The Employment Law Review: Netherlands
i Sources of employment law
Employment is regulated in the Netherlands by three main sources: legislation, collective bargaining agreements (CBAs) and individual employment contracts.
The most important employment law regulations are set forth in Book 7 of the Dutch Civil Code. Various aspects of Dutch employment 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, is a significant influence on Dutch employment 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 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 agreed clauses are more favourable for the employee.
ii Relevant courts and government authorities
There are three distinct types of 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 in the administrative law sector of the court. In cases involving civil servants and social security issues, appeals are taken to a special appeals tribunal, the Central Appeals Tribunal.
The Employee Insurance Agency (UWV)2 is the government authority responsible for administering employee benefits (such as social security and welfare) and helping unemployed people to find work. In addition, the UWV determines 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 Authority3 oversees compliance with laws relating to the protection of personal data.
The Netherlands Institute for Human Rights4 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.
Year in review
As of 1 January 2020, the Balanced Labour Market Act and the Civil Servants Normalisation of Legal Status Act entered into force.
The Balanced Labour Market Act introduced measures that have significantly changed Dutch employment laws, the most important of which are the following:
- A request to terminate an employment contract submitted to the competent court must be based on a specific ground for dismissal, which must be fully substantiated. A 'cumulative dismissal ground' has been introduced by the Act, which can be used for dismissal in cases where the facts and circumstances are not sufficient to fully substantiate one of the specific dismissal grounds. If the court rescinds the employment contract on the basis of the cumulative dismissal ground, it may award the employee additional compensation of up to half the transition payment on top of the regular statutory transition payment.
- The amount of the statutory transition payment has been amended, now being one-third of the gross monthly salary per year of service of the employee. For years that are not fully worked, a pro rata amount is due.
- Legislation on consecutive fixed-term employment contracts has been extended. Employers cannot offer their employees more than three consecutive fixed-term employment contracts over a period of three years without the most recent contract being converted into an open-ended contract, unless that three-year period has been interrupted for six months or longer. This means that consecutive fixed-term employment contracts can be agreed with employees for up to three years rather than two years (as was the case before the introduction of the Balanced Labour Markets Act) before they are converted into open-ended employment contracts.
Under the Civil Servants Normalisation of Legal Status Act, the legal status of civil servants is made 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), 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 are now subject to civil law instead of the rules of administrative law.
Since April 2020, various laws have been introduced to support employers and employees during the covid-19 crisis. The aim of this legislation is the preservation of jobs by way of support for employers who are confronted by a substantial drop in turnover. The first part of this support was issued as per 2 April 2020 (Temporary Emerging Bridging Measure to Maintain Employment,5 referred to as NOW 1), the second part was introduced as per 22 June 2020 (NOW 2) and the NOW 3 package was released on 9 October 2020. The latter measure is currently valid until July 2021.
On 6 November 2020, the Supreme Court rendered an important judgment regarding the question of when a contract must be regarded as an employment contract, and specifically whether the parties' intentions have a role in that respect. The Supreme Court was quite clear on the matter. Section 610 of Book 7 of the Dutch Civil Code describes an employment contract as a contract under which the employee undertakes to perform work in the service of the employer in exchange for a salary during a given period. If the substance of a particular contract satisfies that description, that contract must be regarded as an employment contract. According to the Supreme Court, it is irrelevant whether or not the parties intended their contract to fall within the scope of statutory provisions governing employment contracts.
It would seem that the Supreme Court has reconsidered its judgment in Groen/Schoevers from 1997. In the November 2020 judgment, however, the Supreme Court does leave room for the possibility that the parties' intentions should have a role in interpreting what rights and obligations the parties have agreed on, before making a decision as to how those arrangements should be labelled. In other words, the parties' intentions can have a role in answering the question of whether the parties have agreed on wages or in answering the question of whether a relationship of authority exists between them. It is nevertheless assumed in professional legal literature that, based on this judgment, for the purposes of answering the question of whether a particular contract constitutes an employment contract, the parties' intentions are less relevant and that therefore the courts in fact-finding instances will be more likely to conclude that an employment contract exists in cases where that was not the parties' initial intention. It is logical that parties should bear the potential implications of this judgment in mind when they enter into contracts that are not intended to be employment contracts, such as contracts for services.
