The main implemented changes concern a dismissal law reform, an intended improvement of the legal status of flex workers and an adjustment of the Unemployment Insurance Act. Below, we will discuss the most important changes and suggest a number of recommendations.
The following points are raised:
- Trial period
- Noncompetition clause
- Notice requirement
- Temporary employment clause
- Provisions on succession of fixed-term employment contracts
- Dismissal law, – Grouds for dismissal – Dismissal procedure
- Transition compensation
- Reflection time
- Training and reassignment duty
- Unemployment benefit
As per 1 January 2015:
Trial period:
It is no longer possible to agree a trial period with the employee in case of an employment contract for a definite period of 6 months or less.
There are two alternative options: The first option is to enter into an employment contract for a short period of 2 to 3 months for example.
After this, it may be decided whether an employment contract for a longer period of time is entered into. In that case, this agreement is included in the provisions on succession of fixed-term employment contracts (see below).
The second option is an employment contract to be agreed of more than 6 months, and therefore at least 6 months plus 1 day. In that case, a trial period may be included.
Noncompetition clause:
A noncompetition clause may only be included in an employment contract for an indefinite period. There is one exception to this general rule: in fixed-term employment contracts a legally valid noncompetition clause may be included if the written substantiation shows that the clause is required for substantial business interests and interests of the service.
A judge may (entirely) annul a noncompetition clause if the interest is not required for business interests or interests of the service.
If a noncompetition clause is agreed before 1 January 2015, the ‘old’ legislation will still apply with respect to that clause.
Interim changes of the noncompetition clause are not allowed. Only when a new employment contract is entered into, a new noncompetition clause may be agreed. For that reason, the motivation and phrasing of the business interest or interest of the service in the noncompetition clause is essential. What will fall within the definition of business interest or interest of the service will be decided in jurisprudence. One may certainly think of specific knowledge or business information or disproportionate damage to the employer if the employee were to enter into the services of a competitor. It will be clear that this needs to be established per individual case. A standard provision will not be sufficient. It is considered to apply a provision per job category, with specific elements per employee.
A nonsolicitation clause is generally regarded as a form of a noncompetition clause. However, including a separate nonsolicitation clause and a separate noncompetition clause may be a smart thing to do. For it may well be that the motivation is accepted for one of the two clauses but not for the other one.
Notice requirement:
A so-called notice requirement has been introduced. This means that one month before the termination of the fixed-term employment contract at the latest date, the employer must inform the employee of:
- Whether or not the employment contract will be extended.
- On extension, the conditions thereof.
If the notice period is not observed at all, the employer will be due a compensation equal to the amount of wages for this month. If the employer does fulfil his obligation but does not do so timely, a pro rata compensation is due. The compensation is not only due when the employer has not indicated timely that the employment contract will not be continued, but also when he has not or not timely indicated that he wants to extend the employment contract. In the latter case, it is not likely that employees will claim any compensation but they do have the right to do so.
Should it be clear from the beginning that only a one-time employment contract for a definite period is entered into and that this contract will not be extended, it will probably be possible to already include the notice in the contract. A provision can be included in the employment contract to that end.
Temporary employment clause
The legal provisions state that a temporary employment clause may be agreed in a temporary employment contract for the maximum duration of 26 weeks. The possibility to deviate there from through collective agreement, has been restricted. The possibility to deviate there from through collective agreement, is limited to 78 worked weeks.
As per 1 July 2015:
Provisions on succession of fixed-term employment contracts
The provisions on succession of fixed-term employment contracts have changed. This means that an employment contract for an indefinite period arises if:
- Several employment contracts for a definite period were entered into whereas no more than six months passed between the employment contracts and the total duration of these employment contracts – including the interim periods – exceed a period of 24 months.
- More than 3 employment contracts succeeded each other with interim periods of no more than six months.
The provisions on succession of fixed-term employment contracts do not apply to employees under 18 years of age withan average working hours of 12 hours or less per week. As soon as the employee becomes 18 years, the provisions on succession of fixed-term employment contracts are immediately applicable.
