Protecting the Client s Interests in Dutch Employment Law Disputes

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1 Protecting the Client s Interests in Dutch Employment Law Disputes By Eugenie Nunes, Partner Employment Law, Boekel De Nerée, Amsterdam The Netherlands Source: Inside the Minds: Employment Law Client Strategies in Europe, 2011 ed., Nationwide Book Published by Aspatore Books Introduction The Netherlands is known for having a very strong body of employment law protections. For example, an employer in the Netherlands cannot give notice of termination without the approval of the government body assigned with this authority (UWV WERKbedrijf) or the Court. Also, if it is determined that an employee was given notice and the notice leads to an obviously unreasonable dismissal, the employee can make a claim in court and the court may decide that the dismissal is indeed considered obviously unreasonable and, as a result, the employer has to pay the employee a certain amount of money. Essentially, we have strong employee protections in the Netherlands, and strong labor unions. Consequently, it is important for employers in our country to have proper policies regarding their terms and conditions of employment. To that end, I advise my employer clients to consider fixedterm employment contracts to create some ground rules for the employer-employee relationship. In addition, a growing number of companies want to have freelance contracts with their employees to create a more flexible arrangement, and to decrease their costs in accordance with the financial results of the company. Recent Trends and Issues in Dutch Employment Law A proposed change in the law affecting corporate entities in the Netherlands will have an impact on the employment and dismissal of managing directors. It proposed in the Netherlands to introduce the one- tier board, like in the United Kingdom, and to provide that the managing director of a listed company can only be hired on the basis of a service contract and not on the basis of an employment agreement. There have also been some proposed changes relating to days off from work in the Netherlands. There had been a longstanding rule that, if you were sick for more than six months, you only build up holiday time over that six-month period. However, last year the European Court of Justice decided that employees should have the opportunity to have vacation time irrespective of whether or not they were sick. Also in view thereof, the legislation regarding the statute of limitations in the Netherlands regarding vacation days will change from five years into six months to stimulate employees to take their holiday and to recuperate from their work. Looking ahead, I believe that labor unions will be increasingly involved in the process of establishing labor laws in this country. Currently, a union is permitted to ask the Enterprise Chamber (Ondernemingskamer) for a review of management s performance to determine whether mismanagement has occurred, particularly in the event of a company declaring bankruptcy. It should be noted that unions have not been very active over the last few years in Dutch employment law cases, but now unions are getting more involved with respect to litigation a trend that is influencing management decisions and encourage awareness that their acts can be subject to review. With respect to workplace issues, the courts are taking a closer look at whether a company s economic circumstances justify certain terminations, and whether an employee can be required to accept a change in tasks and responsibilities issues that are particularly important in light of the current recession, which has led to a limited number of job vacancies.

2 Also, employment law in the Netherlands is based on EU directives on transfers of employees as a result of a merger or acquisition. Basically, if you are an employee within a certain company that is acquired by another entity, you will be transferred as a matter of law to the acquirer. This directive has been implemented in different ways in different countries, and the law may also differ to some extent in other EU countries. For example in the Netherlands, the employment agreement of the employee who refuses to be transferred terminates as a matter of law. In certain other countries, the employee may continue to claim employment with his previous employer. Major Employment Laws in the Netherlands The majority of employment laws in the Netherlands are contained in the Dutch Civil Code. The applicable rules also follow from a number of collective bargaining agreements, which are not laws but rather agreements between companies and unions that are effective for two or more years, such as the collective bargaining agreement for the metal industry. Netherlands employment law is also based on various individual acts like the Works Council Act, the Equal Treatment Act, and the Merger Code, which pertains to mergers and acquisitions involving a certain number of employees. Therefore, our employment law is primarily based on the Dutch Civil Code, which contains a section relating to employment conditions, and some specific acts that relate to the implementation of various European directives or specific laws regarding rules that are considered fundamental for working in the Dutch territory, such as those regarding minimum wages and working hours. Understanding Changing Client Needs Our firm s client base primarily consists of listed and mid-cap companies that generally have their own in-house lawyers, or a human resources department that is supported by legally trained people. As outside attorneys, we tend to advise our clients on complex matters that relate to the company and their commercial activities, including employment conditions in the context of mergers and acquisitions and outsourcing projects, as well as Works Council issues, such as the right of advice in case of reorganization or the right of consent in case of privacy-related issues. We prefer to act as a strategic business partner with our clients in order to help them implement proposed changes in their companies and to give guidance not only in the case of legal battles, but also in finding solutions for various employment law issues from a legal perspective. Ultimately, we try to provide support for our clients business goals. Developing an Employment Law Strategy in the Netherlands The process of developing an employment law strategy in the Netherlands largely depends on the individual client s needs. We provide assistance in effecting the client s desired strategy within a certain timeframe and assist in the decision-making process. We also take part in the consultation process with unions or Works Councils where necessary. It is important to work closely with the client to determine where problems may arise, and to ensure that the process of resolving an employment law issue is not taking longer than necessary. I have found that many of our clients have taken steps in recent times to undertake their human resources activities with fewer employees, and to hire more freelance workers for individual projects, particularly at certain periods of peaks in business Essentially, they are making changes to their organizational style and structure in an effort to operate more effectively and efficiently; and this may entail making changes with respect to certain employee positions. Headhunters are still used for hiring in certain positions, but companies are also increasingly recruiting employees through social media in view of the number of people they can reach in that way and cost effectiveness. 2