On 7 February 2020, the Supreme Court rendered its first judgment on the question of whether it is permissible to nullify an employment contract on the grounds of deceit. In the case at bar, the deceit consisted of an employee falsely claiming on his curriculum vitae to have certain qualifications (e.g.,having a particular educational background) to form his employment contract. Until this judgment was rendered, it was assumed in case law of the lower courts that nullification on the grounds of deceit was possible in only a limited (or very limited) number of situations, owing in part to the effect of retroactivity and the fact that this manner of termination is at odds with the laws governing termination of employment contracts that are laid down separately in Book 7 of the Dutch Civil Code. Therefore, it was assumed that an additional requirement had to be met, being that nullification on the grounds of deceit is possible only if it is established after the deceit is discovered that the employment contract is entirely useless because the work cannot be performed. The Supreme Court did not follow the reasoning adopted in the lower courts' judgments: if an employee is deceitful and an employment contract is formed as a consequence of that deceit, the employer is entitled to nullify the employment contract without needing to apply to the courts. This is not diminished by the statutory system of the laws governing termination, as that system is not aimed at protecting deceitful employees. In general contract law, courts have the option of mitigating the consequences for employees, for example by denying the nullification of some or all of its effect. The Supreme Court opined that an employment contract becoming devoid of substance is not a condition that needs to be met to nullify an employment contract on the grounds of deceit. This judgment shows that employers that are confronted with deceitful employees when entering into an employment contract have more options for nullifying their employment contracts than was previously assumed. Combining those options with summary dismissal is also worth considering in such situations.
On 17 July 2020, the Supreme Court ruled that in a situation where an employment contract was cancelled without the standard notice period being observed, the entitlement to the statutory transition payment must be determined on the basis of the date on which the employment contract would have ended if the standard notice period had been observed. By so ruling, the Supreme Court remedied a consequence that the legislature did not foresee in 2015 when the statutory right to a transition payment was introduced. As a consequence of this judgment, employers must award employees the transition payments that they would have owed if they had observed the appropriate notice period. Observing a shorter notice period, whether intentionally or not, will not benefit employers. In the case in question, the employer had observed a notice period of a little more than one month when it cancelled the employment contract with the employee, whereas it should have given six months' notice. The transition payment to be made by the employer should then be calculated based on the employment contract's end date that would have applied if the employer had actually observed the six-month notice period. The law provides that the employer also owes the employee fixed-rate damages, to a sum that is identical to the salary for the period that the employment contract would have remained in place if the six-month notice period had been observed.
In its judgment of 24 January 2020, the Supreme Court set aside a judgment rendered by the Amsterdam Court of Appeal, in which a maximum severance payment scheme in a bank's social plan was deemed void on the grounds of age-based discrimination. Under the maximum severance payment scheme, the severance payment granted under the social plan was capped at the sum of the employee's gross salary until retirement age. Based on that cap, the employee in question was not awarded any severance payment. Both the sub-district court and the Amsterdam Court of Appeal deemed the maximum severance payment scheme to be contrary to the prohibition against discrimination on the grounds of age. The Supreme Court held that, when assessing the appropriateness and necessity of the maximum severance payment scheme, the Court of Appeal had paid too little attention to the broad margin of discretion that management and labour (i.e., employer organisations and trade unions) have to strike a balance between the various interests. According to the Supreme Court, this means that courts must exercise restraint when assessing arrangements made in social plans. It is logical that this judgment will mean that arrangements in social plans will now less be likely to be declared void by reason of age-based discrimination.
