NEW GOVERNMENT PROPOSES CHANGES IN EMPLOYMENT LAW
Following the general elections in March 2017, the jointly governing Liberal Party finally concluded its negotiations with potential new coalition parties in September 2017 with the aim forming a new government. In October 2017 the newly formed coalition government published its plans for the next four years. A considerable number of these plans concern proposed changes in employment law. These plans contain specific measures aimed at reducing the trend for companies to use different forms of flexible labour to an increasing degree (varying from offering fixed-term employment contracts which terminate automatically upon expiry of the contractual term to hiring temp workers or self-employed workers) rather than offering employees an employment contract for an indefinite period of time. The government considers that one of the reasons for this - in itself undesirable - trend is the complexity and cost involved in the dismissal of employees employed on the basis of an employment contract for an indefinite period of time. The government hopes that these new measures will ensure that companies become less reluctant in offering employees an employment contract for an indefinite period of time from the outset or at least after a relatively short initial period of fixed-term employment contracts. In short, the measures are the following.
- Statutory transition compensation payable by the employer in the event of termination of employment will become due immediately rather than to after the initial two years of employment as is currently the case.
- The current increase in statutory transition compensation from 1/6th to 1/4th gross monthly salary (including other remuneration components) for every period of six months of employment after the initial ten years of employment will be abolished. Statutory transition compensation will therefore amount to 1/6th gross monthly salary (including other remuneration components) for every period of six months of employment calculated over the entire period of employment.
- The permissible chain of successive fixed-term employment contracts (which terminate by operation of the law upon expiry of the contractual term) will be a maximum of three employment contracts during an overall maximum period of three years (as opposed to a maximum of two years as is currently the case). This is in line with regulations which were applicable until July 2015 when the current system was introduced. The intermittent period of more than six months (whereby a new chain of successive fixed-term employment contracts can be offered) remains unaltered.
- The rules regarding trial periods will change. In respect of an initial employment contract for an indefinite period of time, a maximum trial period of five months is permissible (this is currently two months). In respect of an initial employment contract for a definite period of time of more than two years, a maximum trial period of three months is permissible (this is currently also two months). In the event that the employee has previously been employed on the basis of a temp contract or a fixed-term employment contract, a trial period will not be permissible (leaving aside exceptional circumstances). And as before, no trial period is permissible in respect of employment contracts for a definite period of time of six months or less.
- In respect of small companies (those employing up to 25 employees) the obligation to continue payment of salary during the initial two years of illness will be reduced to one year. This payment obligation in the second year of illness will be assumed by the UWV. The prohibition to terminate the employment contract during the initial two years of illness will remain unaltered.
- Companies are currently under an obligation to pay statutory transition compensation in the event of termination of employment after two years of illness. This will change. Under the new proposal there will be a possibility to be compensated by the UWV for statutory transition compensation payable to the employee. This proposal was formulated in a Bill which was already brought before Parliament by the previous government. It is intended to have retroactive effect from 1 July 2015.
- The government will introduce a new cumulative statutory ground for termination of employment, in addition to the current exhaustive list of statutory grounds for termination. In addition, the Courts will be given the opportunity to award additional severance compensation to the employee up to a maximum of 50% of statutory transition compensation (and awarded in addition to this).
- In respect of self-employed workers (also referred to as independent contractors), a distinction will be made between three different categories. The first category concerns those persons who perform duties which can be considered as regular business activities of the company in question (the principal), who are paid an hourly rate of approximately between EUR 15-18 an hour and who perform their services over a relatively long period of time (i.e. longer than three months). These persons shall be considered as employees under the law. The second category concerns persons who perform duties which cannot be considered as regular business activities of the principal, who are paid an hourly rate of more than approximately EUR 75 an hour and who perform their services over a relatively short period of time (i.e. less than twelve months). These shall not be considered as employees under the law and will be exempt from wage tax and social security charges. The third and final category concerns persons who are paid an hourly rate of more than between EUR 15-18 an hour (but less than EUR 75 an hour). In respect of this third category a compulsory statement must be obtained (presumably from the tax authorities), comparable to the ‘Declaration of Independent Contractor Status’ (or VAR-certificate) used in the past. This statement can be obtained by the principal by completing a website module and is intended to provide the principal with clarity and assurance beforehand as to whether wage tax and social security charges need to be withheld and paid. However, the question as to whether such a relationship should be typified as an employment relationship or a service contract from a legal perspective will - as before - depend on whether there exists a so-called ‘authority to instruct’ on the part of the company. In other words: are the services provided under the company’s control, supervision and authority? If this is the case, the relationship is likely to be considered an employment relationship.
Aforementioned outline of proposed measures will still need to be incorporated in legislation which will subsequently need to pass through Parliament before it becomes law. In view of this, it is not yet clear whether these new changes will in fact become law.
Niels van Gelder