Work and Security Act

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1 Work and Security Act Eleven major changes and consequences for the employer July 2014 A PUBLICATION OF AKD LAWYERS AND CIVIL-LAW NOTARIES

2 Table of contents 1. Terminating a temporary contract 2. Trial period under a temporary contract 3. Non-competition clause under a temporary contract 4. Risk rules (risicoregeling) 5. Dual dismissal system 6. Transition fee 7. Settlement agreement 8. Professional development obligation 9. Chain regulation (ketenregeling) 10. Successive term of employment 11. Unemployment act

3 Terminating a temporary contract The main rule is that a temporary contract automatically expires. Introduction of a notification period: in the case of temporary contracts with a term of six months or longer, the employer should make it clear at least one month before the expiry date whether or not the contract will be renewed. In the event of non-compliance, compensation is payable by the employer to the employee equal to one month s salary, and in the event of late compliance, a pro rata amount is payable. The employer must, in fact, decide a month earlier about whether or not to renew. The employer will in any case want to avoid the fee becoming payable and in the event of doubt about non-renewal, err on the safe side and communicate the end of the employee s contract in time. The employer incurs increased costs. 1 January 2015

4 Trial period under a temporary contract If a temporary contract is concluded for a period of less than two years, a trial period can be agreed of one month, and for a temporary contract of two years or longer a trial period of two months. In a temporary contract with a term of six months or less, no trial period can be agreed. It will be more difficult for the employer to use short term contracts: a choice has to be made between a temporary contract for longer than six months with a trial period, or a temporary contract for six months or less with no trial period. 1 January 2015

5 Non-competition clause under a temporary contract A non-competition clause can be agreed in both a temporary and a permanent contract. The main rule will be that a non-competition clause is not valid in a temporary contract. A non-competition clause is only valid in a temporary contract if it emerges from the written substantiation that It will become much more difficult for an employer to agree a valid non-competition clause in a temporary contract. There will probably be a lot of litigation about when there is a matter of urgent business interests. 1 January 2015 the clause is necessary due to urgent business interests.

6 Risk rules The main rule of the current risk rules (risicoregeling) is: no work, no pay. The exception to this main rule is that the employee retains his/her right to wages if he/she has not performed the agreed work due to a cause that should reasonably be for the account of the employer. The main rule no work, no pay is repealed. The basic principle is that the employer is obliged to pay wages if the employee has not performed the work, fully or in part, unless this should reasonably be for the account of the The employer must establish and, if necessary, make plausible that the employee lacked the willingness to perform the contracted work. This means that the employer is more likely to be obliged to continue to pay wages if an employee has not worked. 1 January 2015 employee. There is therefore a reversal of the burden of proof.

7 Dual dismissal system The employer can - regardless of the reason for dismissal - choose between two dismissal routes : through the Employee Insurance agency (UWV) or through the district court. Appeal and cassation against the district court s ruling is not possible. The UWV route should be followed in the case of dismissal for economic reasons or dismissal after More clarity about the way ahead. Chance of more and lengthy procedures about the validity of a dismissal/termination. It may take a long time before the parties know where they stand. two years of illness. The procedure at the district court is intended exclusively for a termination for "personal" reasons. The UWV s decision can be put before the district court.

8 Dual dismissal system The length of the dismissal procedure can be deducted from the notice period. Appeal and cassation against the district court s ruling is possible. More clarity about the way ahead. Chance of more and lengthy procedures about the validity of a dismissal/termination. It may take a long time before the parties know where they stand.

9 Transition fee On termination by the district court, compensation can be awarded based on the district court formula. On termination following a UWV procedure, damages can be claimed in the event of manifestly unreasonable dismissal. This (damage) compensation is not subject to a maximum. On the non-renewal of a temporary contract, no compensation is payable. The employee who has worked for at least two years will be entitled to a transition fee on the termination or non-renewal of his employment contract. Dismissal will probably become less costly for the employer. More clarity on the outcome, and thus a greater chance of settlement with the employee. Complex system of compensation On the non-renewal of a temporary contract, a transition fee is also payable. Until 1 January 2020 there is an intermediate arrangement for small businesses and elderly employees.

10 Transition fee This payment is one third of the monthly salary earned in the first ten years of service and half of the monthly salary in the years thereafter subject to a gross maximum of 75,000. In respect of income in excess of 75,000, the payment is subject to a gross maximum equal to one year s salary. The transition fee is not payable in the case of gross culpability on the part of the employee. In the case of gross culpability on the part of the employer, the employee can claim supplementary compensation. This supplementary compensation is not subject to a maximum. Dismissal will probably become less costly for the employer. More clarity on the outcome, and thus a greater chance of settlement with the employee. Complex system of compensation On the non-renewal of a temporary contract, a transition fee is also payable. Until 1 January 2020 there is an intermediate arrangement for small businesses and elderly employees.

