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Boekel News Flash Employment Law November 2012

Submitted By Firm: Boekel De Nerée

Contact(s): Eugenie Nunes, Sascha C. Kuit

Author(s):

Eugenie Nunes and Karin van Zijtveld

Date Published: 11/9/2012

Article Type: Legal Update

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VVD – PvdA coalition agreement: what measures should you expect?

The new government policy was announced in the coalition agreement of 29 October 2012. The plans include a number of drastic changes in the field of employment law and social security. The emphasis is on a short interval between jobs, with the shortest possible dependency on benefits. A brief summary of the most notable changes is presented below.

Dismissal law

Whereas employers can currently follow either the Subdistrict Court procedure or the procedure via the UWV WERKbedrijf (Employee Insurance Agency) in order to terminate an employment contract, the Subdistrict Court procedure will be abolished. The Subdistrict Court Judge will therefore no longer assess the dismissal beforehand, but only in arrears. Employers will only be able to apply to the Subdistrict Court in case of termination of an employment contract with an employee to whom a prohibition of termination applies (e.g. in the event of illness) or with an employee who has a temporary employment contract that does not provide for an early termination.

Employers will in future have to apply for dismissal advice (rather than a dismissal permit) from the UWV before terminating an employment contract. The intention is to handle “the majority” of the applications within four weeks (currently six to eight weeks). If a collective employment agreement provides for a procedure that is similar in terms of content and speed, the employer is not required to request such advice. If the UWV’s advice is positive, the employer can terminate the employment contract while observing the notice period. It is apparent from the coalition agreement that an employment contract can also be terminated if the advice is negative, but that involves risks in light of possible proceedings after termination (see below). The criteria for lawful dismissal will be accurately described. The criteria for termination on economic grounds (such as the proportionality principle) will remain the same, but it is permitted to depart from the proportionality principle in collective employment agreements.

In the event of dismissal at the employer’s initiative, or if a temporary contract of at least one year is not extended, the employer will owe a transition budget for training purposes equal to a quarter of a month’s salary per year of service, subject to a maximum of four months’ salary. Employees with a temporary contract will therefore be better protected than under current law. If the dismissal is based on the employer’s poor financial situation and the employer would become insolvent if it were forced to comply with that obligation, no transition budget is due.

Dismissed employees can apply to the court. The court will then apply the same criteria as the UWV, whose advice will weigh heavily. If the employer has followed the UWV’s advice but the court nevertheless considers the dismissal unjustified or believes the employer is primarily to blame, severance pay can be awarded. The severance pay will be limited compared with the current situation, in which the subdistrict court formula applies. The severance pay will amount to a maximum of half a month’s salary per year of service, subject to a maximum of €75,000. If the employer has departed from the UWV’s advice, the court can also revoke the dismissal, in stead of awarding severance pay. The judgment is not subject to appeal.

The coalition agreement does not mention the possibility frequently used in practice of terminating an employment contract by mutual consent. That possibility will most likely continue to exist.

Social Security

Both the duration and the amount of unemployment benefits will be limited. The duration of unemployment benefits will be reduced from 38 months to a maximum of 24 months. In the new regime employees will accrue one month of entitlement to unemployment benefits per year worked during the first ten years of employment history and half a month per year worked after that period. Existing rights will be respected with regard to the accrual of unemployment benefits, although the new maximum period of 24 months will also apply to existing cases. During the first 12 months the amount of the benefits will be based on the most recent salary; in the last 12 months the benefits will be based on the statutory minimum wage. After that period an unemployed person will be dependent on welfare. It will furthermore be included in the Unemployment Act that all work is considered suitable work after six months (rather than 12 months). The recovering of the first six months of unemployment benefits from employers that was recorded in the Spring Agreement will not go ahead. However, the financial benefit that employers would have as a result of the reforms in dismissal law is offset by an increase in the unemployment insurance contributions.

The state pension age will be gradually increased to 66 in 2018 and to 67 in 2021. The increase will then be linked to the increase in life expectancy. A transitional arrangement will be drawn up for people who take part in an early retirement or pre-pension scheme on 1 January 2013 and who have not been able to prepare for the increase in the state pension age. A “bonus” will furthermore be introduced for employees aged 61 to 65 with a low income. Employees who continue working to the age of 65.5 can retire 1.5 years earlier on average, without any financial loss.

With regard to supplementary pensions the coalition agreement provides that as from an income level of €100,000 there will no longer be any tax facilities for supplementary pensions. The maximum annual accrual rate for new pension accrual will be reduced by 0.4%. For the customary average salary pension, this means that there will be tax facilities for a maximum accrual of 1.75% a year of the pensionable salary.

Other

It is also notable that the coalition agreement provides that the amount of the maximum variable remuneration in the financial sector will be set by law at 20% of the fixed remuneration. The aim is also to improve the statutory protection of different types of flexible work, and initiatives will be taken to improve the balance between flexible and fixed work. Finally, as from 1 January 2015 a 5% quota will gradually be introduced for hiring disabled persons, with a penalty on non-compliance. An exception to the quota arrangement will apply to companies with fewer than 25 employees.

Future

It will take a great deal of time before the proposed measures enter into force. The proposed introduction date of the reforms in dismissal law and the unemployment system is 1 July 2014. The increase in the unemployment insurance contributions has been scheduled for 1 January 2014. The coalition agreement provides that the aim is to reach agreement with the social partners on a social agenda in which these plans are included. This means that the government will negotiate with the employers’ organisations and trade unions. The measures will then have to be recorded in legislative proposals which, after obtaining the advice of the Council of State, will be debated in the Lower House and the Upper House. In sum, the question is to what extent these measures will be embodied unamended in legislation and in what manner the announced measures will be worked out in detail. We will of course keep you informed.

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Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

As an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld
Partner 

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel

Sanmina-SCI

Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.

Starwood

We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel  

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