En update 20140227_nieuw_ontslagrecht_boekje

New Dismissal Law Eleven major proposed changes and consequences for

the employer

** Update after adoption of legislative proposal by the Dutch Parliament **

27 February 2014

A PUBLICATION OF AKD LAWYERS AND NOTARIES

1. Modification of dual system

2. Terminating an employment contract for a definite period of time

3. Transition fee

4. Settlement Agreement

5. Professional development obligation

6. Chain Regulation (Ketenregeling)

7. Trial period under a temporary contract

8. Non-competition Clause

9. Successive term of employment

10. Risk rules

11. Unemployment Act

TABLE OF CONTENTS

THE ABOVE TABLE OF CONTENTS CAN BE CLICKED ON

Consequences for the employer

• More clarity about the way ahead.

• Chance of more and lengthy

procedures about the validity of a

dismissal/termination.

• It may take a long time before the

parties know where they stand.

Effective date

1 July 2015

What is the current situation?

The employer can - regardless of the reason for

dismissal - choose between two “dismissal

routes”: through the Employee Insurance

agency (UWV) or through the district court.

Appeal and cassation against the district court’s

ruling is not possible.

What will change?

The UWV route should be followed in the case of

dismissal for economic reasons or dismissal after

two years of illness. The procedure at the district

court is intended exclusively for a termination

for "personal" reasons.

The UWV’s decision can be put before the

district court. The length of the dismissal

procedure can be deducted from the notice

period. Appeal and cassation against the district

court’s ruling is possible.

Modification of dual system

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Consequences for the employer

• The employer must, in fact, decide a

month earlier about whether or not to

renew.

• The employer will in any case want to

avoid the fee becoming payable and in

the event of doubt about non-renewal,

err on the safe side and communicate

the end of the employee’s contract in

time.

• The employer incurs increased costs.

Effective date

1 July 2014

What is the current situation?

The main rule is that a temporary contract

automatically expires.

What will change?

Introduction of a notification period: in the case

of temporary contracts with a term of six

months or longer, the employer should make it

clear at least one month before the expiry date

whether or not the contract will be renewed.

In the event of non-compliance, compensation

is payable by the employer to the employee

equal to one month’s salary, and in the event

of late compliance, a pro rata amount is

payable.

Terminating an employment contract for a definite period of time

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Consequences for the employer

• Dismissal will probably become

less costly for the employer.

• More clarity on the outcome, and

thus a greater chance of

settlement with the employee.

• Complex system of compensation

• On the non-renewal of a

temporary contract, a transition

fee is also payable.

• Until 1 January 2020 there is an

intermediate arrangement for

small businesses and elderly

employees.

Effective date

1 July 2015

What is the current situation?

On termination by the district court, compensation can be

awarded based on the district court formula. On

termination following a UWV procedure, damages can be

claimed in the event of manifestly unreasonable

dismissal. This (damage) compensation is not subject to a

maximum. On the non-renewal of a temporary contract,

no compensation is payable.

What will change?

The employee who has worked for at least two years will

be entitled to a transition fee on the termination or non-

renewal of his employment contract. This payment is one

third of the monthly salary earned in the first ten years of

service and half of the monthly salary in the years

thereafter subject to a gross maximum of € 75,000. In

respect of income in excess of € 75,000, the payment is

subject to a gross maximum equal to one year’s salary.

The transition fee is not payable in the case of gross

culpability on the part of the employee. In the case of

gross culpability on the part of the employer, the

employee can claim supplementary compensation. This

supplementary compensation is not subject to a

maximum.

Transition fee

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Consequences for the employer

• On entering into a settlement

agreement, the employer has no

certainty for fourteen days as to

whether or not the agreements will be

confirmed.

• The employee can use an annulment

to negotiate higher compensation.

Effective date

1 July 2015

What is the current situation?

A settlement agreement can be agreed legally at

any time. There is no statutory period of reflection

for the employee.

What will change?

A settlement agreement can only be agreed on in

writing. For the employee, there will be a

statutory period of reflection of fourteen

days. During this period the employee can annul

the settlement agreement by means of a written

statement. The employer must inform the

employee about this period of reflection in writing

in the settlement agreement, or within two working

days after signing the settlement agreement.

Should the employer fail to do so, the statutory

period will be extended to three weeks. Should

the employee return from a settlement agreement

and if there will be agreed on a new settlement

agreement within six months, there is no statutory

period of reflection anymore.

Settlement Agreement

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Consequences for the

employer

• Whether or not the employer

complied with the legal

professional development

obligation is an important factor

in answering the question of

whether an employee can be

dismissed.

• This will raise a lot of discussion

about whether the employer

complied with its professional

development obligation.

Effective date

1 July 2015

What is the current situation?

Employment law currently does not require employers

to contribute to the professional development of its

employees.

What will change?