Basics of entering into 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 for a fixed term or an indeterminate period. 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 obliged to provide the employee with a written or electronic statement listing the following details:
- the names and addresses of the parties;
- the place or places where the work will be performed;
- the position of the employee or the nature of the work;
- the date of commencement of employment;
- whether the contract is concluded for an indefinite or fixed term (if the latter, the duration of the contract should be stipulated);
- holiday entitlement or the manner in which holiday entitlement is calculated;
- remuneration and the periodic frequency of payment;
- the usual number of hours to be worked daily or weekly;
- whether the employee will join a pension plan;
- any applicable CBA or scheme made by or on behalf of a competent authority or applicable employment conditions as set forth in Section 8 or Section 8a of the Placement of Personnel by Intermediaries Act;
- whether the employment contract is a temporary employment contract as defined in Section 690 of Book 7 of the Civil Code, a payroll contract as defined in Section 692 of Book 7 of the Civil Code or whether the employment contract concerns an on-call contract as defined in Section 628a, Paragraphs 9 and 10 of Book 7 of the Civil Code; and
- if the employee will work outside the Netherlands for a period in excess of one month, further information, as required.
A non-compete clause, a probationary period and a unilateral amendment clause must be formalised in writing 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 certain circumstances. 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; thus, 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 a 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 with a term of two years or more may be two months at most.
If a probationary period is agreed 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.
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 register with the Dutch tax authorities, or may do so voluntarily, 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, or 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 a 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). A company is required to determine itself whether it has a withholding obligation for income tax and social security contributions in relation to independent contractors. However, the Dutch tax authorities will enforce the current policy regarding the use of independent contractors, in principle only in cases involving deliberate fraud or deception, or after having provided directions to the relevant parties that have not been observed.
Companies must pay their employees a statutory minimum wage. The amount of the minimum wage depends on the employee's age.
All employees are entitled to a statutory minimum amount of holiday, which is calculated by multiplying by four the number of hours they work per week. For people in full-time employment, this equates to 20 days, which 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.
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 to this 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 interests that the employer has sought to protect 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.
If the employer terminates an open-ended employment contract during the probationary period, a non-compete clause can only be enforced if the employer substantiates its major business interests in writing to the employee.
i Working time
Under the Working Hours Act, employees are permitted 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 reduced to no fewer than eight hours, and 36 consecutive hours of rest once every week or 72 hours every two weeks.
Night work is permitted subject to a maximum of 10 hours per shift, which may be extended by two hours for a maximum of five times per fortnight 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 the next 14 hours. If employees work 16 night shifts within 16 consecutive weeks, they may not accrue more than 40 working hours per week.
Overtime pay is not regulated. The question of whether pay is due for overtime 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.
Similarly, there are no statutory rates for overtime pay. The maximum working hours mentioned in Section VI.i also govern the maximum amount of overtime.
Employers have a legal duty to keep and retain various records of foreign workers. This includes obligations to verify the authenticity of their workers' identification documents and to keep copies on file for each employee. These copies must be kept for a minimum of five years after the calendar year in which the employment was terminated. The law does not limit the number of foreign workers in a workplace or company. Employers also have an obligation to provide information to the Immigration and Naturalisation Service (INS). The duty of care applies only to employers who hold the status of recognised sponsor with the INS.
Under the Employment of Foreigners Act, both a work permit and a residence permit are required for workers from outside the European Union, the European Economic Area (EEA) or Switzerland. These permits are issued by the INS, in some cases based on advice obtained from the UWV. Employers must apply for these permits. As a rule, an employer will be granted a permit only if he or she proves that no European Union, EEA or Swiss workers are available for the job. Exceptions exist for special categories of employment, such as the knowledge migrant scheme (KMR). After uninterrupted legal stay and employment for five years, workers from outside the European Union, EEA or Switzerland no longer need a work permit.
When a work permit and residence permit have been approved, the foreign worker must obtain a temporary residence permit (MVV) before travelling to the Netherlands. Citizens of a number of countries (Australia, Canada, Japan, Monaco, New Zealand, South Korea, the United States and Vatican City) 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 permit and a residence permit are 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., in respect of social security contributions and customs duties). If a foreign worker is subject to Dutch taxes or social security contributions, the employer will generally be obliged to withhold taxes and contributions and pay these amounts to the tax authorities. Since 1 January 2019, there is a distinction between Dutch workers and foreign workers regarding tax credits. Only a foreign worker from the European Union, EEA, Switzerland, or from special municipalities Bonaire, St Eustatius and Saba, who is taxed for at least 90 per cent in the Netherlands, is entitled to the same tax credits as a Dutch worker.
