Book 7 of the Dutch Civil Code provides general rules on employment; for instance, rules on employment contracts, employment terms and conditions, equal treatment and termination of employment.
To a certain extent, employers and employees can derogate from the Civil Code in individual or collective employment contracts (collective labour agreements, or CLAs). CLAs form a major source of employment law. Based on the Dutch system of declaring certain CLAs from a particular sector to be generally applicable for the whole sector, a large majority of the employment relationships of Dutch employees (in 2016, approximately 80 per cent) are covered by such CLAs.
In many areas of employment law, detailed rules and regulations are covered in special acts, such as the Works Council Act, the Collective Dismissal Act and the Working Time Act. Many employment rules and regulations stem from EU legislation.
In general, all employment-related claims fall within the jurisdiction of the county courts. Termination of employment claims involving a board member (statutory director) will have to be initiated before the district court. Employment proceedings (including proceedings initiated before the district court) are subject to appeal to the Court of Appeal and appeal in cassation to the Supreme Court in The Hague.
Both the employer and the employee may initiate preliminary relief proceedings. To start preliminary relief proceedings, the claimant must be able to demonstrate an urgent interest in obtaining a speedy ruling from the court. Preliminary relief proceedings are subject to appeal, and appeal in cassation.
Legal proceedings initiated by the works council pursuant to the Works Council Act can be instigated before the county court or a special Enterprise Chamber of the Amsterdam Court of Appeal (see below for further explanation).
As an exception to the general rules that county courts have jurisdiction in employment matters, tor dismissals of employees for business-related reasons or long-term sickness, the employer must approach the Labour Office for permission to give notice of termination. The Labour Office’s decision on the intended termination of employment is subject to appeal to the county court, and further to appeal to the Court of Appeal, and to appeal in cassation to the Supreme Court.
An employee experiencing unequal treatment can ask the Netherlands Institute for Human Rights to investigate the matter. The Institute explains, monitors and protects human rights, promotes respect for human rights (including equal treatment), policy and legislation, and increases awareness of human rights in the Netherlands. The Institute provides non-binding opinions, which are generally followed by parties involved. A negative opinion is generally considered to harm the reputation of the employer.
Ii YEAR IN REVIEW
On 1 January 2015 and 1 July 2015, an extensive package of measures was implemented, aiming to increase the flexibility of the Dutch labour market and simplify dismissal and severance rules. In 2016 we have seen courts struggling with the interpretation of some of the new rules. A major issue is ‘fair compensation’. We will elaborate on this below.
As of 1 April 2016, employers employing 50 employees or more are required to have a whistle-blowing policy in place. An independent governmental body called the House for Whistle-blowers was established, which investigates wrongdoings at the request of whistle-blowers and advises whistle-blowers about their position and possible actions. It provides whistle-blowers with protection against detrimental measures of their employers.
On 1 January 2016, two important changes in Dutch data protection law came into force. Data processors are since then required to notify the Dutch Data Protection Authority, and on some occasions notify the data subjects concerned in the event of a personal data security breach that leads to a significant chance of adverse consequences for the protection of personal data. As of the same date, administrative fines can be imposed in the event of a breach of the main rules under the Dutch Data Protection Act. These fines can amount up to €820,000 or 10 per cent of the annual turnover in the case of a legal entity. Employers can be data controllers, so should make sure that they meet the Dutch data protection rules regarding the processing of personal data of their employees, particularly if data are stored in, transferred to or accessible from locations outside the European Economic Area.
Iii SIGNIFICANT CASES
Over the past 18 months, courts have produced interesting case law on the new employment law rules that came into force in 2015. However, many questions of interpretation remain unanswered. Much debated is how high the ‘fair compensation’ paid on top of the statutory severance (transition fee) in cases of seriously culpable behaviour on the side of the employer should be (see below), as the legislator provides almost no guidance in this respect. So far, no examples exist of cases in which the court decided on a high fair compensation compared to statutory severance the employee was entitled to. The Supreme Court has not yet rendered any decision.
In the Netherlands, temp agencies employ temp workers under an ‘employer-friendly regime’, as laid down in Articles 7:690 and 7:691 Dutch Civil Code, which provides that no dismissal protection exists for these temp workers during the first 78 weeks of employment, even in case of illness. Until recently, it was assumed that only temp agencies could use this employer-friendly regime. Payrolling companies seconding staff on a permanent basis to a third party were not allowed to make use of this regime. The Supreme Court held on 4 November 2016 that payrolling companies are allowed to apply the regime enabling them – like temp agencies – to dismiss employees more easily. The Supreme Court indicated that it is now up to the legislator to make sure that no unreasonable situations will arise in which employees of payrolling agencies are being more easily dismissed than they could expect when becoming employed with the payrolling company. The Dutch Minister of Social Affairs has stated in a reaction to the Supreme Court ruling that this will be an issue for after the parliamentary elections in April 2017.
Iv BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
Under Dutch law, an employment contract does not need to be in writing or in any particular other form. It can be agreed upon orally, but a written employment contract is recommended as evidence of terms of employment. Since there is no legal requirement to have a written employment contract, the parties could start their employment relationship if no contract has been signed. They would breach the law, however, because some information has to be provided to the employee in writing. Certain provisions, such as a probationary period and a non-compete clause, must be embodied in a written contract signed by both parties in order to be valid.
Following a European directive, the employee must receive specific information such as the name of the employer, the place of work and the holiday entitlement in writing. The following information must be provided to the employee in writing to be included in the employment contract:
- a the name and domicile of the parties;
- b the place of employment;
- c the function of employee;
- d the date of employment;
- e if the employment contract is for a limited time, the duration of the agreement;
- f the holiday entitlement and the way it is determined;
- g the notice period for both parties;
- h the salary and when this will be paid out;
- i the usual working hours per day or per week;
- j whether there will be a pension scheme;
- k the applicability of a collective labour agreement;
- l if the employee will be working outside the Netherlands for longer than one month, certain specific information must be provided; and
- m whether the contract is a temporary employment contract.
Probationary periods are allowed depending on the circumstances (see below).
Post-contractual obligations can be agreed on, although there are restrictions in case of temporary employment contracts. As of 1 January 2015, non-compete clauses may no longer be included in temporary employment contracts. The only exception to this rule is a situation where the employer has a major business interest in including such a clause and this interest is (sufficiently) substantiated in writing. Such interest must be present both when the contract is entered into and when the contract ends, failing which the non-compete clause cannot be relied upon. It will be up to the courts to develop further guidelines in this respect. The first signs are that the courts will be very strict and will not easily acknowledge the existence of a major business interest.
When judging a case or an employment contract, it should be verified whether one or more collective labour agreements, a compulsory sector pension fund or employee handbooks (often with a different name such as code of conduct, general rules and regulations, etc.) apply.