11 Settlement agreement A settlement agreement can be agreed legally at any time. There is no statutory period of reflection for the employee. A settlement agreement can only be agreed on in writing. For the employee, there will be a statutory period of reflection of fourteen days. During this period the employee can annul the settlement agreement by means of a written statement. The employer must inform the employee about this period of reflection in writing in the settlement agreement, Consequences for the employer On entering into a settlement agreement, the employer has no certainty for fourteen days as to whether or not the agreements will be confirmed. The employee can use an annulment to negotiate higher compensation. or within two working days after signing the settlement agreement.

12 Settlement agreement Should the employee return from a settlement agreement and if there will be agreed on a new settlement agreement within six months, there is no statutory period of reflection anymore. On entering into a settlement agreement, the employer has no certainty for fourteen days as to whether or not the agreements will be confirmed. The employee can use an annulment to negotiate higher compensation.

13 Professional development obligation Employment law currently does not require employers to contribute to the professional development of its employees. The law stipulates that the employer must allow the employee to take part in professional development that is necessary for the performance of his/her duties. As far as can reasonably be expected of the employer, it must also enable the employee to take part in professional development needed for the continuation of the employment contract, Whether or not the employer complied with the legal professional development obligation is an important factor in answering the question of whether an employee can be dismissed. This will raise a lot of discussion about whether the employer complied with its professional development obligation.

14 Professional development obligation if the position held by the employee ceases to exist or he/she is no longer able to perform this position. An employee cannot be dismissed for unsatisfactory performance if this is the result of non-compliance with the professional development obligation. The possibility of professional development should also be investigated for any reassignment. Whether or not the employer complied with the legal professional development obligation is an important factor in answering the question of whether an employee can be dismissed. This will raise a lot of discussion about whether the employer complied with its professional development obligation.

15 Chain regulation In the case of temporary contracts following each other consecutively within a period of three months on the conclusion of a fourth contract or after three years a contract for an indefinite period of time will be created. There is an unlimited opportunity to deviate in a CLA. In the case of temporary contracts following each other consecutively within a period of six months on the conclusion of a fourth contract or after two years a contract for an indefinite period of time will be created. Consequences for the employer Entering into a temporary contract will make the employer less flexible. Now, under specific circumstances, the employer will decide after two years to let an employee go: the three years job (in)security is reduced to two years.

16 Chain regulation Deviations from the chain regulation s CLA are only possible (1) if business operations require this (2) if a managing director is involved (3) in a sector in which the chain regulation would have unacceptable consequences (4) for students following a dual study programme. It is no longer possible to deviate in a CLA from the interim period of six months. The chain regulation (ketenregeling) does not apply to employees younger than 18 who work no longer than 12 hours a week. Entering into a temporary contract will make the employer less flexible. Now, under specific circumstances, the employer will decide after two years to let an employee go: the three years job (in)security is reduced to two years.

17 Successive term of employment There is a successive term of employment if (i) the skills and responsibilities set out in the new contract are substantially the same as required under the previous contract and (ii) the links between the new employer and the previous employer are such that the latter, on the basis of its experience with the employee, has insight into the qualities and suitability that in fairness should be allocated to the new employer. Employment contracts are more often deemed to be successive terms of employment. For the application of provisions of the chain regulation, this means that a permanent contract could exist earlier. This may also cause the transition fee to be higher.

18 Successive term of employment The second criterion is repealed. Therefore, even if the successive employer has no insight into the qualities and suitability of the employee, a successive term of employment may exist. It is no longer necessary that there is a such a link between the successive employers, that this knowledge about the employee is available. However, there must still be a reason why the employee moves from the previous to the new employer. Employment contracts are more often deemed to be successive terms of employment. For the application of provisions of the chain regulation, this means that a permanent contract could exist earlier. This may also cause the transition fee to be higher.

19 Unemployment Act One month unemployment benefit is accrued with each year of employment. The maximal duration of unemployment benefit is 38 months. After twelve months all work is declared suitable. One month unemployment benefit is accrued per year with Employees will more often claim higher dismissal compensation in view of the fact that the duration of the unemployment benefits is being significantly limited. 1 January 2016 the first ten years of employment. Half a month unemployment benefit is accrued with each following year of employment. The maximum duration of unemployment benefit will be reduced to 24 months in stages. Social partners can introduce a supplement of 14 months unemployment benefit at CLA level. After six months all work will be declared suitable.

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