11 September 2014
Starting January 2015 a new Dutch labour law will be the source of many changes.
It will have a large effect on employment contracts. There may be some repair legislation and formal changes pending 2014, but for now, the following can be considered rather definite.
The current regulation (article 7:668a of the Dutch Civil Code) stipulates that an organisation can employ an employee on the basis of fixed term contracts for three times and/or for a period of no more than 3 years and that the chain is cancelled when there is period of at least 3 months and one day between following contracts. As of July 1st 2015 this article will be changed in a way that an employment agreement for an indefinite period will occur when:
The amount of temporary contracts remains the same, however the period that those contracts comprise, cannot be more than 2 years. Furthermore, the employer will need a “time-out” of at least 6 months and 1 day to cancel the chain. For example, as of July 1st 2015 it is possible to get a fixed contract of 6 months which is then extended with another 6 months, to end with a contract of 1 year. A chain of following 1-year-contracts will however result in an agreement for an indefinite period after 2 contracts (i.e. after 2 years).
As of July 1st 2015 there will be routes for termination of employment agreements. Termination based on extensive incapability ór economic reasons, must be executed through UWV. Termination based on “personal” reasons, like malfunctioning, disturbed relationship, must be addressed by the Cantonal Judge. Please note this change will leave the possibility of an amicable settlement unaffected.
After July 1st 2015, the employer is entitled to unilaterally – and without permission/consent of UWV or the Cantonal Judge- terminate the employment agreement with an employee once the employee has reached the General Old Age Pensions Act (AOW)- eligible age, without an employer having to pay any severance/compensation. Irrespective of the termination-route (UWV of Cantonal Judge) the employer will have to pay a “transition compensation”. This compensation replaces the severance payment and is calculated differently. The transition compensation will be calculated as follows: for every year of service less than 10 years, the employee receives 1/3 of his monthly salary. For every year of service that exceeds 10 years, ½ of his monthly salary is granted. A maximum of € 75.000,- in total applies, unless the employee’s yearly salary exceeds that amount (in which case this higher amount counts as maximum). The transition compensation will not be due in case of severe culpability of the employee, for example in case of termination with immediate effect due to an urgent cause. Temporary employees are also eligible for the transition package, as soon as the temporary employment relation reaches a period of two years (without renewal/extension of the contract);
We expect further complications with regard to the fact that there will be only one route which an employer must take when wanting to terminate an employment agreement. As most cases are not clear cut in the sense that they are either requested because of economic reasons or extensive incapability (which would mean the UWV-route) or personal reasons (meaning the route of the cantonal judge). Employers will want to prevent having to go to court. Employees can use this to negotiate a higher compensation. We expect that most employers will want to not deviate from the transition compensation calculation, especially because a judge will only grant an additional compensation in case of severe culpability of the employer, but there will probably be some trial cases in the second half of 2015 determining what is meant by severe culpability and determining which route (UWV or cantonal court) must be followed. At the same time the old cantonal formula might have some lasting effects even though it does not apply anymore, especially because employers will not be certain which route to take. Of course we will keep you informed of developments, such as on transitional law and the relationship between the changes and ongoing collective agreements.
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