In principle, the terms and conditions of employment can only be amended with the employee’s consent. Unilateral amendment by the employer is possible, but only under limited circumstances. If parties to an employment contract have agreed on a unilateral amendment clause, this will help, but to change terms or conditions of employment the employer would still have to bring forward major business reasons that outweigh the employee’s interest in keeping the employment conditions unchanged. Such major business reasons could, for instance, be a change in tax laws, or major economic business reasons. If no unilateral amendment clause has been included in the employment contract, the employer can base the unilateral amendment on the ground that the employee should accept the amendment under his or her obligation to act as a reasonable (diligent) employee or on the (general) ground of reasonableness and fairness. In any case, to be able to unilaterally amend terms and conditions of employment the employer must prove major business reasons.
ii Probationary periods
The parties to the employment contract may agree in writing on a probationary period, which should be the same length for both the employer and employee. During the probationary period either party may terminate the employment contract immediately without notice and without stating the reasons for termination. No further obligations for either party will exist beyond such termination (including payment of wages by the employer).
As per 1 January 2015, temporary employment contracts entered into for six months or less can no longer be subject to a probationary period. Probationary periods can still be included in temporary employment contracts for longer than six months. A maximum probationary period of one month may be agreed for a temporary employment contract for employment of more than six months and less than two years, for temporary employment for the duration of a project, or for the replacement of an employee (with no agreed termination date). Deviation from this rule is possible via CLAs. A maximum probationary period of two months may be agreed in a temporary employment contract of two years or longer and in a contract for an indefinite period.
iii Establishing a presence
A foreign company can hire employees in the Netherlands without being officially registered.
Registration with the Dutch tax authorities may be required if Dutch social security premiums are due. This is the case if the employee is insured in the Netherlands for social security purposes, which is often the case with Dutch resident employees.
Under certain circumstances a foreign company may be required to register or may voluntarily be registered with the Dutch tax authorities as a withholding tax agent (a company with the obligation to pay taxes on behalf of the employees). An obligation to register will exist if the foreign company has a permanent establishment in the Netherlands. A permanent establishment is defined as a fixed place of business in the Netherlands through which the business of an enterprise is wholly or partly carried on. If a Dutch employee of a foreign company acts on behalf of the foreign company and has, and habitually exercises, in the Netherlands an authority to conclude contracts in the name of the foreign company then the foreign company shall be deemed to have a permanent establishment in the Netherlands in respect of any activities which that person undertakes (permanent representative). This may be different if the activities of the employee are limited to collecting information or have a preparatory or auxiliary character. Furthermore, a permanent establishment 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 (e.g., on a drilling platform).
If employees are hired through an agency or another third party, no registration will be required, provided the agency or third party qualifies as an employer or withholding agent.
A foreign company can engage an independent contractor without being officially registered. It should be carefully checked whether the relationship between the company and the contractor can be considered by the tax authorities to be a de facto employment relationship that may result in a withholding obligation for the foreign company (see above). The Dutch tax authorities have published model contracts. If parties use those contracts and work accordingly, their relationship will not qualify as an employment relationship. Parties may also use their own contract and have it assessed by the tax authorities. Please note that parties should act strictly in accordance with the provisions of the contract that has been approved by the tax authorities in order to avoid that the tax authorities still file an additional levy or a tax penalty in respect of the payroll levies due. Until 1 January 2018, a transitional period is in place. During this period, companies and contractors have the opportunity, if necessary, to amend their existing contracts and working practice. The Dutch tax authorities will monitor developments, but will not enforce the intended measures as long as parties can prove that they are working on the revision of their relationship and parties act in good faith (meaning that they are not deliberately circumventing the new rules). During this period parties should reconsider their existing working relations.
A Dutch independent contractor will invoice the foreign company for the services rendered. The fees may be subject to Dutch VAT at a rate of 21 per cent, or the fees may not be subject to Dutch VAT (e.g., under the reverse charge system) depending on the kind of services rendered and whether or not the foreign company has a permanent establishment in the Netherlands for VAT purposes.
A Dutch resident independent contractor can, for Dutch corporate income tax purposes, constitute a permanent establishment (as a permanent representative) of a foreign company under certain circumstances (see above). The existence of a permanent establishment under Dutch tax law may be restricted by the provisions of a double tax treaty, if applicable.
For Dutch corporate income tax purposes, the income (deemed to be) realised by a permanent establishment will be subject to Dutch corporate income tax. Dutch corporate income tax is levied over the profit at a rate of 20 per cent (for profits up to €0.2 million) or 25 per cent (for profits over €0.2 million). If the activities of a permanent establishment are limited to, for example, certain representative activities, the profit allocated to such permanent establishment may be determined on a ‘cost-plus’ basis.
The activities of an employee or an independent contractor of a foreign company may, depending on the activities, also constitute a permanent establishment in the Netherlands for VAT purposes if the activities are rendered against a fee for clients in the Netherlands. In that case the foreign company has to register for VAT purposes with the Dutch tax authorities.
If a company hires employees, there is a statutory minimum wage for employees aged 23 or older and a minimum wage for employees aged between 15 and 22, the level of which varies according to the age of the employee. Wage taxes and social security premiums are deducted at source. The employer is responsible for reporting and withholding. All employees are entitled to a minimum holiday of four times their working time per week. These statutory holidays are in addition to public holidays, of which there are normally seven each year. No extra day is automatically given should a public holiday fall on a weekend.
The employer must provide a statutory holiday allowance for all employees of 8 per cent of the employee’s gross annual salary, but only up to three times the minimum wage. It is possible to make an employee’s salary inclusive of the statutory holiday allowance, provided that this is agreed in writing. The employee is entitled to receive at least 108 per cent of the minimum wage applicable to his or her age.
V RESTRICTIVE COVENANTS
Article 7:653 of the Civil Code provides rules on non-compete clauses in the employment contract. Such clause will only be valid and binding if agreed in writing and signed by both parties, and the employee is 18 or older when signing it. A generally accepted term for a non-compete obligation is one year. Parties are free to agree upon a non-compete clause. However, it will ultimately be up to the court to decide whether the clause is validly agreed and should remain in force in its original form. A court may limit or even (wholly or partially) annul a non-compete provision if it finds that, while balancing the employer’s interests that are to be protected by such a provision and the employee’s interest in having a free choice of work, the interests of the employee should prevail. The court may also decide to keep the provision in place but grant the employee a form of compensation when the employer insists on keeping the clause. Under the law, there is no obligation for the employer to pay the employee for the term during which the employee is bound by a validly agreed post-contractual non-compete clause. Employers are advised to confirm or renew the non-compete clause if and when an employee is performing a different job or different activities that will or might lead to the non-compete obligation weighing more heavily on the employee. Without such renewal or confirmation, the non-compete restriction may have lapsed when the employer seeks to apply it.
As of 1 January 2015, it is no longer allowed to include non-compete clauses in temporary employment contracts, except in situations where the employer has a major business interest in doing so, which then must be substantiated in writing. Such interest must (be proven to) exist both when the contract is entered into and when the contract ends, failing which the non-compete clause cannot be relied upon. It is up to the courts to develop further guidelines in this respect. In published case law since 1 January 2015 we see that courts are very strict and will not easily acknowledge the existence of a major business interest of the employer. The motivation requirement should not be taken lightly.