3 To develop effective employment law strategies, I think that it is important for the employer and their attorney to have a good overview of the legal limitations they are facing. For instance, you have to determine what kind of requirements must be met under the Works Council Act and other acts in order to implement an employment policy or strategy. Essentially, you need to determine the ideal mix between the client s business goals and the legal requirements they are facing, and it is up to the lawyer to help the client find the right formula. Ultimately, however, it is the client who determines what their business needs and employment law strategies should consist of. He or she must supply the lawyer with the basic information regarding their employment law strategy, because that strategy will be developed on the basis of the client s business requirements. Working with Multinational Companies In today s global business environment, the human resources departments of multinational companies increasingly communicate with each other via video conferencing. In the past, people needed to travel to New Zealand, the United States, or wherever a multinational company s offices were located, but that is no longer necessary. Therefore, new technology has helped limit travel costs for a company s personnel, and at the same time, the human resources people are still able to communicate with each other in an effective way and exchange views, wherever they may be located. At the same time, many multinational companies have employment policies that need to be implemented in each country where they are doing business. However, those policies must be implemented in observance of local laws and lawyers in this practice area need to be aware that there are likely to be significant differences as to what is and is not permitted in various countries in relation to employment law practices, such as the procedural rules to be followed in case of grievance procedures or dismissals. Consequently, it is very interesting from a lawyer s perspective to see how the differences in this area can be bridged. There are often misperceptions between the people who work in the client s various branch offices concerning what they are expected to do or how things work in relation to employment law practices. Therefore, it is the lawyer s job to give some guidance in this area, and that requires understanding the expectations regarding employment law in each country where the client is doing business. It is therefore of importance that a lawyer regular talks with lawyers in other countries to understand their system of law in order to be able to explain to his or her clients the differences and to understand the way the client thinks about the matter. Helping Clients Identify and Audit their Compliance Needs Important local and regional agencies and entities in the Netherlands that deal with employment law issues include the Committee for Equal Treatment, the Merger Committee, the Social Security Board, and the court system. I believe that it is important for employment lawyers to have a respectful relationship with those agencies and their officials in order to facilitate the services we perform for our clients, and offer additional value. Our firm has an excellent employment law compliance department. Consequently, we are able to perform a complete corporate compliance review for our clients that includes many facets. For example, it is important to learn whether the company complies with the requirements of the Dutch Central Bank, and if the client has met the specific rules for, for example, remuneration under the Corporate Governance Code and the Banking Code and the compliance requirements with respect to safety in the workplace and the protection of sensitive information. 3

