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The Refurbished Dutch Employment Law

change-ahead-610-x-320-300x157Dutch employment law has recently undergone some essential changes. Going beyond just a simple face-lift, the revisions of the ‘Labor and Security Law’ (‘Wet Werk en Zekerheid’) have notable implications for employers and employees alike. Staying on top of these developments is imperative for Dutch as well as international businesses employing workers under Dutch law.

Phase 1 – 1st of January 2015

The new rules are being implemented in two phases. The first phase, which started on the 1st of January 2015, introduced four main changes regarding fixed-term contracts.

1. Notification period
A notable development regarding fixed-term contracts is that they no longer expire automatically. The employer must notify the employee one month before the end date of a contract if they wish to terminate or continue employment (in Dutch this period is called ‘aanzegtermijn’). Should the employer disregard this notification period, the employee is entitled to compensation in the height of a one-month salary. If the notice is given, however with delay, the employee is owed a proportional compensation.
This change will also apply to existing contacts with an end date after the 1st of February 2015.

2. Trial periods
The rules regarding trial periods have also been changed. Fixed-term contacts concluded on or after 1st of January 2015, for a period shorter than 6 months, cannot contain a trial period clause at all. Contracts concluded for longer than six months, yet for less than 2 years, warrant a trial period of one month, while for fixed-term contracts for a period exceeding 2 years the maximum is set at 2 months. In case of no end date, the maximum trial period is one month.

3. Non-compete clauses
Furthermore, fixed-term contracts concluded after 1st of January 2015, cannot include a non-compete clause. The only exemption is if it can be demonstrated that there are compelling business or departmental interests at stake, necessitating such an obligation (in Dutch: ‘zwaarwegende bedrijfs- of dienstbelangen’).

4. The ‘No work, no pay’ rule
The ‘no work, no pay’ practice, entailing that an employee is not entitled to pay if they are not performing labor, has been abolished. Under the new rules, an employee is owed a salary regardless of whether they perform labor or not, unless the absence of labor is due to their own doing (in Dutch: ‘loondoorbetalingsverplichting’). In case of a disagreement it is up to the employer to prove that the absence of labor is to be attributed to the employee himself.
There is an option to suspend this obligation by an a priori written agreement, however, only for the duration of the fist 6 months of employment.


Phase 2 – 1st of July 2015

The second implementation phase, commencing on the 1st of July 2015, concerns the automatic transformation of consecutive fixed-term contracts into an open-ended contract, and the law governing termination of employment.

5. Fixed-term contract transformation
Currently, it is possible to extend a fixed-term contract twice (i.e. have three fixed-term contracts following each other), as long as their total duration does not exceed 36 months. After 36 moths the fixed-term contract automatically transforms into an open-ended contract. In order to avoid this, and continue fixed-term employment, there needs to be a minimum of 3 months ‘resting period’ before the cycle can begin again.
As of July, however, the maximum combined period covered by the fixed-term contracts, concluded on or after the 1st of July 2015, is reduced to 24 months and the ‘resting period’ is extended to 6 months.
Any derogation by a collective contract (in Dutch: “cao”) is only valid until the 1st of January 2016. Trying to circumvent the transformation by means of a settlement setting an end date to the open-end contract (in Dutch: ‘beëindigingsovereenkomst’) is not possible. The Dutch High Court (Hoge Raad) ruled that a settlement ending the contract beforehand results in another fixed-term settlement, and is therefore void.

6. Termination of employment
Finally, the second implementation phase affects the termination-of-employment law (‘Ontslagrecht’).

As of the 1st of July 2015, the ‘transition compensation’ (in Dutch ‘transitievergoeding’) will replace the current procedure in which the judge decides on the amount an employer needs to pay to the terminated employee. Under the new rules an employee is entitled to ‘transition compensation’ if their employment is terminated, provided they have been working their employer for a minimum period of 24 months. Compensation is due in all cases; except for when the termination of employment is due to the employee’s own wrongdoing. The length of employment equals the duration of all contracts following each other, with a maximum interruption of 6 months in between.
The amount is determined by the years of service, and can be as high as € 75.000. If the salary exceeds € 75.000 annually, the maximum compensation is a one-years salary.

Furthermore, employers can no longer choose which route they want to take in termination cases. The Employee Insurance Agency (‘UWV’) will deal, within 4 weeks, with dismissal on economical grounds, or dismissal due to a sick leave exceeding 2 years. For all other reasons, including employee’s own wrongdoing, the termination procedure must take place before a judge.

In conclusion, employment law has undergone evident changes. It is debatable who is left in a better position, the employee or employer. Overall, they aim to provide clarity, and simplify procedures for both sides.

Andrea Sindova