If a citizen of another country comes to work in the Netherlands, he or she may be liable for extra costs, known as extraterritorial costs. The employer may grant the employee a free (untaxed) reimbursement of the extraterritorial costs that the employee incurs. The employer may also provide the employee with 30 per cent of his or her wage, including reimbursement, tax free; this is known as the 30 per cent facility. For this, it is not necessary to prove that expenses have been incurred. To make use of this facility, permission is needed from the tax and customs administration and the employer and employee should submit an application. The employee is eligible for this allowance if a number of conditions are met, but – since 1 January 2019 – only for a maximum of five years.
In principle, foreign workers become eligible for a permanent residence permit after five years of legal stay in the Netherlands. All foreign workers are required to pass an integration test to be eligible for the permanent residence permit.
The most common permit for highly skilled workers is the KMR, which is a combined work and residence permit. The only requirement to obtain a KMR permit is that the employee must earn a salary of at least €4,752 gross per month, exclusive of 8 per cent statutory holiday allowance or, if the employee is not yet 30 years old, at least €3,484 gross per month.6 Furthermore, the employer must have obtained recognised sponsor status from the INS.
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 Directive (Directive 2014/66/EU), must apply for an Intra-corporate Transferees (ICT) permit. The Directive applies to employees who:
- are not nationals of Switzerland, Turkey or a country within the European Union or the EEA;
- perform work as a manager, specialist or trainee;
- have an employment contract with an undertaking established outside the European Union;
- are transferred to a group member within the Netherlands; and
- live outside the Netherlands at the time of submitting the application.
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 (for trainees, a maximum of one year), after which it can be converted into a KMR permit, regardless of whether the contract is transferred to the host entity. However, the salary thresholds will be applied strictly.
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, in both the public and private sectors, 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 matter, but can also help to 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 the 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 a code 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 these acknowledgements in employment agreements with their employees. Some companies require their employees to acknowledge receipt and understanding of the code, including its updates, each year.
The Work and Care Act provides that all employees (male and female and regardless of the number of working hours per week) may take unpaid parental leave for up to 26 times their working hours per week when they have or care for a child under eight years of age. A multiple birth or adoption of more than one child at the same time gives the right to full parental leave in relation to each of the children. At the end of the period of parental leave, the employee should return to his or her original number of working hours. Except when the employer has a substantial ground to refuse, the employee is entitled to determine the specifics of his or her parental leave (one day per week, one day per month, a continuous period, etc.). A request to take parental leave must be made in writing at least two months in advance.
Within four weeks of childbirth, an employee who is the partner of a woman who has given birth is entitled to paid post-birth leave equivalent to the number of working hours in the partner's standard working week. With effect from July 2020, additional paternity leave has been introduced, based on which an employee who is the partner of a woman giving birth has the option to take additional leave of up to five times the number of working hours of his or her standard working week within the six months following childbirth. During this leave, the employee will receive compensation of up to 70 per cent of the maximum daily wage set by the UWV, which will pay this compensation to the employer.
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. However, the employee must 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 for a non-skilled employee into that employee's native language. Documents not drafted in Dutch are often drafted in English.
Workers are entitled to freedom of association and representation, based on the European Social Charter and the Dutch Constitution. Under the Dutch Works Council Act, workers can furthermore be represented by a works council or an employee representative body. Moreover, employees may be represented by trade unions, of which 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 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 a company's employees as well as possible, a works council has various rights and obligations, including the right to:
- be consulted on important decisions by the company on financial, economic and organisational matters;
- approve regulations concerning the social policy pursued by the company; and
- be consulted about the appointment and dismissal of members of the company's managing board.
