31 May 2018

Reactions to legislative proposal Labour Market in Balance (WAB)

On 7 May 2018, the internet consultation procedure on the legislative proposal Labour Market in Balance (Wet Arbeidsmarkt in Balans, WAB) closed. Here we provide an overview of the critical reactions from employment law organisations VAAN-VvA, employers’ organisation VNO-NCW and trade union FNV.

On 4 May 2018, VAAN-VvA published a report with their analysis of the legislative proposal WAB. Although the WAB corrects certain shortcomings of the Work and Security Act (WWZ), VAAN-VvA see it as a ‘quick fix’ and argue for a thorough reform of Dutch employment law in the long run. In summary, their conclusions are the following.

The proposals for amendments of on-call contracts, the transition payment and differentiation in unemployment benefits (WW) are positively assessed. However, VAAN-VvA are critical on the proposals for a longer trial period and the related regulation on non-competition clauses. In long-term contracts or fixed-term contracts longer than two years, the parties can agree on a trial period 3 or 5 months, alongside the existing trial period of 1 or 2 months. VAAN-VvA expect that this longer trial period will provide employers with an “easy way out”, which may increase legal complications and juridification. In the case of termination of the employment contract within the trial period, the non-competition clause will lapse, unless substantial business interests justify maintaining the non-competition clause. The employer must inform the employee in writing of these business reasons when terminating the contract. Consequently, the obligation to provide motivation for a non-competition clause can differ in case of fixed-term contracts (when concluding the contract), long-term contracts (none) and when terminating a contract in the trial period (upon termination of the contract).

The new accumulation ground for dismissal (the ‘i-ground’) is positively received and the additional termination payment linked to it seems explicable. It does however raise the question of how to justify this additional payment, since the i-ground is introduced as an added ground for dismissal and is explicitly not meant as a means to “buy off” employees.

With regard to payrolling, VAAN-VvA raise the fundamental question of whether or not payrolling should be regarded as a special form of employment. Although the legislative proposal matches the goals of the WWZ and the WAB, the definitions are not clear enough and are therefore disadvantageous for the employment agency sector.

VAAN-VvA’s recommendations for the WAB:

  • Tighten the rules on reassignment under article 7:669(1) BW
  • Rearrange the rules on chains of fixed-term contracts: more possibilities to derogate by collective bargaining agreement and introduction of a multi-year employment contract
  • A pension cap for transition payments
  • A complete review of regulation of non-competition clauses
  • A review of the appeals system and of the prohibition to annul the Subdistrict Court’s decision in the first instance

VNO-NCW and MKB Nederland are mainly concerned about the new legislation’s focus on the long-term employment contract. Although the necessity of a flexible labour market was underlined in the coalition agreement, the legislative proposal seems to leave less room to enter into flexible employment relationships. This is caused by the proposed changes that ‘zero hour’ contracts are no longer possible after a certain duration, and that payrolling is becoming a less attractive option due to increased regulation and higher costs for employers. The proposed differentiation in unemployment benefits (WW), and the entitlement to a transition payment starting after the first day at work, will also increase the costs of flexible contracts and seasonal labour.

According to trade union FNV, the latter two are one of the few bright spots of the legislative proposal. These measures contribute to making flexible labour more expensive, which FNV has argued for repeatedly. Besides this, they believe the WAB will increase job insecurity for employees, due to the longer trial period during which an employee can be dismissed without a reason. Currently, employees are entitled to a long-term contract after two years, which the WAB will stretch to three years. The newly introduced dismissal ground (the i-ground) will make it easier and cheaper to dismiss employees. Overall, the promised balance between flexible and permanent work is nowhere to be found, says FNV.