If a court finds that the employer had or has no major business interest, it can annul the non-compete clause in its entirety. Generally, if a non-compete clause in a temporary or a permanent employment contract unreasonably impacts the employee in relation to the business interest that the employer seeks to protect, a court can annul the non-compete clause entirely or in part. As an alternative, and provided the non-compete clause restricts the employee in finding other employment, a court may award compensation to the employee for the duration of the restriction. This rarely happens. If the employment contract is terminated or not extended due to serious misconduct of the employee, no compensation needs to be paid. A non-compete clause cannot be relied upon if the employment contract is terminated or extended due to serious misconduct of the employer.
i Working time
Dutch working time regulations are laid out in the Working Time Act. The statutory maximum working hours for an employee of 18 years or older are:
- a 12 hours per shift;
- b 60 hours per week;
- c an average of 48 hours per week in each period of 16 consecutive weeks; and
- d work must be organised as such that the employee works up to a maximum (on average) of 55 hours per week over a period of four consecutive weeks.
Deviation from (only) this last rule is possible via CLAs. In general, an employee must have 11 hours of rest every day, which can be limited once every week to eight hours, and to 36 consecutive rest hours once every week or 72 hours every two weeks. The employee is entitled to short breaks.
Night work is defined as a shift in which at least one hour is worked between midnight and 6am. The maximum duration of a night shift is 10 hours. The night shift may be extended to 12 hours, but only for a maximum of five times per two weeks and a maximum of 22 times per annum. After such extended night shift, the employee may not work for at least 12 hours. In a period of 16 weeks, the employee may work 36 night shifts at most.
If a night shift ends after 2am, the employee may not work for 14 hours. This rest period can be shortened once a week to eight hours, but only if the type of work or the working conditions so require. After three or more consecutive night shifts, an employee may not work for at least 46 hours.
If an employee works 16 or more night shifts in 16 consecutive weeks, he or she may only work a total of 40 hours per week. If an employee works fewer than 16 night shifts in 16 consecutive weeks, the employee may work an average of 48 hours (as with normal daytime work). In the case of consecutive shifts, of which one is a night shift, the employee may work seven consecutive shifts at most. This can be eight shifts if agreed in a CLA.
There is no statutory requirement to compensate overtime. Parties can agree on compensation of overtime in the employment contract. Any applicable CLA should be checked to see if there is any provision on the threshold for receiving overtime compensation, and the level of compensation if a provision exists.
Overtime is normally compensated by extra salary payments. Parties can agree on a ‘time for time’ scheme. This would mean that an employee works, for example, 40 hours on a 38-hour contract and thus ‘saves’ two hours per week to be used later on as free time.
No statutory rates apply for overtime remuneration. These rates are usually laid down in the employment contract or in a CLA, (e.g., 150 per cent of the regular hourly salary for hours worked between midnight and 6am, or 200 per cent of salary for hours worked on Sundays). Rules on limits to overtime that may be performed in a given period are the same as mentioned in Section VI.i, supra.
Vii FOREIGN WORKERS
An employer is not required to keep a register of foreign workers. However, there is an obligation to keep identification for each employee on file. The employer is obliged to verify the authenticity of the identification. The employer must keep these copies for five years after the termination of the employment contract. There is no limit on the number of foreign workers in a workplace or company.
i Non-EU and non-EFTA
On the basis of the Foreign Nationals Employment Act, a work permit is required for workers from a non-EU or non-EFTA country or from Croatia (temporarily, until at least 2018). The permit is issued by the Labour Office or the Dutch Immigration and Nationalisation Service (INS), and has to be requested by the employer. As a rule, an employer will only receive a permit if it proves that no EU workers are available for the job. Employees from outside the EU or EFTA are only allowed to work in the Netherlands in exceptional circumstances. If a work permit is nevertheless granted, this will be for the duration of the contract, with a maximum duration of three years. In practice, more than 50 per cent of the permits granted are granted for (only) six months. Workers from outside the EU who have worked legally in the Netherlands for at least five years, as well as persons admitted on humanitarian grounds, no longer need a work permit.
The application for a work permit by the employer will only be dealt with by the authorities once the foreigner has applied for an authorisation for temporary residence (MVV) before coming to the Netherlands. Foreigners from a number of countries (including Australia, Canada, New Zealand and the US) do not require an MVV. After the MVV is granted, the residence permit is granted automatically. Subsequently, a work permit still needs to be put in place. For certain groups of persons wanting to work and reside in the Netherlands, it is possible to start one procedure for a residence and work permit instead of two separate procedures.
A residence permit is required to stay in the Netherlands for longer than three months. 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 and usually for periods of six months to one year. After five years of main residence in the Netherlands, performing work on a regular basis and gaining sufficient income, a foreigner qualifies for a permanent residence permit. Since 1 January 2010, an integration test has been a requirement for a permanent residence permit for all foreigners.
As from 1 October 2004, a work permit is no longer required for ‘knowledge workers’. The main difference between a knowledge worker and an ‘ordinary’ employee is that a knowledge worker must earn a minimum monthly salary of €4,324 gross or more per month or, if they are under 30, €3,170 gross or more per month (2017). These amounts exclude a statutory holiday allowance (these amounts are indexed every year). Furthermore, the employer must be admitted to the procedure for hiring knowledge workers by the Dutch Immigration and Nationalisation Service by signing a one-time application form stating, inter alia, that the he or she earns at least the amounts mentioned above.
ii EU or EFTA
Residents of any EU or EFTA country (excluding Croatia) and their immediate family have the same rights to work and to social security benefits as Dutch nationals. The only limitation on the exercise of these rights is that the Dutch authorities may exclude any EU or EFTA national on grounds of public safety or health.
As ‘proof of the right of residence’, an EU or EFTA national requires a ‘residence permit for a national of a Member State of the EU’, which is obtainable from the INS in the Netherlands. This document will be provided immediately, subject only to the production of a valid passport or official identification card and a letter from a prospective employer confirming employment or proof of basic financial means and health insurance (by virtue of EU Directive 2004/38). Provided that the offer of employment is for more than a year, the applicant will be entitled to a residence permit for five years. No separate work permit is required by EU or EFTA nationals and the residence permit may always be renewed.
Provided that the foreign worker is subject to Dutch taxes or premiums, the employer will generally be obliged to withhold taxes and premiums and pay these amounts to the tax authorities. Foreign nationals temporarily seconded to the Netherlands can use a special expatriate tax regime, the ‘30 per cent ruling’, provided that certain conditions are met. This tax ruling has the effect of materially reducing the rate of income tax paid by the employee. Generally, it is advisable to apply for this before moving to the Netherlands. It should be noted that the arrangement must be included in the employment contract.