Here as well, the ‘old’ law remains in force with respect to employment contracts entered into before 1 July 2015.
An agreement entered into or extended before 1 July 2015 that does not exceed 36 months, will legally be terminated. This, of course when the stipulations of the former legislation have been met (3 employment contracts with maximum interim periods of 3 months). In that case, however, a transition compensation will be due (see below) and the employer will also have to fulfil his notice requirement (see above).
If an interim period of more than 3 months was observed before 1 July 2015, this will also be honoured as a legal end to the succession of fixed-term employment contracts.
If a contract is entered into or extended after 1 July 2015, the new legislation will be applicable.
In case of collective agreement, the period of 24 months may be deviated from at the expense of the employee to a maximum of 48 months. The number of employment contracts and the interim period of 6 months can no longer be deviated from based on collective agreement. With respect to already concluded collective agreements, a transitional arrangement applies. The provisions of a collective agreement entered into before 1 July 2015, will remain in force for a maximum of 12 months. As soon as the collective agreement expires, the new legislation will become applicable.
It will remain possible to agree on a single fixed-term employment contract of more than 24 months. This may be desirable in the event of a project for a certain period of time. The employment contract may be extended once with a maximum of 3 months. If these requirements are met, the contract will end by operation of law. The notice requirement and the transition compensation will apply.
Dismissal law:
Grounds for dismissal:
As from 1 July 2015, there are only a limited number of grounds for dismissal. A termination may only be effected based on the grounds stipulated by law.
The law states the following grounds:
a) Business circumstances
b) Prolonged occupational disability
c) Frequent sickness absence
d) Unsatisfactory performance
e) Imputable acts or omissions on the side of the employee
f) Refusal to do work based on conscientious objection
g) Disrupted employment relationship
h) Other circumstances that are such that the employer cannot be required to continue the employment contract.
The latter category (h.) is intended as ‘remaining category’. Restrictive use of this remaining category is in order, however. This is also clear from the stated examples: detention, unlawful residence of the employee and no work permit for non-EU nationals.
By stating a limited number of grounds, it will therefore be possible that there are grounds for dismissal that fall outside the scope. In that case, a termination will be difficult or even impossible to effect.
In addition, documentation becomes an important factor. For the ‘unsatisfactory performance’ (d.) it is stipulated by law that the employee must have been informed timely and has been given the opportunity to improve his performance. The employer should also have offered sufficient training. If an employer cannot prove the stated aspects, no termination can be effected.
In the event of business circumstances (a.) the same rules apply as is presently the case. The principle of proportionality e.g., will also have to be applied as per 1 July 2015.
A Ministerial Regulation has been drawn up with the possibility to deviate from the principle of proportionality subject to certain conditions. It will be allowed to deviate from the principle of proportionality with a maximum of 10% in the age categories between 25 to 55 years with respect to employees that demonstrably perform above average or that are expected to possess an above-average potential for the future.
Dismissal procedure:
The procedure to be followed in the event of termination, is furthermore determined by the reason for dismissal. In the event of:
- Dismissal for business reasons or prolonged occupational disability (grounds a. + b.), the Employee Insurance Agency UWV WERKbedrijf must be asked permission to terminate the employment contract.
- Dismissal for personal reasons such as unsatisfactory performance, attributable acts or omissions by the employee or a disrupted employment relationship (grounds c. up to and including h.) a request for termination of the employment contract must be submitted to the district court.
Termination on the grounds of unsatisfactory performance is subject to more strict requirements. As said before, documentation will play an even more important role.
Both employer and employee may appeal and file an appeal in cassation against a decision of the district court in termination proceedings. This means that in some cases it may take some time before employer and employee will have clarity on this matter. The appeal and appeal in cassation proceedings take a relatively long time, so there may be uncertainty for quite some time on the question whether or not the employment contract is terminated.
Decisions by the Employee Insurance Agency UWV may be appealed. If the Employee Insurance Agency UWV WERKbedrijf grants permission to terminate the employment contract, the employee may request the district court to restore the employment contract or to award additional compensation.
If the Employee Insurance Agency UWV WERKbedrijf refused the employer to terminate the employment contract, the employer may request the district court to do so.
