20 November 2018

New employment law already undergoes makeover – is labour market in the balance?

Only three years after the introduction of the Dutch Work and Security Act (Wet werk en zekerheid), which introduced a number of major changes, Dutch employment law is up for yet another makeover. On 7 November 2018, the Minister of Social Affairs and Employment submitted “Labour market in balance” (Wet Arbeidsmarkt in Balans) to parliament. This bill aims to reduce the differences between regular and flexible work. The Minister also formed a committee of experts to advise the government on fundamental reforms in the labour market, including rules for platform workers, robotisation and freelancers. The committee will present its advice in the course of 2019.

The bill’s key measures include:

  • A new ground for dismissal, the “cumulative ground”, will enable employers to combine different reasons for an employee’s dismissal. Employees in such cases may be entitled to an additional 50% on top of the “regular” transition payment. This new dismissal ground may well become the “great escape” for employers who cannot make a case based on one of the other statutory dismissal grounds, such as underperformance by the employee or a damaged working relationship. The question is if this amendment will equally benefit employees, as an additional payment of 50% of the transition payment to compensate for an incomplete dismissal file can be little in comparison to the consequences of the dismissal.
  • Employees will be entitled to a transition payment from their first day of employment, including their trial period.
  • The transition payment will be calculated in the same manner for all employees: one-third of a monthly salary, for each year of employment.
  • The trial period in permanent employment agreements can be as long as five months (instead of the current two months).
  • The rules on successive employment agreements (a “chain of agreements”) will be expanded. Instead of the current two-year maximum, three consecutive temporary contracts can be entered into for up to three years. This reverses the reform introduced by the Work and Security Act.
  • The gap between temporary contracts, which “breaks” the chain of agreements, can be shortened from six to three months in a collective bargaining agreement – if the temporary contracts regard recurring work that can be carried out for no more than nine months a year.
  • An exception to the rules on successive employment agreements is introduced for substitute teachers, in primary schools, who work temporarily in periods of illness.
  • Payroll employees will be entitled to at least the same terms of employment as regular employees working for the same employer, including an adequate pension.
  • The mandatory permanent availability of on-call workers will be limited. On-call workers must be called by the employer at least four days in advance of work, and they are entitled to payment if that work is cancelled less than four days before they are due to start work. This four-day period can be shortened in a collective bargaining
  • Unemployment insurance contributions become more favourable for employers if they offer their employees a permanent employment agreement, instead of a temporary employment agreement.

The Dutch Council of State has been remarkably critical in its advice on the bill. Although it is positive about the introduction of a cumulative ground for dismissal and about the adjusted transition payment, it believes that the measures regarding payrolling and the extended trial period are unlikely to be effective. The Council of State even advises the government to leave these two measures out of the bill.

Internet consultation is now open on the delegated regulations that form part of the proposed legislation, as well as on an additional regulation concerning the extended possibilities to deduct the costs of education from the transition payment. The consultation period ends 10 December 2018.