If a foreign employee is employed by a Dutch company on the basis of an employment contract governed by Dutch law and physically works in the Netherlands, Dutch employment law will apply and the employee can seek protection under it. Under specific circumstances, mainly depending on where the employee carries out the activities (e.g., only in the Netherlands or also in other countries and to what extent), another country’s law can apply to the employment relationship of a foreign worker. Employees who are temporarily seconded by their original employer to work in the Netherlands could fall under the scope of the European Directive on Posting of Workers. Following this directive, Member States of the EU must ensure that their national businesses (companies) guarantee posted workers a central core of mandatory protective legislation. The directive seeks to guarantee that workers who are being temporarily posted (and to whom an employment contract subject to another country’s laws remains applicable) will enjoy the rights as laid down in certain minimum protective provisions in force in the Member State to which they are temporarily posted, no matter what the law applicable to the contract is. These minimum protective provisions concern:
- a maximum work periods and minimum rest periods;
- b minimum paid annual holidays;
- c minimum rates of pay, including overtime rates;
- d conditions of hiring out of workers, in particular by temporary employment undertakings;
- e health, safety and hygiene at work;
- f protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people; and
- g equality of treatment between men and women and other provisions of non-discrimination.
The Law on Employment Terms and Conditions for Cross-border Employment in the EU implementing the rules of the EU Posting of Workers Directive, also provides that provisions concerning the matters listed above included in CLAs, which were declared generally applicable in the whole sector of industry by the Minister of Social Affairs, can apply to workers from other countries who are posted in the Netherlands.
Viii GLOBAL POLICIES
Companies in the Netherlands lay down internal discipline rules in codes of conduct or handbooks. Other than employment terms and conditions, which are usually also laid down in handbooks or codes, such disciplinary rules are generally not regulated by statute, but are used to impose disciplinary measures.
In general, no approval or consultation requirements exist for the introduction of a policy providing disciplinary rules. Disciplinary rules do not have to be filed with or approved by government authorities.
The employer is legally required to have a policy in place regarding labour conditions in general and, within that policy, a policy that is focused on the prevention of or limitation of ‘psychosocial work stress’, including sexual harassment; aggression and violence; bullying; and stress-creating pressure in general. For the introduction of a policy related to the labour conditions, the employer needs to obtain the prior approval of the works council. When introducing a policy, the company must be sure that general rules of equal treatment and data protection are followed. As indicated above, employers in the Netherlands with larger numbers of employees provide handbooks or codes that provide not only disciplinary rules but also employment terms and conditions. The way of binding employees to these handbooks or codes and communicating any changes to them is subject to different legal requirements.
The rules should preferably be communicated in Dutch, although this is not strictly necessary. The only requirement is that the employees who will be bound by the rules have to understand them.
If rules are implemented for the first time, these rules (the handbook or code) should preferably be handed to the employees who then sign for acceptance. If it is difficult to provide each employee with a hard copy of the rules (for instance in companies with a large number of employees), they may also be distributed via the intranet. However, it will then be up to the employer to demonstrate that the employees indeed received a copy of the rules and understood them. The implementation, amendment or withdrawal of general regulations on certain employee benefits requires the prior approval of the works council.
In the employment contract (of new hires), the employer can provide a reference to a handbook or code providing employment terms and conditions or disciplinary rules. By signing the contract, the employees declare they have seen and understood the rules applicable to them. In terms of disciplinary rules, there is no requirement for the employer to have these rules signed by employees. The employer has a general right to impose disciplinary rules on its employees. If the handbook or code includes employment terms and conditions, a reference to such handbook or code in the employment contract is sufficient to bind the employee, but the employer will still have to be able to prove that the employee received the handbook or code.
Changes to disciplinary rules may be communicated via the intranet, but in the case of employment terms and conditions changes can only be made with the employee’s consent (and under certain circumstances the prior approval of the works council).
There is no statutory obligation under Dutch law to provide an employee with employment documents in the Dutch language. It follows that, in their duty to behave as a ‘sound employer’ (as laid down in Article 7:611 of the Dutch Civil Code), an employer should ensure that an employee understands the content of the documents which are provided to the employee. Therefore, if an employee does not understand the English (or another) language, the employer will not be allowed to provide the employee with documents in this language. The consequence of handing an employee a document in a language that he does not understand may be that a court (if requested to rule on the subject) would rule that the employer has not acted as a sound employer. There are no further formalities as to translation of employment documents for the benefit of the employee.
X EMPLOYEE REPRESENTATION
Depending on the number of employees in the company, there is a requirement for companies to set up representative bodies. Under the Works Council Act (WCA), a company must have a works council if it employs 50 or more employees. Smaller companies can have a voluntary works council or can put another form of employee representation in place.
A company that employs between 10 and 50 employees may be under an obligation to establish an employee representative body. An employee representative body must be established at the request of a majority of the workers, or can be established by the employer voluntarily. Such body has limited powers compared to a works council. According to the WCA, some of the provisions applicable to a works council are also applicable to the employee representative body.
If there is neither a works council nor an employee representative body, but the company employs between 10 and 50 employees, the company must hold an employee consultation meeting at least twice a year to discuss the general course of business of the company. The company must hold such a meeting at any time when at least 25 per cent of the employees request it.
If the management of a company does not fulfil the obligation to install a works council when required, any interested party can ask a court to order such installation. The works council is an independent body elected by the employees. It has its own by-laws. A works council must have the following number of members:
- a 50 to 99 employees, inclusive: five members;
- b 100 to 199 employees, inclusive: seven members;
- c 200 to 399 employees, inclusive: nine members;
- d 400 to 599 employees, inclusive: 11 members;
- e 600 to 999 employees, inclusive: 13 members; and
- f 1,000 to 1,999 employees, inclusive: 15 members.
There will be an additional two members for every further 1,000 employees, up to a maximum of 25 members. Employee representative bodies must have at least three members.
The election procedure for representatives in a works council is for the most part laid out in the WCA. In short, the process is that the employer will set a date for the elections and announce that date to the employees and trade unions. There must be at least 13 weeks between the announcement of the election date and the election date itself. The employer prepares a list of all employees eligible for election and voting. Candidates can be put forward by employees and trade unions. At least two weeks before the election, the final lists of candidates should be adopted. A committee is usually appointed to organise the elections (i.e., to prepare and certify the ballot papers and to determine the date and hour of the election). After the election, the results are announced to the company, and the works council is in place.
An employee representative body is elected by a secret written election process, by employees working in the company. No specific procedure must be followed, although in practice it is similar to the election of a works council.
The term of office of works council members is three years unless the works council itself determines that the term of office will be two or four years. The works council can determine that half of the members will resign every two years. Elections are, therefore, held every two, three or four years. If an employee no longer works in the company, membership of the works council ends automatically. The term of office for members of the employee representative body has not been set down in statute.
