Major changes in Dutch employment law
By Jeffrey L. Kenens, TeekensKarstens
On 18 February 2014 the Dutch House of Representatives adopted the legislative bill for the Work and Security Act that was submitted on 29 November 2013. The Dutch Senate has endorsed it on 10 June 2014. The Act leads to fairly drastic changes in Dutch employment law. It has partly taken effect as per 1 January 2015. The other part of the Act will take effect as per 1 July 2015. In this note, I briefly mention the major changes in Dutch employment law without elaborating too much. Please note, that for the purpose of this brief news article no deviations possibly provided for in collective labour agreements have been taken into account.
Parties to an employment contract may agree on an initial probation period. This must be laid down in writing. During the probation period either party may terminate the employment contract at any time with immediate effect, in principle without being liable towards the other party.
As per 1 January 2015 it is no longer possible to agree upon a probation period in case of a fixed-term contract equal or shorter than six months. The probation period lasts one month at most in case of a fixed-term contract longer than six months and shorter than two years. The probation period may last two months at most in case of a fixed-term contract of two years or longer or in case of a permanent employment contract.
The probation period for both parties should be equal, in default of which the probation period is null and void.
A non-compete clause is basically valid for each permanent employment contract. However, in order to restrict an employee validly from accepting competing employment after termination of the employment contract, the non-competition clause must be agreed upon in writing and signed by both parties. The employee must have the age of majority and should expressly agree to the content of a non-competition clause.
As per 1 January 2015 a non-compete clause in case of a fixed-term contract is only valid, if the employer explicitly states in writing the compelling reasons on behalf of the companies business for providing this clause in the employment agreement. If not, the clause is null and void. The compelling reasons must be present both at the time of concluding the clause and at the time that the employer wants to make an appeal to this clause.
A request for enforcement of a non-competition clause by the employer can be restricted or denied by the court. Furthermore, a non-competition clause may become invalid if the responsibilities ensuing from the employee’s position are substantially amended in the course of employment, or in case the termination of the employment contract or the non-continuation of the employment contract is due to severe imputable acts or omissions of the employer.
It is customary to provide for a penalty clause in the employment agreement in case the employee violates the non-competition clause.
Apart from concluding an amicable termination agreement, as per 1 July 2015 in order to terminate the employment contract, the employer will basically be forced to distinguish between:
- a termination due to economical circumstances and for reasons of long term illness of the employee (more than two years): by filing a request at the District Employment Services Authority (“UWV’) for a permission to give notice;
- a termination due to personal circumstances, conflicts, etc.: by filing a request for dissolution at the Court.
If the UWV denies the permission to give notice, the employer may ask the Court to dissolve the employment contract instead. As per 1 July 2015 it is not possible anymore to claim damages for unfair dismissal.
As per 1 July 2015 the employer is obliged to inform the employee in writing about the possibility to rescind the amicable settlement agreement within two weeks for any reason. If the employee is not informed about this statutory right, the two weeks periods is extended into three weeks. The result of a rescinded settlement agreement is, that the employee is employed with the employer again as if nothing has happened.
Notice with the employee’s consent
As per 1 July 2015 the employer may give notice to terminate the employment contract without any permission of the UWV, if the employee gives his consent in writing. Again, the employee may withdraw his consent within two or maximum three weeks.
A fixed-term employment contract ends by operation of law upon expiration of the term without notice being required. However, as per 1 January 2015 the employer is obliged to inform an employee in writing at the latest one month prior to the expiration of the term whether the employer wants to continue the fixed-term contract or not. If the fixed-term contract is to be continued, the employee must be informed in writing about the employment conditions. In case the employer does not notify the employee on time, the employer will forfeit to the employee a penalty of maximum one gross monthly salary.
If an employer dismisses an employee who has been working for that employer (including any predecessor) for at least two years or decides not to continue the fixed-term employment contract that lasted for 24 months or longer, the employee has a right to claim a so-called transition compensation, unless the employee has acted seriously imputable or neglectful.
This compensation amounts 1/6 of a monthly wage for each six months that the employee worked with that employer or with its predecessors. From the tenth year of service this amounts up to 1/4 of a monthly wage for every six months. The transition compensation goes up to a maximum of € 75,000 gross, or up to a maximum of a one year’s gross salary if the employee makes more money per year than € 75,000 gross. The Court can reward extra compensation above the transition compensation, if the employer is to blame or has been acting neglectful.
For small companies with less than 25 employees there will be a transition period. Until the year 2020 such company may pay its personnel a lower transition compensation, if that company is forced to dismiss its personnel due to financial circumstances. In that case, for calculating the amount of the owed transition compensation, the employer only needs to take into account the years of service with that company (including any predecessor) starting from May 1st 2013.
Through the collective labour agreement one may deviate from the legal regulations regarding the transition compensation. The regulation through the collective labour agreement needs to be equivalent to the transition compensation.
Any costs that have been made for preventing the employee to become unemployed in the future can be deducted from the transition compensation, if these costs meet the criteria that the Dutch Government has defined.
An employer does not need to pay any transition compensation if:
- the termination takes place on the initiative of the employee;
- the termination is due to blameful and neglectful acting of the employee himself;
- the employee is younger than 18 years old and has worked on an average basis 12 hours or less per week;
- the employment contract ends after reaching the pensionable age; or
- there is a case of suspension of payment, bankruptcy or debt on the side of the employer.
The transition compensation replaces the so-called cantonal formula that has been used by the Courts for many years. Although it will be less expensive to terminate employment contracts after 1 July 2015, the criteria for terminating an employment contract will be more harsh. It will therefore be more important than ever to built up a strong case against the employee before filing a request for dissolution at the Court.
Appeal and cassation
As per 1 July 2015 it will be possible to appeal and to bring an appeal in cassation against the judgment of the Court to dissolve or not to dissolve the employment contract. This may lead to many new legal proceedings. Currently, there is no possibility of appeal against such judgment, except for a few exemptions, which in practice has always led to a fairly quick dismissal procedure.
The changes in Dutch employment law are the biggest since 70 years. Dutch employment law has always been a lawyer’s paradise. It is now expected to become a litigator’s heaven!
Jeffrey L. Kenens, Advocaat, Partner
TeekensKarstens advocaten notarissen, Vondellaan 51, Postbus 201, 2300 AE Leiden
T: +31 71 - 535 80 86; F: +31 71 - 535 80 01
published: January 2015