If management violates these rights, the works council may seek redress in court.
Works councils consist 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 the members of their works council a specified number of hours to meet and discuss works council matters during working hours, for which they will receive full pay.
Companies that employ between 10 and 50 employees may be under an obligation to establish an employee representative body, rather than a works council.
ii Trade unions
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 about the collective terms of employment in connection with the formation of CBAs;
- drafting redundancy or social plans; and
- providing guidance in the event of forced redundancy in organisations.
CBAs dominate at industry level. Negotiations normally take place between the trade union 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. They also cover issues such as working hours, holiday entitlement, pension and social matters. At the company level, the employer's representatives negotiate directly with the workers' representatives.
i Requirements for registration
The General Data Protection Regulation7 (GDPR) applies to the processing of personal data. The GDPR is accompanied by the General Data Protection Regulation (Implementation) Act.
When employers process personal data in an employment context, they will – as a main rule – act as a controller within the meaning of the GDPR. A controller is the party that determines the purposes and means of the processing activity.
The controller needs to comply with certain principles when processing personal data. Personal data shall be:
- processed lawfully, fairly and in a transparent manner;
- collected for specified, explicit and legitimate purposes and not further processed in a manner that is incompatible with those purposes;
- accurate and kept up to date;
- stored for no longer than is necessary to achieve the purposes for which the data are collected and subsequently used; and
- processed in a manner that secures the appropriate security of the personal data.
Personal data may be processed only if the processing is necessary in connection with the performance of the employment contract with the employee, or the controller can rely on another lawful basis for processing set out in the GDPR. As a general rule, employers cannot process the personal data of job applicants or employees on the basis of their consent because of their dependency on the employer.
Under the GDPR, a controller shall maintain a record of processing. This internal documentation obligation does not apply to companies or organisations employing fewer than 250 persons, unless 'the processing it carries out is likely to result in a risk to the rights and freedoms of data subjects, the processing is not occasional, or the processing includes special categories of data . . . or personal data relating to criminal convictions and offences'.8 Employers will regularly process employees' personal data in the context of their human resources and payroll administration, and the management of their daily business operations. The above-mentioned derogation does not apply to these non-occasional processing activities.
Small and medium-sized enterprises will need to maintain a record of these processing activities. The record must include:
- the name and contact details of the controller and (where applicable) the name and contact details of any joint controller, the controller's representative and the controller's data protection officer;
- a list of the purposes of the processing;
- the categories of data subjects and the various types of categories of personal data that are processed;
- the categories of recipients to whom personal data will be disclosed;
- whether the personal data will be sent to countries outside the European Union; and
- where possible, the retention periods that apply and the security measures that have been taken.
The controller needs to make the record available to the supervisory authority on request.
The GDPR requires controllers to implement appropriate data protection policies when this is proportionate in relation to their processing activities. Even when the implementation of these policies is not strictly required by the GDPR, an employer will usually implement them as part of its data protection compliance programme and its efforts to document and demonstrate GDPR compliance.
As set out above, the controller must implement appropriate technical and organisational measures to protect personal data against loss and any form of unlawful processing. These measures shall guarantee an appropriate level of security, taking into account the risks associated with the processing and the nature of the personal data to be protected. The measures must also aim to prevent any unnecessary collection or further processing of personal data.
In the event of a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to personal data, the controller shall notify the supervisory authority about the breach within 72 hours of becoming aware of it, unless the breach is unlikely to result in a risk to the rights and freedom of natural persons. However, if the breach is likely to result in a high risk to the rights and freedom of natural persons, the controller shall also notify the breach to the data subject without undue delay.
The controller shall provide data subjects, such as job applicants and employees, with information in clear and plain language, about the processing of their personal data. This information must include, among other things, the identity and contact details of the controller, the contact details of the data protection officer (if applicable), the purposes of the processing of the personal data, the recipients of the personal data, the applicable retention periods and the data subjects' rights.
