Netherlands adopt new labour law for 2015

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1 Netherlands adopt new labour law for 2015 It has long been uncertain whether the Labour law reform in the Netherlands would actually take place. However, it was decided on 10 June 2014 that the current law would be adjusted and a labour and security bill ( Wet Werk en Zekerheid ) has now been passed. The new law changes the following aspects of labour law: (A) dismissal, (B) unemployment benefits and (C) the legal status of flexible workers (including workers on fixed-term contracts and temporary workers). Not all the changes will enter into force at once. There are basically three start dates: 1 January 2015, 1 July 2015 and 1 January This brochure briefly explains the most important changes and start dates. A. Dismissal Dismissal rules will change on several counts on 1 July These changes include: 1. Prescribed dismissal procedure The new law maintains the preventive dismissal procedure, i.e. in order for a contract of employment to be duly terminated, a formal dismissal procedure must be followed and an impartial body must first decide if dismissal is allowed. There were two alternative procedures in the past: either the contract was terminated subject to prior approval by the Employment Office or the contract of employment was cancelled in severance proceedings before the Industrial Tribunal. As of 1 July 2015, the dismissal procedure will be determined by the grounds for dismissal, which are divided into: Enforced redundancy or redundancy on grounds of long-term incapacity Employment Office ( UWVWERKbedrijf ) Dismissal on personal or behavioural grounds (unsatisfactory performance, disruption to working relations) Industrial Tribunal. The new law also puts an end to any confusion over mandatory compliance with the dismissal approval procedure in the case of international contracts of employment. As of 1 July 2015, contracts of employment governed by Dutch law must also be terminated in accordance with Dutch law, i.e. either by obtaining approval or in severance proceedings before the Industrial Tribunal. This will simplify matters in connection with ex-pat and secondment contracts. 2. Severance pay A new form of transitional severance pay ( transitievergoeding ) will be introduced on 1 July The judge s formula ( kantonrechtersformule ) applied in the past for the purpose of calculating severance pay in severance proceedings before the Industrial Tribunal will no longer apply. Although

2 the new transitional severance pay is redundancy pay, it is designed primarily to facilitate the transition to a new job. The most important aspects of transitional severance pay are as follows: Every worker who has been employed for at least two years has a claim in principle to payment of transitional severance pay if his/her contract of employment is terminated by the employer. This applies to termination both of unlimited-term contracts of employment and of fixed-term contracts of employment which are not extended by the employer. The amount paid in transitional severance pay depends on the number of years the worker was employed and is calculated as follows: Less than 10 years employment: From the 10 th year of employment: 1/6 of the monthly salary per six months employment 1/4 of the monthly salary per six months employment A transitional rule applies to workers who are 50 years of age or over when they are made redundant. They are entitled to higher severance pay up to 1 January 2020, provided they have then been employed for at least 10 years. For those workers, severance pay is equal to ½ the monthly salary for every six months worked after their 50 th birthday. There is an exception to this transitional rule: it does not apply to companies with an average of less than 25 workers ( small enterprise rule ). Also, these small enterprises may, under certain conditions, calculate the transitional severance pay as if the contract of employment had started on 1 May 2013, even if the worker was employed before then, if the worker was made redundant due to financial problems in the company. The new law also allows employers to deduct the costs of finding a position in the event of dismissal or imminent dismissal, for example for (further) training or outplacement, from the transitional severance pay. However, this will be subject to a ministerial decree ( AMvB ) which has not yet been adopted. Transitional severance pay is capped at 75, gross or the worker s total annual salary, if it exceeds 75, gross. In principle, workers have no claim to transitional severance pay in the following instances: If the worker is under 18 years of age and works an average of 12 hours a week or less. If the contract of employment ends because the worker has reached retirement age or is entitled to a national old-age pension ( AOW ). If the contract of employment ends due to serious misconduct on the part of the worker. If the employer enters into composition or is declared bankrupt or if the employer is subject to a debt restructuring arrangement.

3 In the event of serious misconduct on the part of the employer, the worker may be awarded enhanced severance pay in addition to transitional severance pay. 3. Appeal A general appeal procedure will apply to both dismissal procedures as of 1 July The rules are as follows: In principle, both the employer and the worker can lodge an appeal against a severance decision by the Industrial Tribunal with the higher tribunal, after which an appeal on a point of law may be lodged with the Hoge Raad (Dutch Supreme Court of Justice). An appeal can also be lodged against a decision by the Employment Office ( UWVWerkbedrijf ) approving a dismissal. The rules are as follows: If the Employment Office approves the dismissal and the employer terminates the contract of employment, the worker can lodge an action for unfair dismissal with the Industrial Tribunal and either seek reinstatement or accept termination and (enhanced) severance pay. If the Employment Office does not approve the dismissal, the employer may initiate severance proceedings before the Industrial Tribunal. In principle, decisions by the Industrial Tribunal can be appealed before the Court of Justice and, where applicable, an appeal on a point of law can be lodged with the Hoge Raad. 4. Cooling-off period in the event of agreed redundancy As of 1 July 2015, workers have 14 days in which to reconsider if they agreed to the termination of their contract of employment by mutual agreement ( termination agreement ). Employers must advise workers that they have a cooling-off period. If they fail to do so, the cooling-off period is extended to three weeks. B. Unemployment benefits (WW) The new law is designed to help workers made redundant to find a new job quickly. The amendments apply to the period for which unemployment benefits are paid and to the term appropriate work, which defines the alternative employment which must be accepted by someone who is unemployed.

