The Work and Security bill was adopted by the Senate on June 10, 2014, and will come into effect on January 1, 2015, and January 1, 2016, respectively. The law aims to strengthen the legal position of flexible workers, make dismissal law simpler, faster and fairer, and (among other things) reform unemployment benefits.
Some important changes to keep in mind:
Limitation chain scheme: a maximum of 3 consecutive employment contracts can be concluded within 2 years with an interval of less than 6 months. The possibility to deviate from this by collective labor agreement is limited.
For fixed-term contracts of 6 months or shorter, it is no longer allowed to agree on a probationary period. A fixed-term contract may only contain a non-compete clause if there are compelling business or service interests.
The freedom to choose to go to the UWV or the subdistrict court disappears. It will be legally mandatory to request a dismissal permit from the UWV in cases of economic reasons and long-term incapacity for work. The subdistrict court judges on (among other things) the disturbed employment relationship and the culpable employee/employer. The grounds for dismissal are legally established. Given the stricter criteria and limited scope for the subdistrict court to determine compensation, the current expectation is that more termination requests will be rejected.
The law introduces a statutory transition compensation for the mobility and employability of the employee. After at least 2 years of service, the transition compensation roughly entitles the employee to 1/3 of a monthly salary per year of service for the first 10 years, then 1/2 of a monthly salary per year of service, and for those aged 50 and over, 1 monthly salary per year of service. Training costs can be deducted from the transition compensation. It is assumed that the employee’s consent is required for this. There will be a statutory maximum of 75,000 euros.
The bill offers the possibility to agree on different dismissal criteria, a separate dismissal committee, and an equivalent alternative to the transition compensation through a collective labor agreement (three-quarters mandatory law).
In the case of serious culpable conduct or omission by the employer, a fair compensation can be requested at the subdistrict court. However, this compensation should be awarded very sparingly (the “mouse hole”).
The unemployment benefit is becoming more activating, by limiting the benefit duration (in the long term) to a maximum of 24 months. Social partners can agree on an additional consecutive unemployment benefit.
Appeals and cassation are possible. This will certainly play a role in negotiations and alternative dispute resolution.
Tips for practice
The legislator provides detailed regulations, mandatory dismissal procedures, and that does not make it easier. The expectation is that dismissal under the new law will be more difficult to implement. Employers may even more often prefer a freelancer or engage flexible workers through the employment agency. The employer will (especially in a tightening labor market) still want to bind staff to them, for continuity and retention of know-how. Below are some tips for new-style employment contracts:
- Check whether the fixed-term employment contracts and employee handbook are still in accordance with the new law;
- Consider including an arbitration or alternative dispute resolution clause in the employment contract / employee handbook;
- The golden parachute (contractual severance payment) can also be an effective means to avoid going to the Employee Insurance Agency (UWV) or the subdistrict court;
- Develop a vision on lifelong education, innovation, and preservation of know-how (protection of intellectual property);
- Collective labor agreement parties can work with different dismissal criteria, transition compensation, and their own dismissal committees.
