What s new? The regime before 1 January 2014 New notice periods for all Transition rules What else is changing? Unresolved issues What is the financial effect of the reform? Major changes in Belgian dismissal rules What s new? Following a Constitutional Court decision in 2011, the Belgian legislator had until 8 July 2013 to end the difference between the way it treats blue- and white-collar workers on two accounts: the notice period in case of termination; and the absence of a guaranteed salary for the blue-collar worker s first day of sick leave (the so-called waiting day). The court found the relevant legal provisions discriminatory (so non-constitutional) but decided to keep them until 8 July 2013, to give the legislator time to harmonise its treatment of the two kinds of workers. Employer and trade union representatives negotiated a solution in July, which the government then turned into a draft law. The law was voted on in late 2013 by parliament, and it came into force on 1 January 2014. The Employment Contracts Act of 3 July 1978 (ECA) has been amended accordingly. It introduces a new way to calculate the notice period for all workers. As expected, blue-collar workers will see their notice period (or termination indemnity paid in lieu) increase, and white-collar workers will see theirs decrease. These new rules supersede the change in law brought about by the law of 12 April 2011, which came into force in 2012 and affected employment contracts that started on or after 1 January 2012. The regime before 1 January 2014 For contracts that existed before 1 January 2012: the minimum statutory notice for blue-collar workers on termination by the employer was 28 or 56 days, depending on the length of service less than 20 years or 20 or more. Many industries increased the minimum through sector-level collective bargaining agreements (CBAs); and Satya Staes Polet Principal Associate T +32 2 504 7594 E satya.staespolet@freshfields.com Jean-François Gerard Head of Practice Development T +32 2 504 7697 E jean-francois.gerard@freshfields.com the minimum statutory notice for white-collar workers was three months for each (started) period of five years service. Employees whose annual gross salary was more than 32,254 were entitled to longer notice periods often calculated according to the Claeys formula. For new contracts that started on or after 1 January 2012: minimum statutory notice of between 28 and 129 days for blue-collar workers, depending on length of service and without prejudice of specific sector-level provisions; Freshfields Bruckhaus Deringer llp 1
for white-collar workers who used to earn less than 32,254 gross a year, three months for each (started) period of five years service; and roughly 30 days notice for each year of service for employees who used to earn more than 32,254, with a minimum of three months. As of 1 January 2014, a single regime replaces all the previous ones. There will no longer be a difference between blue-collar and whitecollar workers. New notice periods for all As of 1 January 2014, a single regime replaces all the previous ones. There will no longer be a difference between blue-collar and white-collar workers. For dismissal and resignation, the new notice periods now depend solely on length of service. Salary levels and the employee s position no longer affect the termination package for white-collar workers. Notices are now expressed in weeks, not months or days, and the notice periods will be calculated as follows: Service period from 1 January 2014 Notice (Employer) Notice (Employee) 0 < 3 months 2 weeks 1 week 3 < 6 months 4 weeks 2 weeks 6 < 9 months 6 weeks 3 weeks 9 < 12 months 7 weeks 3 weeks 12 < 15 months 8 weeks 4 weeks 15 < 18 months 9 weeks 4 weeks 18 < 21 months 10 weeks 5 weeks 21 < 24 months 11 weeks 5 weeks 2 < 3 years 12 weeks 6 weeks 3 < 4 years 13 weeks 6 weeks 4 < 5 years 15 weeks 7 weeks 5 < 6 years 18 weeks 9 weeks 6 < 7 years 21 weeks 10 weeks 7 < 8 years 24 weeks 12 weeks 8 < 9 years 27 weeks 13 weeks 9 < 10 years 30 weeks 13 weeks 10 < 11 years 33 weeks 13 weeks 11 < 12 years 36 weeks 13 weeks 12 < 13 years 39 weeks 13 weeks 13 < 14 years 42 weeks 13 weeks 14 < 15 years 45 weeks 13 weeks 15 < 16 years 48 weeks 13 weeks 16 < 17 years 51 weeks 13 weeks 17 < 18 years 54 weeks 13 weeks 18 < 19 years 57 weeks 13 weeks 19 < 20 years 60 weeks 13 weeks 20 < 21 years 62 weeks 13 weeks 21 < 22 years 63 weeks 13 weeks After 21 years service, the notice period increases by one additional week for each year of service. The employer can still choose between a termination with notice to be worked or an immediate termination with payment in lieu of notice. The payment in lieu of notice is still based on the annual gross salary and benefits, as under the old rules. 2 Major changes in Belgian dismissal rules, March 2014
