New Government proposes changes in employment law (update)

In our newsletter dated 29 November 2017, we provided you with an overview of the intended plans the newly formed coalition parties had in mind with regard to 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, rather than offering employees an employment contract for an indefinite period of time.

In this newsletter, we will first elaborate on the new Bill on the Labour Market in Balance Act (WAB), which has been submitted on 7 November 2018 to Parliament. Most of the previously reported plans as described in our newsletter are outlined in this Bill, together with some newly proposed measures. In addition, we will briefly discuss the status of the previous reported plans that have not returned in this Bill.

Outline of proposed measures in the WAB

Amendments with regard to successive fixed-term employment contracts

  • 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).
  • The intermittent period of more than six months (whereby a new chain of successive fixed-term employment contracts can be offered) remains unaltered. However, there will be greater flexibility to deviate from this rule by Collective Labour Agreement (CLA) if the nature of the work so requires.
  • The chain arrangement will no longer apply to temporary contracts given to supply teachers in primary education who are hired to replace sick teachers.

Amendments with regard to on-call contracts

  • It will be regulated that an ‘on-call contract’ (e.g. a so-called zero-hours contract or ‘min-max’ contract) is the contract wherein the scope of the work to be performed is not determined as (i) a fixed number of hours per period of no more than one month, or (ii) a fixed number of hours per period of no more than one year, whereby the right to pay is evenly spread over that period.
  • The employer must notify the employee at least four days in advance that the employee is expected to perform duties. Failing this, the employee does not have to respond to this notification. Furthermore, in case the notification is partially or completely withdrawn within these four days, the employee will be entitled to salary payment over the period for which the employee is cancelled. This four-day period can be shortened to one day by CLA.
  • In case of a so-called zero-hours contract, the employee may terminate the contract with due observance of a notice period of four days. This notice period can be shortened by CLA as well.
  • Once an on-call contract has been in effect for a period of 12 months, the employer must offer the employee the number of working hours equal to the average monthly working hours over the preceding 12 months. Even if the employer does not offer these working hours, the employee is still entitled to salary payment over this amount of working hours.

Protection of payroll employees

  • The WAB includes a definition of payrolling. According to this definition, payrolling means to provide a third party with an employee to perform duties under the supervision and management of that third party (hereafter: the client), on the basis of an assignment agreement between the payroll company (i.e. the employer) and the client, whereby the payroll company is only authorized to offer the employee to another client with the initial client's permission and whereby the payroll company does not fulfil a so-called labour market allocation function.
  • While payrolling structures remain possible, the mitigated employment-law system with regard to temporary workers will no longer be applicable in this context.
  • Payroll employees must receive the same primary and secondary terms and conditions of employment as employees who are directly employed by the client. An adequate pension scheme is to be provided to payroll employees. The terms of this pension scheme will be laid down in a governmental decree.  

A new ground for termination of employment: the cumulation ground

  • A new statutory ground for termination of employment will be introduced, in addition to the current exhaustive list of statutory grounds for termination. On the basis of this so-called cumulation ground, the court will be able to terminate the employment contract on the basis of a cumulation of the existing grounds, such as an imputable act in combination with poor performance and a breakdown in the employment relationship.
  • In case the employment contract will be terminated on the basis of the new cumulation ground, judges will be given the opportunity to award additional severance compensation to the employee up to a maximum of 50% of statutory transition compensation (which will be awarded in addition to the transition compensation).

A new maximum trial period

  • 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 two months).

Amendments with regard to statutory transition compensation

  • Statutory transition compensation payable by the employer in the event of termination of employment will become due immediately, rather than after 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 1/3rd gross monthly salary (including other remuneration components) for each year of employment, calculated over the entire period of employment, whereby incomplete years will be taken into consideration on a pro rata basis.
  • Small companies will be compensated for the statutory transition compensation if they have to terminate their business due to retirement or illness.

Lower contribution with regard to permanent contracts

  • Employers will pay lower unemployment insurance contributions (WW-premies) for employees employed on the basis of an employment contract for an indefinite period of time (not being on-call contracts), in comparison to employees employed on the basis of an employment contract for a definite period of time. The difference between the high and low rates are set at five percentage points. A governmental decree will stipulate that this lower contribution will be revised in certain situations, for example in case the employment contract is terminated within the extended probationary period.          

The aforementioned outline of proposed measures will still 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. The WAB is scheduled to enter into force on 1 January 2020.
The status of the intended plans that have not returned in the WAB

As mentioned in the introduction, not all previous reported plans have found their way to the submitted WAB. The proposed measure with regard to the possibility to be compensated by the UWV for statutory transition compensation payable to the employee after two years of illness was already accepted by the Parliament in July 2018 and has become law. For more information regarding this measure, please be referred to this article on our website.

Another initially proposed measure that is not included in the WAB, is the proposal to reduce the obligation to continue payment of salary during the initial two years of illness to one year with regard to small companies (those employing up to 25 employees). There was much criticism regarding the feasibility of these plans, as well as questions as to whether adequate reintegration measures would be taken in the second year of illness (in view of the fact that the company would no longer pay the salary). The government now proposes that instead of this measure, all companies (big and small) will receive a flat rate financial compensation of EUR 1,150.00. However, the government has also indicated that it is open to other proposals from the social partners on this subject.

Lastly, the proposed replacement for the Assessment of Employment Relationships (Deregulation) Act (“Wet DBA”) is not included in the proposed legislation. The government has indicated that an outline letter regarding this topic will be published soon.

We will follow all legislation processes closely and keep you informed of any developments. Feel free to contact our employment lawyers with any queries you may have.