4 I believe every client should have a proper conversation with an employment lawyer on at least an annual basis in order to discuss what kind of governmental regulations and internal rules have changed during that time that may affect their employment law strategies. It is also important to discuss what the business is going to do in the future, its expectations regarding size, and its relationship with the Works Council. In case of significant business decisions that require the advice of the Works Council, it is sensible to give some extra attention to update the Works Council and to communicate in an early stage, where possible, such in order to obtain their commitment to the process. Basically, you are looking to get a complete picture of the client s situation to determine whether some aspects of their employment law strategy should get more attention than others, and which issues need to be solved first to facilitate the business process. When a client receives notice of an employment law violation, it is important to know how to respond to that notice. For example, the client may have employees who should have a certain work permit because they are of a different nationality, and a penalty may be imposed if they do not have it. Therefore, it is very important to review with your client on a regular basis what kind of activities they are involved in, and whether there are specific requirements related to those activities that need to be addressed. Handling Employment Disputes: Litigation vs. Mediation Most employment law disputes in the Netherlands go to litigation. In the event of a termination dispute, you will be dealing with the Social Security Board or the court. Likewise, if there is a financial dispute about salary or bonuses, you will need to go to court. A claim for equal treatment may be handled by the court or the Committee for Equal Treatment, but generally the court will make the final decision in these cases. Fortunately, we also have a strong and well-developed mediation system in the Netherlands, and the courts will determine whether mediation should be initially tried to resolve a dispute. However, if you want to go to mediation in the Netherlands you need the approval of both parties. In some instances, the judge at a court hearing will say to one of the parties, I do not think you are likely to win the case. Maybe you should consider talking with the other party in order to reach a settlement. Of course, generally, it is important to help clients avoid employment lawsuits in the first place. To that end, it is crucial for a client to have a proper human resources policy with clear rules which are available to all personnel. Clients must also inform underperforming employees about their problems, in writing, and instruct them on how they need to do better. Unfortunately, many employers terminate employees without first compiling performance files, which can lead to litigation. Therefore, having a proper policy in place regarding these matters is very effective. Negotiating and Resolving Disputes between Employers and Employees Most disputes between employers and employees in the Netherlands concern termination issues, including those related to a no-competition clause or equal treatment, as well as bonus negotiations. In recent times, many companies have increased the flexible aspects of their working relationships in order to replace employees by a flexible (freelance) workforce. However, there tend to be litigation about the circumstances justifying such replacement is and the conditions therefore. Communication is generally the best way to resolve any dispute between an employer and employee. A proper conversation can often resolve a workplace dispute, whether or not it leads to the termination of an employment agreement or payment of a claimed amount. In fact, many court cases start because one of the parties stopped talking to the other. Therefore, to the extent that you want to reach a solution to an employment law issue particularly if you do not have a very strong case you need to talk to the other party. 4

5 As employment lawyers, we can encourage such discussions by explaining to the client why good communication with their employees is to their advantage and can contribute to a strong human resources policy. No manager wants to spend a lot of time on dealing with employee conflicts; it is not in the best interest of a company to get involved in a court case that may take years to resolve. Basically, it is important for the continuity of the client s business to find a solution to their employee disputes, and as an employment lawyer, you can help the client develop a process for resolving such disputes. Conclusion I believe that an increasing number of employment law measures in the Netherlands will be based on EU directives, including those relating to class actions and employee Works Councils both on a European level and a local level, particularly with respect to multinational reorganizations and restructurings. For lawyers to stay up to date about the latest changes and trends in employment law in the Netherlands, it is important to do a lot of reading and writing in this area. You have to read and publish articles related to your profession and the specific field or area of employment law you are involved in. It is also important to keep in mind that winning is not the most important goal in this profession. Even if you win in litigation, you may wind up having a very difficult relationship with your local Works Council in the future. It is always in the business interest of your client companies in to protect and safeguard, to the extent possible, a good relationship with the local Works Council to get things done on their behalf Fortunately, in many cases, appropriate communication between the parties can help you to find an acceptable solution to the client s problem. Key Takeaways As a law firm we work and negotiate closely with clients to determine their needs, highlight potential problems, and reach a quick solution. We also consult with unions or Works Councils where necessary. People who work in a multinational client s branch office often perceive their responsibilities as an employer differently. Lawyers must provide guidance in this area, which necessitates understanding employment laws in each country where the client does business. Attorneys must meet with clients on a regular basis to ensure that the clients are aware of the laws and the attorneys are aware of their clients activities. A proactive approach is required. Reading and writing are vital for lawyers who wish to stay up to date about changes and trends in Netherlands employment law. Winning a case or a negotiation is not the most important goal: allowing your client to do business in the future is and to contribute to its success from a legal angle. Maintaining a constructive relationship with the local Works Council, as far as possible, will be highly valuable in this regard. Acknowledgement: I thank the clients and other business relations who shared their views with me with respect to their business needs and their expectations of legal services providers. Such enables us to be aware of their inside of the minds and gives us the opportunity to provide the legal services to meet these expectations. 5