The law stipulates that the employer must allow the

employee to take part in professional development that

is necessary for the performance of his/her duties. As

far as can reasonably be expected of the employer, it

must also enable the employee to take part in

professional development needed for the continuation

of the employment contract, if the position held by the

employee ceases to exist or he/she is no longer able to

perform this position.

An employee cannot be dismissed for unsatisfactory

performance if this is the result of non-compliance with

the professional development obligation.

The possibility of professional development should also

be investigated for any reassignment.

Professional development obligation

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Consequences for the employer

• Entering into a temporary contract

will make the employer less flexible.

• Now, under specific circumstances,

the employer will decide after two

years to let an employee go: the

three years ‘job (in)security’ is

reduced to two years.

Effective date

1 July 2015

What is the current situation?

In the case of temporary contracts following each other

consecutively within a period of three months on the

conclusion of a fourth contract or after three years a

contract for an indefinite period of time will be created.

There is an unlimited opportunity to deviate in a CLA.

What will change?

In the case of temporary contracts following each other

consecutively within a period of six months on the

conclusion of a fourth contract or after two years a

contract for an indefinite period of time will be created.

Deviations from the chain regulation’s CLA are only

possible (1) if business operations require this (2) if a

managing director is involved (3) in a sector in which

the chain regulation would have unacceptable

consequences (4) for students following a dual study

programme. It is no longer possible to deviate in a CLA

from the interim period of six months. The chain

regulation does not apply to employees younger than

18 who work no longer than 12 hours a week.

Chain Regulation

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Consequences for the employer

It will be more difficult for the employer

to use short term contracts: a choice has

to be made between a temporary

contract for longer than six months with

a trial period, or a temporary contract for

six months or less with no trial period.

Effective date

1 July 2014

What is the current situation?

If a temporary contract is concluded for a period

of less than two years, a trial period can be

agreed of one month, and for a temporary

contract of two years or longer a trial period of

two months.

What will change?

In a temporary contract with a term of six

months or less, no trial period can be agreed.

Trial period under a temporary contract

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Consequences for the employer

• It will become much more difficult for

an employer to agree a valid non-

competition clause in an employment

contract for a definite period of time.

• There will probably be a lot of litigation

about when there is a matter of urgent

business interests.

Effective date

1 July 2014

What is the current situation?

A non-competition clause can be agreed in both

a temporary and a fixed term employment

contract.

What will change?

The main rule will be that a non-competition

clause is not valid in a fixed term employment

contract. A non-competition clause is only valid

in a temporary employment contract if it

emerges from the written substantiation that the

clause is necessary due to urgent business

interests.

Non-competition Clause

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Consequences for the

employer

• Employment contracts are more

often deemed to be successive

terms of employment.

• For the application of provisions

of the chain regulation, this

means that a permanent

contract could exist earlier.

• This may also cause the

transition fee to be higher.

Effective date

1 July 2015

What is the current situation?

There is a successive term of employment if (i) the

skills and responsibilities set out in the new contract

are substantially the same as required under the

previous contract and (ii) the links between the new

employer and the previous employer are such that the

latter, on the basis of its experience with the

employee, has insight into the qualities and suitability

that in fairness should be allocated to the new

employer.

What will change?

The second criterion is repealed. Therefore, even if the

successive employer has no insight into the qualities

and suitability of the employee, a successive term of

employment may exist. It is no longer necessary that

there is a such a link between the successive

employers, that this knowledge about the employee is

available. However, there must still be a reason why

the employee moves from the previous to the new

employer.

Successive term of employment

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Consequences for the

employer

• The employer must establish

and, if necessary, make

plausible that the employee

lacked the willingness to

perform the contracted work.

• This means that the employer is

more likely to be obliged to

continue to pay wages if an

employee has not worked.

Effective date

1 April 2016

What is the current situation?

The main rule of the current risk rules is: ‘no work, no

pay’. The exception to this main rule is that the

employee retains his/her right to wages if he/she has

not performed the agreed work due to a cause that

should reasonably be for the account of the employer.

What will change?

The main rule ‘no work, no pay’ is repealed. The basic

principle is that the employer is obliged to pay wages if

the employee has not performed the work, fully or in

part, unless this should reasonably be for the account

of the employee. There is therefore a reversal of the

burden of proof.

Risk rules

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Consequences for the employer

Employees will more often claim higher

dismissal compensation in view of the fact

that the duration of the unemployment

benefits is being significantly limited.

Effective date

1 January 2016

What is the current situation?

One month unemployment benefit is accrued

with each year of employment. The maximal

duration of unemployment benefit is 38 months.

After twelve months all work is declared

suitable.

What will change?

One month unemployment benefit is accrued per

year with the first ten years of employment. Half

a month unemployment benefit is accrued with

each following year of employment. The

maximum duration of unemployment benefit will

be 24 months. Social partners can introduce a

supplement of 14 months unemployment benefit

at CLA level. After six months all work will be

declared suitable.

Unemployment Act

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