In principle, the data subjects have a right of access to their personal data. Consequently, data subjects may ask, at reasonable intervals, whether personal data relating to them is processed and, if so, the controller shall provide a copy of their personal data and information about the processing. Furthermore, data subjects can, under certain circumstances, request an employer to rectify, supplement or erase personal data, to restrict the processing of their personal data or can object to certain processing of personal data. In specific cases, data subjects also have a right to data portability. The data subject rights set out above are not absolute and restrictions may apply, for example where this is necessary to protect the rights and freedom of others. The data subject also has the right to lodge a complaint with a supervisory authority.
The Dutch Data Protection Authority supervises compliance with legislation on the use of personal data.
ii Cross-border data transfers
Personal data may not be transferred to countries outside the European Union, unless the receiving country guarantees an adequate level of protection. This also applies to transfers of personal data within a group of companies. The European Commission (EC) has decided that the following countries provide an adequate level of protection: Andorra, Argentina, Canada (commercial organisations), Faroe Islands, Guernsey, Israel, Isle of Man, Japan, Jersey, New Zealand, Switzerland and Uruguay. The countries belonging to the EEA also are deemed to guarantee an adequate level of protection.
On 12 July 2016, the EC adopted the EU–US Privacy Shield adequacy decision, which became operational on 1 August 2016. The European Court of Justice has invalidated this adequacy decision in its ruling of 16 July 2020. Therefore, as of 16 July 2020, personal data may no longer be transferred to organisations in the United States on the basis of the EU–US Privacy Shield.
In the absence of an adequacy decision, personal data may also be transferred to third countries if appropriate safeguards are implemented as set out in Article 46 of the GDPR, such as approved binding corporate rules or approved standard contractual clauses, to the extent that in the circumstances of the specific transfer the safeguard that is used ensures an essentially equivalent level of protection as provided under European Union law. Where this is not the case, the data exporter shall implement additional measures to guarantee protection with respect to the envisaged transfer. If no such additional measures are available, the safeguards cannot be relied on as a transfer tool.
Finally, in the absence of an adequacy decision or appropriate safeguards, personal data may be transferred if one of the exceptions of Article 49 of the GDPR applies.
iii Sensitive data
The processing of special category personal data (such as data regarding race or ethnic origin, political opinions, religion or philosophical beliefs, membership of a union, genetic or biometric identification data (for identification purposes), health or sexual preferences) is, in principle, prohibited. The same applies to personal data relating to criminal convictions or offences. The GDPR provides for certain circumstances based on which the processing of sensitive personal data is allowed, for example if the data subject has given his or her explicit consent or if the data subject has manifestly made the data public himself or herself. The Data Protection Regulation (Implementation) Act also provides specific derogations to these prohibitions. An employer may, for example, process health data where this is necessary for the reintegration of employees in a case of incapacity for work.
iv Background checks
It is not uncommon for a company in the Netherlands to perform background checks when it intends to hire a new employee. This could be done by asking the job applicant for extra background information or by 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 request information about credit records through the applicant or employee, through a public source or with the applicant's or employee's permission. Applicants or employees are not obliged to answer questions about their credit records, unless this is relevant for the performance of the job. Similarly, whether processing of this type of data is permitted will depend on the position. Information about an applicant's or an employee's criminal record qualifies as sensitive personal data. Processing this type of data is prohibited unless a statutory exception applies. However, if a person's criminal record is relevant for the performance of a job, an applicant or an employee must duly inform the employer (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 Dutch Ministry of Security and Justice if such a certificate is relevant for the position.
Besides the aforementioned, it is important for employers to realise that it is generally prohibited to request medical tests, ask questions about the use of illegal narcotics (in spare time) and to process health data. In the Netherlands, drug or alcohol tests are regarded as medical tests and the related data as health data.
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 with 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 record their terms in a settlement agreement.
Termination by mutual consent
Settlement agreements are only valid if they are concluded in writing. Employees have the option to terminate settlement agreements within 14 days, either by withdrawing their consent (without giving reasons) 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 time limit to three weeks.
