Legislative proposal on Work and Job Security

On 18 February 2014 parliament accepted the ‘Work and Job Security’ bill, which is sheduled for introduction on 1 July 2015.

This article gives an up-to-date summary of the key proposed changes, which parliament will debate in the coming period. As is widely known, the new legislation will at any rate tend to depress severance payments. A calculation given under the heading `compensation´ below clearly shows the difference between the new transition payment and the current subdistrict court formula. It must be borne in mind that under the new law the subdistrict court may always award a higher payment where there has been a serious culpable act.

Employment termination law
The reasons for dismissal determine which of two possible procedural routes will apply in a given case:

– an application must be made to the work placement branch of the Employee Insurance Agency (UWV WERKbedrijf) for a dismissal permit for business reasons, and in the case of long-term work disability;
– for all other person-related reasons, and where the working relationship is damaged, the case must be brought before a court with the power to terminate the employment contract.

* The transition payment for employment of two years or more is subject to a maximum, which is the higher of € 75,000 or one year’s salary.

* The transition payment for every employee is one sixth of the monthly salary for each half year of service for a length of employment of ten years or less (effectively 1/3 of a month’s salary for each year in the job); for every half year of employment above ten years an employee will also receive one quarter of the monthly salary (effectively one-half of a month’s salary for each year in the job).

For example:
an employee aged 45 who has been in a job for fifteen years and seven months, and whose gross monthly salary is EUR 3,000 (including holiday allowance and emoluments), will receive the following transition payment in the event of dismissal for economic reasons:

First ten years: 20 x EUR 3,000 x 1/6 = EUR 10,000
Period after ten years: 11 x EUR 3,000 x 1/4 = EUR 8,250
Total payment: EUR 18,250

As an indication, the same employee would have received 13 x EUR 3,000 = EUR 39,000 under the current subdistrict court formula.

* * Transitional rules will apply until 2020 for employees who are over the age of fifty. The transition payment for this group in the case of ten years of employment is set at one month for each year of employment above the age of fifty, with an exception for companies with fewer than twenty-five employees.
* The transition payment can be reduced or set at zero if payment of the full amount would put a company’s continuity in jeopardy, or lead to even more dismissals.
* Small businesses (i.e. with fewer than twenty-five employees) will have the option until 1 January 2020 to disregard an employee’s period of service before 1 May 2013 in the transition payment calculation, if the reason for dismissal is a poor financial situation.
* The subdistrict court has the power to award severance pay over and above the transition payment in the event of ‘serious culpable acts or omissions’ on the part of the employer.
* Employees have two weeks following the conclusion of a settlement agreement in which to change their minds and cancel the agreement. An employer is obliged to inform the employee of this cooling-off period, failing which the employee is entitled to a three-week period.

Flexible labour

These measures will now also come into force on 1 July 2015, instead of 1 July 2014 as originally intended.

* Trial periods are no longer allowed in six-month temporary contracts.
* Temporary contracts may no longer include a noncompetition clause, except in exceptional circumstances, for which reasons must be demonstrated.
* Abolition of zero-hours contracts in the care sector.
* The 3 x 3 x 3 rule for sucessive fixed-term employment contracts has been changed to 3 x 2 x 6. What this means is no more than three temporary contracts in any two-year period with gaps of six months or less. Some deviation from this remains possible only in a collective agreement, but not for the six-month gaps, and then only if the nature of the work makes temporary contracts necessary. There is also a maximum of six temporary contracts in any four-year period. The new provisions on succession of fixed-term employment contracts will be evaluated three years after coming into force.
* Employers must give an employee at least one month’s notice prior to the end date of a temporary contract of six months or more, as to whether the contract will or will not be extended and, if so, if any conditions apply. An employee is entitled to one month’s salary if this obligation is completely disregarded, and to payment on a pro rata basis if the deadline for notice was missed.

Unemployment benefits
The unemployment benefits calculation is being changed to one month for each year of employment for the first ten years, and ½ month for each additional year. Employment history accumulated until 2016 will continue to be honoured, with each such year giving entitlement to one month of unemployment benefit. The level of unemployment benefit will still be related to income.
* The maximum duration of the publicly financed unemployment benefits will be reduced progressively by one month each quarter until 2016. From 2019 the government will pay unemployment benefit for no more than two years.
* Employers and unions may introduce an additional fourteen months of unemployment benefit into individual collective agreements.
* The definition of appropriate work will be tightened, such that employees will have to accept a job below their level after only half a year.
* The publicly financed component of unemployment benefit will be paid on a 50-50 basis by employers and employees, starting in 2016-2020. This transition will be arranged so that the effect on the burden is neutral.
D.H. Oolbekkink
Employment Law
February 2014

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