a reasonable period of time to issue its advice. Although one month is considered to be a reasonable period, it is likely that the works council will request more time. Therefore, it is not uncommon for the whole consultation procedure to take six to eight weeks.
If the works council's advice is not followed, or is not followed in its entirety, the employer must inform the works council of the reasons for not following the advice. This will delay the process and, as a consequence, the employer will have to suspend the implementation of its decision until one month after the date on which the works council was notified of the decision. If the decision is fully in line with the advice, the employer may implement the decision immediately.
Where dismissals are the result of a reorganisation, the employer can provide for financial compensation in a social plan. Employers have no obligation to draw up or negotiate a social plan. However, in the event of a mass lay-off, the employer will benefit from setting a standard for the financial compensation in a social plan and the works council will require a social plan as part of the mandatory advice procedure. If trade unions are not involved in the matter, a social plan is sometimes agreed to with the works council, or simply drafted unilaterally by the employer.
XIII TRANSFER OF AN UNDERTAKING
The Dutch Civil Code (Article 7:662 et seq.) applies where an undertaking is transferred in whole or in part from one employer (transferor) to another (transferee). The Code implements the Transfer of Undertakings (Protection of Employment) Regulations (the TUPE Regulations) regarding the safeguarding of employees' rights in the event of a complete or partial transfer of an undertaking. If a transfer qualifies as a transfer of undertaking under the TUPE Regulations, the employees employed by the transferor, including all their rights and obligations, are automatically transferred to the transferee. This means that the employees' employment contracts, including the existing terms of employment, non-compete clauses and the provisions of CBAs become the transferee's responsibility. Whether a transaction qualifies as a transfer of an undertaking depends on the facts and circumstances of the case. The transferor and transferee remain jointly and severally liable for obligations towards the employees for one year after the transfer date.
If employees object to the transfer and do not wish to continue the employment contract with the transferee, the employment contract with the transferor will end by operation of law on the transfer date. Neither the transferor nor the transferee has any obligations towards the employee in this termination.
The respective rules do not apply to the transfer of an undertaking by receivers in the event of the insolvency of the transferred business. Moreover, the transfer of an undertaking is not considered a valid reason for terminating an employment contract.
The Civil Servants Normalisation of Legal Status Act will enter into force on 1 January 2020. This Act makes the legal status of civil servants largely equivalent to that of private-sector employees. Certain groups of civil servants are excluded, namely political officials, the judiciary, military officials (including civilian personnel), the military service, notaries, bailiffs and police officers. The Central and Local Government Personnel Act will continue to apply to this group of civil servants. One consequence of this change and the new Civil Servants Normalisation of Legal Status Act is that the majority of civil servants will be subject to civil law instead of the rules of administrative law.
As set out in Section II, a number of significant changes are proposed in the Balanced Labour Market Act, which is expected to enter into force on 1 January 2020.
With regard to independent workers, the government has announced that it will draft a new act to replace the existing Deregulation of Assessment of Independent Contractor Status Act. The reason for amending the existing legislation is twofold: to strengthen the position of independent contractors and to afford employers a greater degree of certainty about the nature of the relationship (independent worker versus employee). The new act is currently expected to enter into force in 2020, but the government has already announced that, owing to the complexity of this subject, it might be difficult to meet this deadline.
1 Dirk Jan Rutgers is a partner, Inge de Laat is the managing partner and Annemarth Hiebendaal is an associate at Rutgers & Posch.