Works council members may interrupt their work for internal consultation, training and education (on full pay) for a number of hours to be determined in conjunction with the employer. The works council may appoint committees and call in experts; it may use certain facilities of the company (conference rooms, telephones, etc.) and it holds its meetings as much as possible during working hours. Employee representative bodies have fewer rights than works councils. An employee representative body, for example, only has a right of prior advice under very specific circumstances. As the Works Council Act includes fewer rules with respect to employee representative bodies, in practice rules similar to the ones for works councils are applied to employee representative bodies on issues such as the number of hours per annum that the employees and members may use for training. The company must allow both the works council and the employee representative body to meet for a mutually agreed number of hours per annum.
Representatives enjoy protection from dismissal and from discrimination on account of their positions. This applies to employees who are or have been on the list of nominations for elections to the works council; who are or used to be members of the works council or of an employee representative body; who are or used to be members of committees of the works council; who have taken the initiative to establish a works council; or who perform duties incidental to the office of secretary of the works council (not necessarily a member of the works council). When asked to terminate the employment contract of a person mentioned above, a court must verify that the request is not connected with the membership of the works council or a works council committee.
The works council has a number of general rights such as the right of initiative, the right to general and specific (financial) information as well as some special powers, such as the right of advice and the right of prior approval. The company must seek the works council’s advice in respect of certain intended major economic decisions by the company. If the advice goes against the intended decision and the company nevertheless takes the decision, such decision may not be implemented during a period of one month from the day the works council was informed of the decision or could have reasonably known about the decision. During that month, the works council has the right to appeal to the Enterprise Chamber of the Amsterdam Court of Appeal. If the company intends to implement, change or withdraw general regulations in certain areas of employee benefits, it needs prior approval of the works council. Failing such approval, the company must seek approval of the cantonal court after having asked the business committee to mediate. If no approval is obtained, any such decision taken is null and void.
Xi DATA PROTECTION
i Requirements for registration
The Dutch Data Protection Act (DPA) implements the rules of a European directive on data protection in Dutch national legislation. If the employer qualifies as a data controller (the entity that determines the purposes and means of the processing of personal data), the employer must notify the processing of the personal data either to the Dutch Data Protection Authority or, if applicable, to its data protection officer. Some forms of data processing are exempt from notification, and are listed in the Exemption Decree.
The notification to process must include, inter alia, the name and address of the employer (i.e., the data controller); the contact details of a dedicated contact person; categorisation of the data being processed; and the related purposes for the processing, broken down per type of data subject (e.g., future, current or former employees and their emergency contacts and beneficiaries); the recipients of the data; whether the data will be sent to countries outside the EU and what kind of security measures are taken. The data controller also has the duty to inform the data subject of its identity, which types of personal data are processed, the purpose of processing, recipients of the data and the retention period. The data controller can provide this information by means of a privacy statement, for example.
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 must guarantee an appropriate level of security, taking into account the state of the art and the costs of implementation, and having regard to the risks associated with the processing and the nature of the data to be protected. These measures must also aim to prevent unnecessary collection and further processing of personal data.
The personal data should preferably be provided on a need-to-know basis to the persons within the employer who have access to the data. Certain data will be accessible, depending on, for example, the sensitivity and the nature of the data, the people who wish to access the data and what powers such people will have to use, change or analyse the data. In principle, the data should be accessible to the data subject. Consequently, the data subject may ask, at reasonable intervals, whether (and what) personal data is processed relating to him or her. Furthermore (under certain circumstances) the data subject can request the employer to correct, complement or remove personal data or can object to certain processing of personal data.
ii Cross-border data transfers
No special rules apply if personal data are transferred to a country within the EEA. Outside the EEA, in case of transfer to third countries, transfer is in principle only legitimate if it concerns a third country with an adequate level of protection (a list of which can be found on the EU website).
If a country is not on the list on the EU website, data might still be transferred if one of the other exceptions apply, such as:
- a the conclusion of unchanged EU Standard Contractual Clauses issued by the Commission; or
- b the unambiguous consent of the data subject.
In relation to (b), it should be born in mind that obtaining valid consent in the employment context is problematic as it can not generally be assumed that employees or applicants can freely decide whether or not they will provide consent in view of their dependent position. If none of these options provide a solution, the data controller needs to obtain a permit from the Minister of Justice.
It should be noted that basing the data transfer on the Safe Harbor rules is no longer legitimate, in light of landmark ruling of the Court of Justice of the European Union of 6 October 2015 in the Maximilian Schrems v. Data Protection Commissioner case (C-362-14) and the related Statement of the Article 29 Working Party of 15 October 2015. On 12 July 2016, the European Commission adopted, with immediate effect, the Privacy Shield, after changes were made to address heavy criticism received on the draft version. The Privacy Shield is a new framework for transatlantic data flows, replacing the invalidated Safe Harbor mechanism. The purpose of the new framework is to ensure the protection of the fundamental rights of European citizens when their data are transferred to the US, while providing legal certainty for businesses. As it is still uncertain whether the Privacy Shield will withstand legal challenges, businesses should not rely on it exclusively.
iii Sensitive data
Specific rules apply to the processing of special categories of personal data, such as data regarding someone’s:
- a religious or philosophical beliefs;
- b race or ethnic origin;
- c political opinions;
- d health;
- e sexual preferences;
- f membership of a union;
- g criminal record; and
- h personal data concerning unlawful or objectionable conduct connected with a ban imposed with regard to such conduct.
In addition to these special categories of personal data, specific rules apply to the processing of identification numbers of persons prescribed by law. Visual material such as pictures (e.g., of employees) may, under the circumstances, qualify as special personal data as they may show information about a person’s race, religion or health. Based on the DPA, it is prohibited to process special personal data except under certain circumstances provided in the DPA. The DPA provides a specific exemption for the processing of medical data by employers under strict circumstances. Furthermore, the processing of special personal data is, in general, allowed if the data subject gives his or her explicit consent or if the data subject has manifestly made the data public himself or herself. Please note that, as mentioned above, consent may not be reliable in an employment situation. Specific criteria also apply as to when information qualifies as ‘manifestly made public by the data subject him/herself’.
iv Background checks
Background checks are commonly done in the process of hiring new employees. Information on the applicant can be obtained through the applicant, any public source like the internet, or through references. However, certain restrictions apply, based on several legal areas. For example, an employer should always take care not to take discriminatory action. This includes equal treatment on the basis of age, race, gender, religion, belief, political conviction, nationality, sexual orientation, marital status, disability or chronic disease. In addition, the selection procedure for applicants in the Netherlands is restricted by fundamental rights of privacy, the DPA and the Medical Test Act. Furthermore, various rules of conduct regarding recruitment and selection have been drafted by (professional) associations. Finally, a CLA may contain binding rules on selection and recruitment.
In the Netherlands, it is common to ask detailed questions about the applicant’s professional training and educational background. The applicant is obliged to give the employer the information he or she needs to get a fair and honest idea about the applicant’s capabilities. The employer may ask for original documents or diplomas. Recent case law shows that from a labour law point of view employers do not need permission to check the employment history of their applicants (as long as the received information is correct). Further information can be obtained through public sources (including search engines such as Google) and the observations of the interviewer. However, the right of the employer to search public sources may be limited under privacy law.
