The Work and Security Act

“The changes to dismissal law have been broadly discussed in politics and the media. The government intends these changes to strengthen the position of flexible workers and to organise the Unemployment Insurance Act (WW) in such a way that it will be easier for people to find work. On 31 January 2014, new light was shed upon this bill and amendments were made to it through a Memorandum of Reply and a Memorandum of Amendment. On 18 February 2014, the Lower House approved the amended Work and Security Bill. The Senate is currently examining this bill. The Senate Committee’s preliminary inquiry for the Ministry for Social Affairs and Employment (SZW) will be held on 8 April 2014. The most important elements of the bill are discussed below.

Changes per 1 July 2014

The legislator aims to restrict flexible employmen insofar as possible, so that employees can work towards obtaining a permanent contract quicker and more often in order to create more security. The following changes are intended to contribute to this.

Probationary period Probationary periods are no longer permitted for temporary contracts for 6 months or shorter.

Non-compete clause The basic premise is that it is forbidden to include a non-compete clause in a fixed-term contract except in the case of exceptional circumstances (which must be substantiated in the employment contract).

Notification period In principle, a fixed-term employment contract will end by operation of law, unless it has been agreed in writing that prior notification is necessary. As it is beneficial for employees with a temporary contract to be informed in good time by their employer as to whether their employment contract will be continued, the government has proposed a notification period of one month. In concrete terms this means that in case of temporary contracts for six months or longer, the employer must notify the employee one month in advance. If the employer does not do this, the employee will be owed a sum equal to one month’s salary. The employee must submit the claim for this notification fine’ to the court within two months. From the Memorandum of Reply it would appear that an employer can Always give notification when entering into a fixed-term employment contract.

The notification period does not apply to employment contracts that terminate within one month following 1 July 2014.

Temporary employment agency employees, payrolling, care sector The statutory term for using employment agency employees may soon be extended through a collective agreement to a maximum of 78 weeks. This can currently be deviated from without limitation though the collective agreement to the disadvantage of the employee.

Special rules of dismissal with regard to payrolling will expire. The basic premise is that employment protection for payroll employees is equal to that of ordinary’ employees.

Another important change is the abolition of 0 hour contracts in the care sector.

The abovementioned changes will probably enter into effect as from 1 July 2014.

Transitional law With regard to the aforementioned changes (intended to strengthen the position of flexible workers) the old legislation will remain in effect for employment contracts that have been entered into before 1 July 2014. This may be deviated from to a certain extent through a collective agreement.

Changes per 1 July 2015

Provisions on succession of fixed-term employment contracts (chain rule) The amended provisions on succession of fixed-term employment contracts were initially intended to enter into effect as from 1 July 2014. This has been postponed for one year until 1 July 2015.

Currently, an employer may enter into a maximum of 3 fixed-term employment contracts within a three-year period. If a fourth employment contract is entered into or if the three years have been exceeded this will become an open-ended employment contract. The chain will only be broken if there is an interval period of at least three months between employment contracts, in which case it is possible to start counting from the start once more. As from 1 July 2015 there will be an open-ended employment contract after a maximum of 3 temporary contracts within a two-year period. The term for the interval period of at least three months has been increased to a minimum of six months.

It will only be possible to deviate from these provisions on succession of fixed-term employment contracts through a collective agreement if working with temporary contracts is necessary given the nature of the work’. The Explanatory Memorandum gives project-based work as an example of this. An exception to this derogation, however, is that a maximum limit has been set of six temporary contracts within a four-year period. The aforementioned interval period of six months may not be challenged.

It should also be noted that it is possible to derogate from the provisions on succession of fixed-term employment contracts with regard to directors of legal entities through the contract.

The new legislation will not apply unless a new or consecutive employment agreement is entered into on or after 1 July 2015. It will not be possible to derogate from it through the collective agreement.