Transition rules apply to employees hired before 1 January 2014, but dismissed after this date. Transition rules Transition rules apply to employees hired before 1 January 2014, but dismissed after this date. Phase 1 The old rules in place on 31 December 2013 apply to service years accrued before 2014. There is one exception: white-collar workers who earn more than 32,254 (annual gross) will be entitled to one month for each year of service accrued before 1 January 2014, with a minimum of three months. The so-called Claeys formula is no longer relevant and cannot be called on in negotiation by employees. Phase 2 The new regime applies to service years accrued from 1 January 2014. The total notice period is made up of the notice periods accrued under phases 1 and 2. The same rule applies to blue-collar workers. But because this would lead to continued discrimination for blue-collar workers under current employment contracts, they will be entitled to an additional dismissal indemnity paid by the state. This indemnity is equal to the difference between the notice or payment in lieu calculated on the basis of the transition rules and the notice or payment in lieu that would apply if the new rules applied to their whole service. Blue-collar workers who are not entitled to this dismissal indemnity will still be entitled to a so-called dismissal allowance. Other rules apply in specific sectors. Here are two examples A white-collar worker hired on 1 January 2000 and terminated on 1 January 2015 and who earns more than 32,254 gross a year will be entitled to 13 months notice for the period between 1 January 2000 and 31 December 2013, plus eight weeks for 2014. A blue-collar worker in the food industry hired on 1 January 2000 and terminated on 1 January 2015 will be entitled to 147 days notice for the period between 1 January 2000 and 31 December 2013, plus eight weeks for 2014. The blue-collar worker will also be entitled to the dismissal indemnity paid by the state. Notice periods notified as of 1 January 2014 start on the Monday that follows the notification date and no longer on the first day of the month after the notification date. What else is changing? Start date of the notice period Notice periods notified as of 1 January 2014 start on the Monday that follows the notification date, and no longer on the first day of the month after the notification date. Dismissals by registered mail take effect on the third day after they are sent. So to start on the next Monday, notices must be sent on the Wednesday at the latest. Trial period The trial period no longer exists. It used to allow for shorter notice periods during the first few months of the employment relationship. So, it did not make sense to keep these now that notice periods are a lot shorter. Trial periods in contracts signed before 2014 will stay in place until their agreed term. Where the end of the trial period was the trigger for specific entitlements or obligations (eg non-compete clause, schooling clause), the reference to the former trial period is replaced by the first six months of the employment relationship. In student contracts and in interim and temporary employment contracts, the first three days of effective employment remain a trial period. During this period both parties may end the contract without notice or payment in lieu. Freshfields Bruckhaus Deringer LLP 3
Motivation of the dismissal and unfair dismissal Until now, an employer wasn t obliged to justify dismissing an employee. However, a (sometimes formal) justification was needed in circumstances such as dismissals for gross misconduct or dismissals of protected employees. Blue-collar workers enjoyed a specific protection ie they could claim that their dismissal was not based on their performance or attitude, or on economic reasons and, if the employer could not prove otherwise, they were entitled to an extra six months indemnity. Under the national CBA no. 109, which the National Works Council entered into on 12 February 2014, dismissals notified from 1 April 2014 will have to be justified if requested by the dismissed employee. And from the same date, the specific protection for blue-collar workers under the unfair dismissal rules will no longer exist, except for certain categories of blue-collar employees. The dismissed employee may ask the employer to give the reasons for the dismissal by registered mail within two months after the effective end of the contract. The employer must respond by registered mail within two months from this request. The employer s response must give concrete reasons for the dismissal. Employers may, of course, give the reasons for the dismissal when the dismissal is notified. In this case, and if it gives concrete reasons for the dismissal, the employer does not have to respond to a later formal employee request. An employer that does not respond to the employee s request (and has not given the reasons for the dismissal) is subject to a fine of two weeks of the employee s salary and benefits. If the dismissal is clearly unreasonable, the employer may be ordered to pay an indemnity equal to at least three and at most 17 weeks salary and benefits. The employee may claim additional damages under civil law. Dismissals notified from 1 April 2014 will have to be justified if requested by the dismissed employee. A dismissal is considered clearly unreasonable if the employee is under an open-ended contract, the reasons for the dismissal are unrelated to the employee s attitude or performance or to the operational requirements of the business and if it would not have been decided by a normal and reasonable employer. In a dispute, the burden of proof will be divided as follows: if the employer has given the reasons for the dismissal in line with statutory provisions, each party must provide the relevant supporting evidence of the alleged facts; if the employer has not given the alleged reasons for the dismissal, it must provide