From a privacy law perspective it is important that screening activities are tailored to the position and qualifications needed. Depending on the position and qualifications concerned, different background information is relevant in relation to, for example, someone’s communicational skills or disposition as team player. The interest of the future employer (and that of relevant third parties) should be weighed against the privacy interest of the applicant.
Information on credit and financial background can only be obtained through the applicant, through a public source or with the permission of the applicant. The employee is not required to answer questions on his or her credit and financial background unless that is relevant to performing the job. Whether processing such data is legitimate will depend on the position at hand, and whether all general privacy principles are accounted for.
Information on the criminal background of an applicant qualifies as a special category of personal data. Processing such data is prohibited unless a statutory exception is applicable. In principle, an employee does not have to answer questions about his or her criminal background. When, however, the criminal background is relevant to the performance of the job, the applicant is required to inform the employer thereof (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 to provide a certificate of conduct of the Integrity and Screening Agency of the Dutch Ministry of Security and Justice if such is relevant for the position at hand. A certificate can only be requested for a specific position, which position must be mentioned and described in the application for the certificate. The Agency has access to the criminal database and will verify whether the employee has shown any criminal behaviour (which may or may not have resulted in a penalty or conviction) forming an obstacle to the position at hand, in view of the possible risks for society if the applicant would fulfil this position. The Agency will then provide the applicant with the certificate or not; no additional information is provided.
As a basic rule, performing medical tests and processing related health data is prohibited unless a particular job makes exceptional demands on the employee’s physical strength and stamina and such a test is required by law (e.g., jobs that require high physical demands such as heavy lifting, or jobs that require physical fitness because of a high risk of injury or a high safety risk to the employee or others, such as pilots). Examples of such a statutory obligation to take a pre-employment medical test can be found in the Nuclear Energy Act and the Maritime Crew Act. The pre-employment medical test may not serve as a tool to make a selection between job applicants. The test can only be done after all other assessments of the job applicant’s suitability for the job have been completed, and if on the basis of those assessments the employer has the firm intention to hire the applicant.
In relation to drug or alcohol use, the principal rule is that an applicant or an employee is, in principle, allowed to do whatever he or she wants in his or her free time as long as it does not influence his or her functioning as an employee. There are exceptions to that rule depending on the job (such as when the employee is a role model, for example a teacher). Generally, applicants cannot be asked about their use of illegal drugs since that would be a violation of privacy rights. In the Netherlands, drug or alcohol tests are considered medical tests and the related data as health data. When the employee is already hired, case law shows that testing is allowed under very particular circumstances and when the employer has a reasonable suspicion that an employee uses drugs or alcohol. The employer will then have to prove that the use of drugs or alcohol negatively influences the work of the employee. The employer has a far-reaching duty to assist the employee if the employee has an alcohol or drug problem. Whether such a duty exists depends on the circumstances.
If relevant to the job, special selection procedures or methods can be used, such as psychological and assessment tests. Whether such data qualify as health data, being a special category of personal data, is debatable. However, investigations of the Dutch Data Protection Authority show that it does not qualify the data as such. A psychological test is not considered a medical test. A psychological test or assessment is therefore allowed for if certain conditions are met and the general principles of data protection are taken into consideration. It must be conducted by or under the supervision of a psychologist with due observance of the guidelines set by the Dutch Professional Association of Psychologists. The psychologist may only provide the employer with the results of the tests or assessment with the applicant’s consent.
Xii DISCONTINUING EMPLOYMENT
Under Dutch law, an employer must have a reason to dismiss an employee. The most common reasons for termination are business economic reasons and performance reasons. It is important to keep a file on employees to be able to prove underperformance and the reasons for dismissal. In general, the employee will have to be made aware of his or her underperformance and given a reasonable chance to improve (unless there is an urgent case for dismissal).
As per 1 July 2015, there are four ways in which an employer can seek termination of an employment contract:
- a termination agreement;
- b giving notice of termination with Labour Office permission;
- c termination by the court; or
- d giving notice of termination with the employee’s permission (new rule implemented as per 1 July 2015).
Although a termination agreement between employer and employee has been the most common termination method for a long time, the written termination agreement setting out the terms and conditions of the termination was only given a legal basis as per 1 July 2015. The employee has a right to end the termination agreement in writing – without being required to state any reason – within two weeks after the agreement has been signed. The employer must include the termination right in the termination agreement, failing which the period during which the employee can exercise this right is extended to three weeks. The employee may terminate a termination agreement only once in a rolling six-month period. The termination right cannot be waived contractually. Board members do not have a termination right.
The advantage of the termination agreement route, as compared to getting employee consent for giving notice, is that in the termination agreement full and final settlement can be agreed with the employee so that the employer is ensured that the employee will not have any claims vis-a-vis the employer after the termination.
Termination via Labour Office or court
As per 1 July 2015, employers do not have the option of addressing the Labour Office or the court when seeking termination of an employment contract. The reasons for the termination will dictate which procedural route must be followed.
The Labour Office procedure is compulsory if the employment contract is terminated for business reasons or due to an employee having been on sick leave for over two years. The court procedure is compulsory if the employment contract is terminated for reasons related to the individual employee. Six legal grounds for termination are laid down in statute:
- a frequent sickness;
- b poor performance after an improvement plan;
- c culpable actions or omissions of the employee;
- d conscientious objections;
- e a disrupted employment relationship; or
- f other circumstances.
Where the court could previously terminate an employment contract if it found that all the facts and circumstances of the case should lead to such, the dismissal petition on which a termination request is now based must fully substantiate at least one of the grounds listed above) for a court to terminate the employment contract.
Courts could previously award any reasonable severance to compensate for imperfections in the dismissal case. Since 1 July 2015, however, extra severance on top of the new statutory severance (transition fee) can only be awarded in extraordinary cases of misconduct on the employer’s part.
Where before 1 July 2015 the court’s decision was not appealable, the court’s ruling is now subject to appeal and ultimately cassation.
It has turned out to be very hard in practice to predict when the courts will rule that the termination ground referred to under (f) is fully substantiated. In the legislative notes to the new rules, and later in academic literature on the matter, it has been argued that a difference of opinion on the manner in which the employee should perform his or her work or a ‘clash of characters’ may be considered ‘other circumstances’, based on which the employment contract can be terminated. However, the courts have indicated that they find themselves restricted by the legislator to rule on a termination based on the ‘other circumstances’ ground. We have seen that obtaining a termination of employment through the court is, as expected, more challenging than before, particularly in cases based on poor performance of the employee. We advise employers to keep detailed and well-documented performance records.
Notice of termination with employee permission
As per 1 July 2015, a new termination route has been introduced: the employer can give notice with permission of the employee. This is a similar route to that of termination by termination agreement, and is not used much in practice. No further elaboration is therefore necessary at this stage. The employee can revoke his or her consent to the termination in writing within a period of two weeks, without stating any reason. The employer must then confirm the revocation right to the employee in writing ultimately two working days after the employee’s written consent was given for the termination, failing which the period during which the employee can exercise the revocation right is extended to three weeks.