One dismissal route Currently employers may opt for dismissal through the UWV (application for dismissal permit) or termination through the cantonal court. This choice will expire. In future, the route to be taken will be determined by law. For instance, dismissal on the grounds of economic reasons and long-term incapacity for work will be dealt with by the UWV. All other reasons related to the employee, such as poor functioning or a damaged working relationship, and any other grounds must be submitted to the cantonal court.

If the UWV issues a negative decision on a dismissal on the grounds of economic reasons, the employer will be entitled to submit a request for termination to the cantonal court. An employee who has been dismissed through the UWV may still request the court to reinstate the employment contract. There is an expiry date for 2 months for this. The court will assess the UWV procedure.

Appeal following dismissal The current system does not provide any opportunity for appeal after a court has issued a judgement in termination proceedings. The new regulations entail that an employee can initiate an appeal and an appeal in cassation in order to rescind the granted dismissal. This means a longer period of insecurity as to whether or not an employment contract has actually been terminated. Termination with Mutual consent It is still possible for the employer and employee to terminate the employment contract by means of a severance agreement. An important additional difference will be that the employer must include in the termination agreement that the employee has a termination period of 14 days after the date of the termination agreement without stating reasons. In that case, the employee has the right for 14 days following the termination agreement to state that they do not consent to the termination agreement. If such a termination period is not included in the termination agreement, this period will be extended to three weeks. Furthermore an employee may only make use of such a revocation once within a six-month period.

Transitional remuneration Regardless of whichever dismissal route is chosen, all employees will be entitled to a transitional remuneration upon the termination of an employment contract that has lasted for at least two years. This can be used for education and training, among other things. It would seem that the application of the famous cantonal court formula has expired with this.

When calculating the amount of transitional remuneration to be paid, the only factor that will be taken into consideration is the length of employment:

Employment < 10 years: 1/3 month's salary per year of service Employment > 10 years: 1/2 month’s salary per year of service that the employee has been in service longer than 10 years.

This remuneration will be capped at 75,000, or one year’s salary if the employee earns more than this amount.

An exception has been drafted into the bill for calculating the remuneration for employers who have on average fewer than 25 employees in service and have initiated termination proceedings on economic grounds and are demonstrably in financial difficulties. For these employers, the duration of the employment will be counted as from 1 May 2013 when calculating the amount of transitional remuneration that they owe. The years of service prior to this date will not be taken into account. This scheme will continue until 1 January 2020. After this date all the years will count (therefore also the years prior to 1 May 2013).

It also applies (until 2020) that one month per year of service must be taken into account when calculating the transitional remuneration for employees older than 50.

There are also grounds upon which the amount of the transitional remuneration may be lowered. These would include situations in which the employee has engaged in serious misconduct which is imputable to them. Vice versa, the cantonal court may award a dismissal payment (with no maximum limit) in addition to the transitional remuneration if there has been serious culpability on the part of the employer.

Transitional law In principle, the old legislation will apply to all requests for dismissal submitted before 1 July 2015.

Changes per 1 January 2016

Unemployment Insurance Act (WW) There will also be important changes to the structuring of the WW. The legislator aims at working towards an activating WW’.

The maximum duration of the publicly financed part of the WW will be gradually reduced by one month per trimester from 2016 until it has finally been reduced to 24 months as from 2019. In its Explanatory Memorandum, the legislator states that it is the task of management and labour to introduce a supplement of 14 months WW at the collective agreement level so that the duration will remain the same (38 months).

The WW will be organised as follows: for the first 10 years of employment 1 month will be accrued for each year of service, and for the years following this, å_ month will be accrued per year of service, whereby the minimum of 3 months WW will be maintained.

The accrued employment history meaning 1 month per year of service will be respected up to and including 2016. The amount of WW will continue to be wage-related. In 2017, the first people will be affected by the consequences of reducing the duration of the WW.

Finally, the definition of suitable work will be tightened. This means that after six months, instead of 12 months, all work will be considered suitable.”

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