Notice after permission from the UWV
Employers have to request permission form the UWV to terminate an employment contract on economic grounds or on the grounds of an employee's long-term illness (i.e., 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: 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, to a maximum of six months for the employee, but in that case the employer's notice period must be twice as long as that of the employee. Payment in lieu of notice is not permitted.
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 as a result of pregnancy or childbirth, is based on the employee's membership of a trade union, or the employee's attendance of meetings held by political organisations, or the employee exercising his or her right to parental leave, or involves any discrimination.
Requesting the sub-district court to rescind the employment contract
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, or 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, in principle, 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. Employers may also combine two (or more) uncompleted grounds for dismissal (cumulative dismissal ground). When terminating the contract, the court will take the applicable notice period into account and deduct the time taken by the court proceedings. 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 an 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 whose employment contracts end are generally entitled to a transition payment from the first day of employment. This applies also to employees with fixed-term employment contacts that are not renewed. As a rule, employees are not entitled to a transition payment if their employment contracts are terminated by mutual consent, but this will naturally be relevant when arrangements are made regarding the termination. In addition, employees are not entitled to a transition payment (1) if the employment contract is terminated at 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 transition payment is not age-related and amounts to one-third of the monthly salary for each year of service (including extra days or months pro rata). Monthly salary means one month's gross salary plus monthly average variable pay and benefits during the 36 months before notice of dismissal. The payment is set at a maximum of €84,000 gross or one year's 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.
The court may grant an employee additional compensation of a maximum of half the transition payment if the termination is based on cumulative dismissal grounds. In the situation that 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. This additional compensation is not capped and is based on all relevant circumstances.
Both employers and employees are entitled to terminate the employment contract 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, or have the employment contract rescinded by the relevant court. Employees who are instantly dismissed are not entitled to any unemployment benefits. 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 described in Section XIII.i (e.g., notification period, severance payment, categories of employees protected against dismissal) also apply to cases of redundancy.
In the event of a mass lay-off, additional rules apply. A mass lay-off occurs when a company decides to dismiss 20 or more employees 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 length 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 for 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 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 intended decision to reorganise the organisation. The employer is obliged to submit its intended 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 effect on the intended decision. A request for advice must, as a minimum, include a statement of the grounds for the intended decision, the consequences anticipated for the people 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. In general, the works council may decide what information is reasonably necessary for it to perform its duties.
Before it issues its advice, the works council will deliberate on the matter concerned with the employer 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 amount of time to issue its advice. Although one month is considered to be reasonable, 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 not followed in its entirety, the employer must inform the works council of its reasons. 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.
When 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 with the works council, or simply drafted unilaterally by the employer.
Transfer of an undertaking
The Civil Code (Article 7:662 et seq.) applies when 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 (generally known as TUPE) 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 TUPE, the people employed by the transferor, including all their rights and obligations, are automatically transferred to the transferee. This means that the 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 covid-19 pandemic is expected to have a significant influence on employment law in 2021, as in 2020. The Dutch government has announced that certain aspects of new employment legislation that was previously expected in 2021 has already been delayed because of the pandemic, for example, replacement of the existing Deregulation of Assessment of Independent Contractor Status Act. The legislative proposal for this new Act is currently scheduled for early 2022 and aims to provide independent contractors and their clients with more certainty on the qualification of their contractual relationship and to prevent pseudo self-employment.
1 Dirk Jan Rutgers is a partner, Inge de Laat is managing partner, Stephanie Dekker is a counsel and Annemarth Hiebendaal and Annemeijne Zwager are attorneys at Rutgers & Posch.
2 Uitvoeringsinstituut Werknemersverzekeringen.
3 Autoriteit Persoonsgegevens.
4 Studie- en Informatiecentrum Mensenrechten.
5 Tijdelijke noodmaatregel overbrugging voor behoud van werkgelegenheid.
6 The quoted monthly salaries are those applicable for 2021.
7 Regulation (EU) 2016/679 of the European Parliament and of the Council on the protection of natural persons with regard to the processing of personal data and on the free movement of such data.
8 id., at Article 30, Paragraph 5.