Besides having to prove at least one valid ground for the termination of the employment contract, an employer will need to substantiate that it is impossible to redeploy the employee (even after training) elsewhere in the business or in affiliated businesses (i.e., other group entities). Whether this applies to foreign group companies remains to be seen. We expect that this will depend on the type of position. If the employee works in a position in an ‘international environment’, it seems reasonable that the employer will be required to look into redeployment options even beyond the Dutch borders. The requirement to investigate redeployment possibilities applies to all dismissal grounds with the exception of ‘culpable actions or omissions of the employee’, the reason for this being that the employer cannot be expected to keep these employees employed.
Labour Office procedure
The Labour Office procedure will usually take about six to eight weeks, provided that the reasons for termination are clear. The Labour Office does not have the authority to award compensation to the employee. If the termination reason is difficult to substantiate then the Labour Office’s approval may be withheld. There is appeal with the court, the Court of Appeal and even cassation with the Supreme Court possible from the decision of the Labour Office.
Once permission is granted to the employer by the Labour Office to terminate the employment contract, the applicable notice period should be considered, minus the time the procedure with the Labour Office took with a minimum of one month. The statutory term of notice to be observed by the employer is one month for every five years of service, with a maximum of four months. These terms may be extended by written agreement and may be reduced in an applicable CLA. The statutory term of notice to be observed by the employee is one month. The parties can deviate from these statutory rules in writing. If the notice period for the employee is extended beyond the statutory notice period of one month, the term of notice to be observed by the employer must be at least twice as long as that of the employee, which may not exceed six months (and therefore the notice period for the employer may not exceed 12 months). An employment contract should be terminated as per the day parties agreed on or per the last day of the period of salary payment.
Payment in lieu of notice is permitted. The parties should, however, realise that the employee will only obtain state unemployment benefits as from the end of the applicable notice period (had that notice period been taken into account). Should the parties therefore agree that the employee will not be employed during the full notice period (i.e., that the notice period will be wholly or partly paid out), the authorities can decide to deny the employee unemployment benefits for a certain period of time. This consequence is usually pointed out to the employee (in writing) to avoid any claims for loss of income in this respect.
As set out above, the court procedure is compulsory if the employment contract is terminated for reasons related to the individual employee. After the employer has filed a petition with the court, the employee will have the opportunity to file a defence statement. An informal hearing will take place during which the court can put questions to the parties and their attorneys and the parties may further defend their case. The proceedings at the cantonal court can generally be completed within a relatively short period (as a rule it takes six to eight weeks between filing the petition and the issuing of the judgment). If the request is granted, the employment agreement will terminate as per the date ordered by the court. The court will terminate the contract, taking account of the applicable notice period under deduction of the time the court proceedings took. Appeal and cassation is possible.
As from 1 July 2015, every employee who has been employed for at least 24 months and whose employment contract is terminated or not extended at the employer’s initiative is entitled to a statutory severance, called the transition fee. This statutory transition fee replaces the severance pay based on the well-known court formula. In most cases, the transition fee is lower than the severance pay based on the court formula. The amount of the transition fee depends on the aggregate duration of the employment: one sixth monthly salary for every full six months of employment during the first 10 years of employment and one quarter monthly salary for every successive six-month period. The following rules apply.
For purposes of calculating the aggregate duration of the employment, succeeding employment contracts between the same employer and employee are added up provided eventual intervals are less than six months.
The monthly salary for purposes of calculation of the transition fee includes the monthly gross base salary plus the average statutory holiday allowance, 13th-month payment, average overtime and shift allowance over the 12 months preceding the dismissal, and the average variable monthly salary (including bonus and commission payments and profit sharing bonuses) over the three years prior to the year in which the employment is terminated.
The transition fee is capped at €77,000 gross or any higher gross annual salary amount.
While it is possible to agree to a higher severance pay, it will not be permitted to contractually replace the transition fee by any lower payment.
The transition fee is not due in the following cases.
- a A termination agreement is entered into, although it is expected that paying the transition fee to the employee will become the starting point for termination negotiations.
- b The dismissal takes effect on or after the state pension age or other pensionable age applicable to the employee.
- c The employee whose employment is terminated is under the age of 18 and has worked no more than 12 hours per week on average.
- d Suspension of payment was declared against the employer, the employer was declared bankrupt or a debt restructuring took place.
- e The employee has shown seriously culpable behaviour, for instance by failing to comply with sickness inspection rules or committing a serious breach of important company rules. Courts do have the possibility to award the transition fee to the employee in these cases if they find that it would be unreasonable to withhold the payment thereof.
In order to mitigate the effect of the sudden transition from the former court formula to the new statutory transition fee, two temporary measures were adopted, leading to an increased transition fee for older employees and a lower transition fee for ‘small employers’ being forced to lay off employees due to a poor financial situation:
- a Until 2020, employees aged 50 years and older who have been employed by the employer for at least 10 years are entitled to a higher transition fee: one half monthly salary for every six months of employment after the age of 50. Employers employing less than 25 employees are exempt from having to pay this higher transition fee.
- b Until 2020, employers employing less than 25 employees, being forced to make employees redundant because of a poor financial situation, can disregard the months of the employment before 1 May 2013 when calculating the transition fee payable to the employee.
Costs which can be deducted from the transition fee
Employers can deduct certain ‘transition or employability costs’ from the transition fee with the employee’s consent. Transition costs are costs incurred in relation to the termination of the employment contract in order to avoid unemployment. These costs mainly relate to training or outplacement. Employability costs are costs incurred during the employment relationship, which have lead to an increase of the employee’s external employability. This will mainly relate to training of the employee during the employment, which training is not related to the employee’s position or career path with the employer.
Compensation arrangements in collective labour agreements
As an alternative to the statutory transition fee, parties to a collective labour agreement may agree on an alternative arrangement. Such similar arrangement replaces the statutory arrangement and may consist of cash or benefits in kind (or a combination thereof). Under such similar arrangement, the value of total compensation to which the employee is entitled must be at least equal to the statutory transition fee to which the employee would have been entitled.
Fair termination compensation
As per 1 July 2015, only in case of ‘seriously culpable acts or omissions’ on the side of the employer may a court award additional compensation to the employee if it finds that this is fair in light of the circumstances of the termination. Such additional compensation may only be awarded in exceptional situations. Examples of seriously culpable acts or omissions are:
- a sexual harassment;
- b discrimination;
- c neglecting of reintegration;
- d inadequate care for working conditions;
- e false dismissal ground; or
- f urgent cause.
It is up to the courts to develop case law on the circumstances under which employees can claim additional compensation, and to what amount. The rulings from 2015 and 2016 indicate that county courts and courts of appeal are not easily inclined to accept that the situation is such that additional compensation has to be paid, and that even if compensation has to be paid the amounts are not very high.
