Major changes to Dutch employment law

In the Netherlands, the Work and Social Security Act 2015 has entered into force this year. In two tranches – as per 1 January and 1 July 2015 – major changes have been introduced to Dutch employment law.

As its legal framework had been unchanged since the Second World War, the reform of Dutch employment law has been a popular topic for Dutch politicians for over two decades, especially during election times. The widespread belief was that Dutch employment law had become too rigid and too complicated.

The Work and Social Security Act 2015 covers changes to several laws, including but not limited to, the Dutch Civil Code and the Unemployment Act. It aims to make dismissal faster, fairer and less costly and to get the unemployed back to work sooner.

However, many Dutch employment law specialists, including the undersigned, doubt whether in practice the goals of the Act can be achieved and whether the Act is not a good example of ‘throwing the baby out with the bathwater’, as the saying goes in the Netherlands.

A closer look at the Work and Social Security Act 2015 teaches that many of the changes result in a more complicated employment law and most likely, lengthier dismissal proceedings, which is underlined by the following selection of 10 major changes:

  1. Fixed route for termination proceedings
    The element of free choice to terminate a Dutch employment contract through court or the administrative authority UWV is abolished. The termination procedure to be followed depends on the reason for termination of the employment contract. Termination for business economic reasons and long-term disability will be dealt with by the administrative authority, all other grounds by the court.
  2. Annulment of settlement agreement
    Termination of an employment contract by mutual consent is still possible at any time, but the employee may change their mind and annul such a settlement agreement within two weeks after the signing of it without giving reasons. In the event that the employer has not informed the employee in writing of such a right, the term to annul is three weeks.
  3. Introduction of appeal
    Introduction of appeal in cases of termination of employment contracts; meaning that it has become possible to challenge a District Court‘s judgment in second and third instance at the Court of Appeal and subsequently at the Supreme Court of the Netherlands.
  4. Prohibition of non-competition clause
    Non-competition clauses may in principle no longer be agreed upon in fixed term employment contracts, unless it is required in view of compelling company interests. It is mandatory to give a written motivation for the non-competition clause in a fixed term employment contract. Failure to do so results in the absolute nullity of the clause.
  5. Prohibition of probationary period
    A probationary period in a fixed-term employment contract for up to six months is no longer possible. It will be deemed void by operation of law. An employer who wishes to employ a new employee must therefore carefully consider to either offer a fixed-term employment contract for a period longer than six months with a probationary period, or one with a term of less than six months without a probationary period.
  6. One month notification obligation
    An employer is obliged to notify the employee in writing whether or not a fixed term employment contract will be renewed, and under what terms, at the latest one month before expiry of the fixed-term employment contract. No notification is required for fixed-term employment contracts for up to six months. Failure to comply with the notification requirement means that the employment contract still ends by operation of law, but the employee may claim up to one month of salary as damages for not being timely notified.
  7. New basis for calculation of severance pay
    The severance pay based on the cantonal court formula is replaced by the transition compensation, which amounts approximately to 2/3 less. New is also that in principle every employee whose employment is (i) terminated at the initiative of the employer or (ii) not renewed after it lasted at least two years, shall be entitled to this transition pay. In general, over the first ten years, the employee must receive a pay of 1/6 monthly salary per six months that the employment contract lasted, and subsequently 1/4 monthly salary per six months that the employment contract for the period over ten years.
  8. Training obligation for termination
    Training is one of the new requirements which must be met if an employer wishes to terminate an employment contract, unless the reason for termination is a culpable act or omission of the employee. Prior to the Work and Social Security Act 2015, no such obligation existed. The training must be aimed at the performance of an employee’s own specific job or to improve his position in the possible event of redundancy.
  9. Pensionable age valid ground for termination
    Reaching the pensionable age has become a valid ground for termination of an employment contract by the employer. No permission from the administrative authority UWV or the court is needed from that moment on for termination and no transition payment as a severance has to be paid.
  10. Faster indefinite term contract by operation of law
    The term in which an employer can offer fixed-term employment contracts to an employee, before an indefinite term employment contract starts to exist by operation of law, is shortened. An employment contract following three successive fixed-term employment contracts concluded in succession within a period of six months (previously three months) and/or an employment on the basis of two or more employment contracts that exceeds a term of two years (previously three years), is considered an agreement for an indefinite period by operation of law.

The above serves to give a quick understanding and overview of the most important changes to Dutch employment law, for which purpose the exemptions to these changes have not been discussed. It is not meant to provide an exhaustive explanation of the changes due to the Work and Social Security Act 2015.

If you would like more details regarding any of the above topics, please feel free to contact:

Alper Tekin Erdogan

Attorney at Law / Advocaat

E: tekinerdogan@bonlegal.nl

T: +31634150152