supporting evidence that the dismissal was not clearly unreasonable; and the employee who has not asked for the reasons for the dismissal must provide supporting evidence that the dismissal was clearly unreasonable if (s)he wants to claim any indemnification. The CBA does not apply to dismissals during the first six months of service, interim contracts, student contracts, dismissals with a view to access the early retirement regime, dismissals with a view to retirement, dismissals within the framework of restructurings, dismissals subject to a statutory procedure and dismissals for gross misconduct. Belgium remained one of the few European countries where dismissals did not have to be justified. But with these new rules, Belgium has ended this situation. While the new dismissal rules should put an end to the discussions around the length of notice or the amount of payment in lieu, the newly introduced obligation of justification will, conversely, trigger new forms of discussions before court. It is expected that parties will try to avoid such discussions by settling on the justification for the dismissal, in exchange for an additional indemnity. 4 Major changes in Belgian dismissal rules, March 2014
Outplacement Under the old rules, outplacement only had to be offered to employees who were dismissed after they reached the age of 45. Under the new regime, dismissed employees will be entitled to outplacement as soon as they are entitled to 30 weeks notice, regardless of their age and provided that they are not dismissed for gross misconduct or within the framework of a restructuring. The old regime will apply to employees aged 45 years or more who are not entitled to 30 weeks notice. When the employee is dismissed with a notice to be worked, the outplacement service has to amount to 60 hours. It is mainly used during the hours of paid leave to which the employee is entitled to search for a new job. When the employee is dismissed and paid in lieu of notice, the outplacement must have a value of one-twelfth of the annual salary earned during the preceding civil year, with, however, a minimum of 1,800 and a maximum of 5,500. If the employee accepts the outplacement, four weeks pay will be deducted from the payment in lieu; if the employee refuses, the four weeks pay will not be deducted. From 1 January 2016, the four weeks pay will be deducted even if the employee refuses. By 1 January 2019, sectors should implement rules providing that two-thirds of the notice or payment in lieu (with a minimum of 26 weeks) will be worked or paid, while one-third will be paid out through redeployment measures. Collective dismissals and social plans The old rules still apply to collective dismissals when the employees are dismissed within a collective dismissal that was decided and notified before 31 December 2013 and they fall within the scope of a social plan that was filed with the Ministry of Labour on 31 December 2013, at the latest. Top managers in listed companies Executive directors, members of the executive committee and managing directors of listed companies must comply with specific requirements set out by the 2009 Governance Code and confirmed by law on 6 April 2010. In summary, conventional severance indemnity is capped at 12 months. It can go up to 18 months if advised by the remuneration committee and above 18 with a vote from the general meeting. These requirements are unaffected by the new dismissal rules. According to the draft new Belgian Banking law, which is under discussion in parliament, similar rules should also apply to financial institutions in the short term. Waiting day From 1 January 2014, blue-collar workers will receive their guaranteed salary from the first day of sick leave. Unresolved issues We are far from full harmony between blue- and white-collar workers statuses. So for now differences will remain, and these could lead to other decisions from the Constitutional Court and more changes. Freshfields Bruckhaus Deringer LLP 5
What is the financial effect of the reform? The exact financial effect of the changes will vary from one industry to another, but it looks clear that blue- collar-heavy industries will see a net increase in termination costs. Employers who have mostly white-collar workers might think they are safe. But the changes we have looked at in this briefing are not the only ones. Under a royal decree that came into force on 1 October 2013, several indemnities paid at the end of the employment relationship and that used to be exempt from social security contributions indemnities of clientele and indemnities paid on the basis of non-compete covenants, among other things entered into after the end of the employment contract are now subject to those contributions. freshfields.com Freshfields Bruckhaus Deringer LLP is a limited liability partnership registered in England and Wales with registered number OC334789. It is authorised and regulated by the Solicitors Regulation Authority. For regulatory information please refer to www.freshfields.com/support/legalnotice. Any reference to a partner means a member, or a consultant or employee with equivalent standing and qualifications, of Freshfields Bruckhaus Deringer LLP or any of its affiliated firms or entities. This material is for general information only and is not intended to provide legal advice. Freshfields Bruckhaus Deringer LLP, March 2014, 00444