Certain categories of employees, besides employee representatives, are protected from dismissal. In general, an employer cannot give notice if the termination is based on discriminative grounds such as sexual preference. Employees are protected from dismissal during inter alia the first two years of incapacity to work; the period during which the employee is pregnant (including the period up to and including the 16th week after childbirth); military (or alternative compulsory) service; membership of a union; political leave; and during adoption, parental or care leave. Under those circumstances, termination with permission of the Labour Office is not allowed. The employer must ask a court to terminate the employment contract (if possible) or settle with the employee on termination with mutual consent. Employees belonging to the groups mentioned can be summarily dismissed for urgent reasons such as serious misconduct or gross negligence.
Under certain circumstances – mostly in cases of gross misconduct of the employee – the employer can decide to instantly dismiss the employee for urgent cause, without having to consider the applicable notice period. These are circumstances in which it cannot reasonably be requested from the employer to continue employing the employee. The employer cannot linger and must terminate as soon as it is clear that the facts and circumstances justify an instant dismissal. Whether or not an urgent cause for dismissal exists will depend on all facts and circumstances of the case. There is a statutory list with examples of behaviour that justifies an instant dismissal for urgent cause. Although not very common, circumstances may exist in which the employee is allowed to instantly terminate his or her employment for urgent cause (e.g., physical abuse of the employee or not paying the regular salary) because it cannot reasonably be expected for the employee to remain employed.
An employee can be made redundant for economic business reasons. The intention of an employer to dismiss a group of at least 20 employees within three months (in the same Labour Office region) qualifies as a collective redundancy and must be notified to the Labour Office and trade unions involved. The notification should at least include the reasons for the redundancy, whether or not the works council (if there is one) has been consulted, the criteria used to determine which employees will be made redundant and the calculation method for severance pay. After notification the company can choose to follow the individual termination procedures with the Labour Office, to ask the court to terminate the employment contracts (although some courts refer the company to the Labour Office once it finds out that a collective dismissal is involved) or to settle with the individual employees involved.
In cases of collective redundancy, a request for advice needs to be addressed to the company works council or another employee representation body if the redundancy falls under the scope of Article 25 of the Works Council Act. The process of obtaining advice is discussed above.
Usually, a social plan is agreed with the trade unions involved, including, for example, severance payments or outplacement programmes. The social plan can set forth agreements as to rehiring of employees.
In case of termination of one or more employment contracts for business related reasons (redundancies), employers are required to apply strict selection rules in order to select the employees who are to be made redundant. The redundancies must be distributed proportionally over different age groups in each category of functions (the same or in any case interchangeable functions). The age structure within these categories of functions must be kept the same as much as possible. Moreover, within a particular age group, in a certain category of functions, the employee with the least seniority should be made redundant first (the last-in-first-out principle). If the selection criteria are not applied correctly, in principle, involuntary termination of employment will not be possible.
Parties to a collective labour agreement can deviate from the selection criteria: up to 10 per cent of the employees to be made redundant may be excluded from the selection procedure if these employees perform above average, and if all employees were duly informed beforehand that performance can impact the selection of employees in case of redundancies. If an employee is excluded from redundancy due to extraordinary performance, another employee has to take his or her place. However, this may not lead to additional redundancies of employees under the age of 25 or of employees of 55 years and older, meaning that employees in these age groups will not be impacted by the better performance of other employees. It is expected that unions will not be easily convinced to include this possibility in a collective labour agreement.
As of 1 July 2015, parties to a collective labour agreement can set up a Redundancy Committee which will take over the tasks of the Labour Office with respect to assessing termination requests of employers for business reasons. The Redundancy Committee must be impartial and independent and must function on the basis of procedural rules safeguarding essential principles such as the right to be heard, confidentiality, reasonable procedural time limits and a reasonable decision period for the Redundancy Committee. If a Redundancy Committee has been set up, parties to the collective labour agreement can agree on further deviations from the standard selection rules as set out above. Again, unions are unlikely to agree to this if no additional benefits or facilities for employees who are made redundant are provided in exchange.
Xiii TRANSFER OF BUSINESS
The transfer of undertaking (TUPE) rules stemming from EU Directive 2001/23/EC are implemented in Articles 7:662 and following of the Dutch Civil Code. If the assets of a company are transferred and the transfer qualifies as a transfer of undertaking under the TUPE rules, the employees employed with the transferor company will automatically transfer to the employment of the transferee company. A TUPE can occur if part of the assets of a company are being transferred, in which case one has to establish which employees ‘work in the transferring business’ and automatically transfer to the employment of the transferee company. Whether a transaction qualifies as a TUPE will depend on the facts and circumstances of the case. The main criteria are whether the assets being transferred constitute an ‘economic unit’, which retains its identity after the transfer. When assessing if a TUPE occurs, the wide variety of case law of the ECJ and the EU national courts have to be taken into account. The employees automatically transferring to the transferee company on the basis of a TUPE remain entitled to the terms and conditions of employment they enjoyed with the transferor company. It should be noted that, apart from the general TUPE rules, Dutch law knows a separate set of rules for the transfer of collective employment terms and conditions stemming from CLAs and for the transfer of pension entitlements. The transferor and the transferee remain jointly and severally liable for one year after the transfer date with respect to obligations towards the employees. Following the landmark Albron Catering v. FNV case of the ECJ and the subsequent final Dutch court decision, TUPE rules apply to employees who have been permanently seconded by one group company to another group company and therefore not employed with the transferring company
As described above, as per 1 July 2015, every employee who has been employed for at least 24 months and whose employment contract is terminated or not extended at the employer’s initiative, is entitled to a statutory severance called the transition fee. As an alternative to the transition fee, parties to a collective labour agreement may agree on a similar arrangement (laid down in the collective agreement). The requirement that the (value of) the total compensation to which the employee is entitled, (for instance, transition fee plus outplacement), should at least be equal to the transition fee to which the employee would have been entitled, is going to be repealed as per 1 January 2018.
Under Dutch law, employees who are sick enjoy dismissal protection for a period of two years of sickness. During the same period they are entitled to continuation of salary up to 70 per cent of the salary. Contractual provisions providing a higher level of salary during illness are common. Since 1 July 2015, employers are required to pay the statutory severance to employees whose contracts are terminated after having been sick for two years. Following opposition by employers against these new rules, the Dutch Minister of Social Affairs has proposed that employers, having paid the severance to these employees, be reimbursed out of a special government fund, funded by an increase of employer contributions to the nationwide social security system. The new rules are expected to enter into force on 1 January 2018.
The state retirement age will be increased from 67 in 2021 to 67 and three months in 2022. This amendment will affect all employees born after 1954. The increase is the direct result of the increase in the average Dutch person’s life expectancy. Dutch law provides since 2012 that if the average life expectancy of Dutch persons increases, the state pension age will automatically increase. The expectancy is that the state pension age will be 68 in 2025. Interestingly, several political parties are campaigning for a decrease of the pension age this (election) year.
1 Els de Wind is a partner and Cara Pronk is an associate at Van Doorne NV.