In both cases appeal and appeal in cassation proceedings are possible.
Transition compensation:
An employee who has been employed for at least 24 months, is in principle entitled to a so-called transition compensation on termination of the employment. The underlying idea was that the employee is assisted from one job to the next and, within that framework, receives compensation to be spent on training, counselling or outplacement. Hence the term ‘transition compensation’. This idea has now been abandoned and it concerns gross compensation paid directly to the employee.
The transition compensation is due irrespective of whether the employee is employed on the basis of an employment contract for a definite or indefinite period. Nor does it matter whether or not the employment contract was terminated by not extending the employment contract for a definite period, by giving notice or termination.
The height of the transition compensation depends on the duration of the employment:
- Over the first ten service years, the compensation amounts to 1/6 monthly salary per half service year.
- Over the period that the employee is longer than 10 years in service, the compensation amounts to 1/4 monthly salary per half service year.
- The compensation is capped at €75,000 gross or to the amount of the annual salary if this is higher than €75,000 gross.
- There is a transition period until 1 January 2020.
- An employee of 50 years or older, with an employment contract that spans at least 120 months, is entitled to 1/2 of the monthly salary for each half year of the employment contract after reaching the age of 50. This is not applicable to employers with less than 25 employees.
- In the event of business circumstances, employers with less than 25 employees may base the calculation of the amount of the transition compensation on the duration of the employment starting from 1 May 2013.
It is possible to deviate from the provisions concerning the transition compensation through collective agreement, provided that an equivalent arrangement is reached.
In principle, no transition compensation is due in the event that:
- The employment contract is terminated before the employee reaches the age of 18 and the average working hours did not exceed 12 hours per week.
- The employee has reached the pensionable age.
- The termination is the result of imputable acts or omissions on the side of the employee.
- The employment contract is terminated with mutual consent.
- The employer is declared bankrupt, is granted suspension of payment or when the statutory debt restructuring scheme is applicable.
Cost of measures may be deducted from the transition compensation that aim at preventing unemployment and stimulating a broader deployability in finding a new job. One may think of costs for training and outplacement. This is subject to very strict conditions by general administrative measure.
The provisions concerning the transition compensation are mandatory legal provisions. This means that these may not be deviated from. If an employment contract contains a provision that stipulates that, at the end of the employment, the employee is entitled to a certain amount of (severance) pay, as from 1 July 2015, the employee in principle is also entitled to the transition compensation. Therefore, it may be important to change the provisions on this subject in the employment contract, in the sense that the employee is not entitled to both compensations. For example by including that the transition compensation will be deducted from the severance pay.
Reflection time:
After the law amendment, the possibility remains to terminate the employment contract with mutual consent. Employees who have agreed to their dismissal or that have agreed to a termination with mutual consent, will have fourteen days reflection time. Within that term, the employee may reverse the dismissal.
The employer is under the obligation to point this reflection time out to the employee. If the employer fails to do so, the reflection time is extended by one week.
Training and reassignment duty:
A general reassignment duty was introduced. Before an employer may terminate the employment contract, it has to be assessed whether the employee, within a reasonable term and whether or not through training, may be placed in a fitting job.
It is included in the law as an element of good employer practices that an employee is entitled to training that is necessary for the performance of the job and for the continuation of the employment contract if the job becomes redundant or if he is no longer able to fulfil the job.
Change in the Unemployment Insurance Act
Adjustments of the unemployment schemes should result in unemployed employees accepting work sooner.
Main changes:
- All labour is considered suitable after 6 months instead of 12 months. This change has become effective as per 1 January 2015.
- Phasing out of unemployment benefit from 36 to 24 months. The phasing out will start as per 1 January 2016
In view of the above, it is of importance that the employment contracts are adapted to the new labour legislation. In addition, it is important that more attention is given to updating and maintaining personnel files and that a correct and adequate assessment system is applied.
Further information
You are welcome to consult us before taking a major decision with regard to summary dismissal of an employee for cause. For any further information regarding this subject, you can contact our office, 0031 – 10