4 The two amendments will enter into force on different dates as follows: 1. New definition of appropriate work: as of 1 January 2015 At present, persons in receipt of unemployment benefits need only look for employment commensurate with their qualifications during the first six months. After six months, a lower level of work must be accepted and after one year on benefits, basically any job must be accepted. As if 1 January 2015, any work must be accepted after six months out of work. 2. Shorter period of unemployment benefits: as of 1 January 2016 The period for which unemployment benefits are paid will gradually be reduced from 38 at present to 24 months in The social partners can make different arrangements in collective agreements, in order to extend the period of payment and/or increase unemployment benefits. C. Workers on flexible contracts of employment Workers on flexible contracts of employment mainly include temporary workers and workers on fixedterm contracts or zero-hour/standby contracts. This group of workers is very important in the eyes of politicians and the legislature and requires greater protection. The new rules are explained briefly below, with a note of the start date of each rule. 1. Compulsory notice (1 January 2015) Workers on a fixed-term contract of employment of six months or more must be informed at least one month prior to expiry of the term of the contract, if and on what terms their contract is to be renewed. A limited transitional rule applies to existing contracts: the new compulsory notice rule will not apply to contracts that expire within one month of the date on which the rule enters into force. As of 1 February 2015, compulsory notice will apply to all fixed-term contracts (of at least six months). If the employer fails to give this information, the worker is entitled to compensation of up to one month s salary. 2. Limited trial period for fixed-term contracts (1 January 2015) It will no longer be possible to agree a trial period for fixed-term contracts of up to 6 months.

5 The law clarifies (in keeping with settled case-law) that any agreement on trial periods for successive contracts is null and void. However, a new trial period can be agreed if the new contract clearly requires different expertise and involves different responsibilities. 3. Limited non-competition clause in fixed-term contracts (1 January/1 July 2015) As of 1 January 2015, the agreement of a non-competition clause is generally prohibited in a fixed-term contract of employment. An exception can be made if the employer clearly substantiates the operational or official interests that justify a non-competition clause when the clause is agreed. If there are no such serious operational or official interests, the court may declare the non-competition clause to be null and void. Notwithstanding the above, as of 1 July 2015 employers will not be able to cite a duly agreed noncompetition clause if the contract of employment is terminated on the grounds of serious misconduct on the part of the employer. This rule replaces the current rule, under which the noncompetition clause lapses if the employer is liable for compensation on the grounds of termination of the contract. 4. Temporary work clause: restricted facility to derogate under a collective agreement (1 January 2015) The current law allows a written agreement to be signed under which the contract of employment between the temporary worker and the employment agency ends as and when the hirer terminates the placement. In other words, if the hirer has no further use for the temporary worker, the contract of employment between the temporary worker and the employment agency also ends. This agreement is referred to as the temporary work clause ( uitzendbeding ). At present, the temporary work clause is limited by law to the first 26 weeks of the placement. However, it is possible to derogate from this deadline (basically for an unlimited period of time) to the worker s detriment under a collective agreement. This facility for derogation under a collective agreement has been limited. A temporary work clause can only be extended under a collective agreement to a maximum of 78 weeks. This will apply to contracts signed on or after 1 January 2015, provided that a valid collective agreement exists to which the transitional law applies. 5. Continued payment of wages for on-call work (zero-hour and minimum/maximum contracts) (1 January 2015) Under the current law, employers can agree with workers in writing that their obligation to continue paying wages during the first six months of the contract of employment will not apply if the worker is unable to do his job for reasons for which the employer is to blame. This six-month period may

6 be extended indefinitely by collective agreement. Under the new law this will no longer be possible. The period for which wages must be paid can only be curtailed in a collective agreement for specific functions listed in this collective agreement. This will apply to contracts signed on or after 1 January 2015, provided that a valid collective agreement exists to which the translational law applies. A different, more generous rule applies to temporary contracts of employment. The Minister may stipulate, at the request of the Social and Economic Council ( SER ) that no exemption to mandatory payment of wages is allowed in certain industries. Such a request has already been made for on-call work in the healthcare sector and the Cabinet has announced that this request will be accepted. 6. Changes to chain clause: quicker unlimited-term contracts (1 July 2015) Under current law, an unlimited-term contract of employment arises where: a) more than three contracts are signed, or b) if they last with interruptions for a total of 36 months or more and the interruptions of these successive contracts last no more than three months. This chain clause is also referred to as the 3 x 3 x 3 rule (maximum of 3 contracts within 3 years with an interruption of no more than 3 months). The chain clause will be stricter as of 1 July An unlimited-term contract of employment will arise where: a) more than three fixed-term contracts of employment are signed, or b) if they last with interruptions for a total of at least 24 months and the interruptions of these successive contracts last no more than six months. The rule will therefore be a 3 x 2 x 6 rule. The new clause will apply depending on when the contract of employment started. The current 3 x 3 x 3 rule will continue to apply to fixed-term contracts signed before 1 July 2015, even if they end after 1 July 2015.

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