New NL Employment Law
As of 2015 Dutch employment law will receive a complete overhaul, with far-reaching new legislation now approved by parliament. Starting as of January 1st and continuing on July 1st, the following changes will be phased in.
Below we will discuss in more detail which measures are being taken and when each measure will most likely come into force.
The main objectives of the new legislation are:
- Creating quicker and cheaper termination proceedings;
- Getting people off unemployment benefit and back to work sooner;
- Strengthening the legal position of temporary personnel.
- 1st of January 2015 – Probation periods
From the 1st of January 2015, it will be prohibited to include a probationary period in any temporary employment agreement for less than a duration of six months. In the old situation, a probationary period of one month was permitted.
In practice, if an employer wishes to include a probationary period, an employment contract of longer than six months must be concluded. For example, a seven month contract with a probationary period of one month is allowed under the new rules.
For all contracts concluded before January 1st, the old rules will apply, even if the probationary period falls (partly) in 2015.
1st of January 2015 – Obligatory notice period for temporary contracts
For all employment contracts concluded for longer than six months, it will be obligatory for the employer to give notice to the employee if the employer does not intend to extend the contract. If the employer does wish to extend the contract, then the employer must also notify the employee of the terms and conditions for extension.
Notice must be given at least one month in advance of the end of the contract. If the employer does not give notice or is too late giving notice, the sanction is that the employer is liable for a penalty of a maximum of an one month’s salary. If no notice is given, the penalty is a full extra month’s salary. If notice is given, but too late, then the penalty equals the amount of time the employer is in arrears. For example, if notice is given on the 10th of the last month, ten days salary is owed as a penalty.
The employment contract will still end automatically at the end of the agreed period, even if no notice is given. The penalty is meant to stimulate employers to inform employees on time, so they can start looking for a new job.
For employment contracts shorter than six months or contracts with no fixed end date, such as for the length of a specific project, no notice is necessary.
This rule will have immediate effect as of January 1st for all existing employment contracts, apart from contracts that end before February 1st as the full notice period cannot be taken into account by the employer and would make the employer automatically liable.
Employers and HR departments will have to keep a strict diary from now on to ensure timely notice for temporary personnel.
1st of January 2015 – Non-competition clause for temporary contracts
As of January 1st, it will be much harder to conclude a temporary contract with a non-competition clause. It will still be possible, but the clause must be clearly concluded in writing with an explicit justification as to why a non-competition clause is necessary. The employer must have a substantial interest in concluding a non-competition clause with a temporary employee. For example, a temporary employee in a shoe shop may not be forbidden to move next door, but the employer of an employee with specialist knowledge of a manufacturing process may conclude a non-competition clause to protect its interests.
The clause can be tested in a court of law. If the court does not find that the employer has a substantial interest, then the non-competition clause will be declared null and void.
Non-competition clauses concluded before January 1st will be respected.
As non-competition clauses will be more difficult to conclude for temporary workers, secrecy and relationship/ non solicitation clauses will gain importance to stop temporary personnel from misusing confidential information and client base in new employment. We would advise making sure that these clauses are included in your (standard) contracts and that a fixed penalty is included to deter the employee further from improper conduct.
1st of July 2015 – Stricter rules on ‘chains’ of temporary contracts
From the 1st of July, temporary employees will become permanent sooner.
Under the old rules, a pause of three months between two contracts broke the chain of consecutive temporary contracts. This will become six months on the 1st of July. At the same time, the maximum period within which temporary contracts can be concluded ,will fall from three to two years. The maximum of three consecutive temporary contracts stays the same.
Say an employee is employed for three months on a temporary contract and is let go. Three months later the employee is reemployed with another temporary contract for six months, which is extended for another 12 months. Under the old rules a fourth contract could be concluded for a maximum of another 18 months as the chain had been broken and the employee would not be in permanent employ. Under the new rules, on conclusion of the fourth contract, the employee is automatically employed on a permanent basis. These rules are likely to have most effect in the hotel and hospitality industry, where employees tend to rotate among different restaurants and bars.
Again, it is important to make an inventory of your temporary staff and their contracts, as these rules comes into effect immediately on the 1st of July.
July 1st 2015 – Mandatory termination proceedings
Under the old system the employer could choose whether to terminate a contract via permission from the Dutch Employment Insurance Agency (UWV) or via dissolution proceedings at the cantonal court.
As of the 1st of July there will be two mandatory routes for termination.
Permission from the UWV must be sought for collective termination proceedings, termination after two years of illness and in case of termination because of financial difficulties. For all other termination grounds, such as a conflict between employer and employee or underperformance, the employer may only use dissolution proceedings via the cantonal court.
It will still be possible to terminate the employment contract by mutual consent. However, new rules will also apply to termination agreements. A termination agreement will only be valid if concluded in writing and the agreement must contain a clause stating that the employee has the statutory right to dissolve the agreement for a period of 14 days after conclusion. If this clause is not included, the minimum notice period extends from 14 days to three weeks and the employee still has the right to dissolve the contract.
July 1st 2015 – Limitation of severance pay
The employer will be liable for compensation when terminating a permanent employment contract or any temporary contract that has lasted for 24 months or more irrespective of whether the UWV or cantonal court is used for termination. This new ‘transitievergoeding’ or transition payment is meant to replace the current cantonal court formula, which is used to calculate severance payment by the courts.
The transition payment will be 1/6th of a monthly salary for every half year the employee was employed for the first 10 years of the contract and 1/4th of a monthly salary for all years of service above 10 years.
There is a transition period until 2020 for all employees over the age of 50 with more than 10 years of service in companies with over 25 employees. In that case the employee is entitled to a full month’s salary for each service year above the age of 50.
For small employers with less than 25 employees there will also be a transition period until 2020. Under circumstances still to be decided, if the termination is due to economic reasons, the employment period before the 1st of May 2013 will not be taken into account when calculating the transition payment. The employer will therefore only have to take into account the years of service after the 1st of May 2013.
The transition payment will be capped at either € 75,000 or a full year’s salary if the employee earns more than this amount. This hails a complete change in severance pay rules as currently no severance is owed in proceedings with the UWV and severance is (in theory) unlimited in cantonal court proceedings.
The transition payment is not required of the employer if:
- The employee is younger than 18 at the time of termination;
- Employment is terminated due to reaching a pensionable age;
- The employee has been grossly negligent;
- In case of bankruptcy or a moratorium.
1st of July 2015 – Limitation and revision of unemployment benefits
As of the 1st of July 2015 ex-employees receiving more than six months of unemployment benefit will be obliged to take all work offered, even if it is unskilled work or out of their area of education or expertise.
Between 2016 and 2019 rights to unemployment benefits will be gradually scaled down to a maximum of 24 months.
How can Veldhuijzen & Nuiten help you?
For foreign employers doing business in the Netherlands Dutch Employment law is often a mine field. The new rules will mostly come into effect immediately and can have grave implications for companies with staff in the Netherlands if these are not taken into account on time.
We can provide a full scan of your employment relations, provide you with new (model) employment agreements or advise on the best ways to proceed in case of restructuring or collective termination procedures.
Jaap Wijnja is our contact person for (international) employment and labour law. Please feel free to contact him with your questions and queries.
