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The Netherlands: The Social Agreement

Submitted By Firm: Boekel De Nerée

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

Author(s):

Eugenie Nunes and Afra Pepping

Date Published: 5/6/2013

Article Type: Legal Update

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Less than six months ago, the Dutch Liberal Party VDD and Social Democrats PvdA agreed in the Coalition Agreement to radically reform dismissal law and the Unemployment Insurance Act. The government wanted the changes to enter into effect on 1 July 2014. The Social Agreement that was recently concluded between social partners and the government contains yet other changes to these plans. Reformation of dismissal law and the unemployment benefit will not take place any sooner than on 1 January 2016. The provisions on succession of fixed-term employment contracts will be amended on 1 January 2015.

Dismissal law
Dismissal law will be modernised with effect from 1 January 2016. The UWV will not issue dismissal advice, as included in the Coalition Agreement, but the current preventive dismissal review will remain intact. The dismissal procedure will depend on the reason for the dismissal: the UWV will review dismissal applications due to reorganisation or long-term occupational disability, while the subdistrict court will rule on requests for termination of an employment contract due to an employment dispute or inadequate performance. If the UWV rejects the request for permission for dismissal, the employer can request the subdistrict court for termination; the court carries out a review based on the same criteria as the UWV. If the UWV allows the request, the employee can request the court to restore the employment contract. An appeal is possible in conformity with regular procedural law. In the Collective Labour Agreement (CLA), social partners can agree on an assessment of the dismissal by a sector committee - instead of the UWV - to be formed by them. If such a committee has been formed, the social parties can deviate from the principle of proportionality in the CLA.

A new element compared to the present situation is that the employee also gets two weeks' time for reflection in case of a termination by mutual consent.

The employer will pay a transition fee in respect of an employee who has been on the payroll for more than two years, unless the dismissal is related to serious culpable conduct of the employee. In case of serious culpable conduct of the employer, the subdistrict court can award an additional severance payment. The transition fee amounts to 1/3 monthly salary per year of service  for the first 10 years of service and 1/2 monthly salary for the next years of service, with a maximum amount of € 75,000 or an annual salary if it amounts to more than € 75,000. Educational expenses will be deducted from the fee. If an employee has 10 or more years of service, the years of service above the age of 50 until 2020 grant a right to a transition fee of one monthly salary per year of service, with an exception rule applying to companies with less than 25 employees. In the CLA the rules with regard to the transition fee can be deviated from.

Unemployment Insurance Act
The reform of the Unemployment Insurance Act with effect from 1 January 2016 will be structured differently than had been anticipated in the Coalition Agreement. The benefit paid out under the Unemployment Insurance Act remains salary-related. Between 1 January 2016 and 1 July 2019 the duration of benefits under the Unemployment Insurance Act is gradually reduced to 24 months, by one month per quarter; social partners can agree on a supplement of 14 months of unemployment benefit in the CLA, which agreement will in principle be declared binding. From 2016, an employee accrues one month of unemployment benefit per year of service in the first ten years of service and 1/2 month per year of service in the years after that; the employment history accrued until 2016 will remain intact. As from 2016, the employees will pay unemployment insurance contribution. The employee contribution in the financing of the unemployment benefit will gradually be increased up to 50% in 2020.

Provisions on succession of fixed-term employment contracts
What is also important is the proposal to amend the provisions on succession of fixed-term employment contracts (already) from 1 January 2015: in a succession of temporary employment contracts that succeed one another with an interruption period of less than six months (currently: three months) the last contract will be converted into a contract for an indefinite period of time by operation of law if: a) the last contract is the fourth contract in the succession, or b) the total duration of the succession of fixed-term contracts is more than two years (currently: three years). A deviation in the CLA is only allowed if the nature of the work makes fixed-term contracts necessary and if no more than six contracts are concluded in a period of four years. For temporary employment agencies it is relevant that the period within which the temporary employment clause applies can no longer be extended in the CLA without limitation. In this context, a maximum period of 78 weeks will apply.

Other measures in the field of flexible work (with effect from 1 January 2015)
In fixed-term contracts with a duration of up to 6 months a probationary period clause can no longer be included. In fixed-term contracts, irrespective of the duration, in principle a non-competition clause can no longer be included. Measures will be taken in order to counter any improper use of temporary employment agency work, payrolling and contracting. The special rules of the UWV with regard to granting permission for the dismissal of payroll employees will lapse.

Occupationally disabled persons
There was a lot of resistance against employing occupationally disabled persons at the quota of 5% that is foreseen in the Coalition Agreement. The compulsory quota has been replaced by a guarantee of the employers in the market sector. They will gradually create extra jobs for occupationally disabled persons, from 2,500 in 2014 and 5,000 in 2015 gradually increasing to 10,000 per year in 2020-2026. As from 2014, the government itself will annually make 2,500 jobs available for people with an occupational disability during a period of 10 years. If less than 11,000 jobs have been created at the end of 2016, a quota will still be introduced. In addition, municipalities and social partners will incorporate 35 Work Placement Companies, which will handle the placement of employees with an occupational disability.

Execution of the measures
In this overview, we have explained the most important measures; the Social Agreement contains many other plans. Many things still have to be developed further. The opposition parties in the Dutch parliament have indicated that they will only decide whether to agree with the measures once these measures have been explained in legislative proposals.  Therefore, it remains to be seen how the plans will be elaborated and how much still needs to be changed in order to obtain to approval of the parliament. We will carefully follow this process for you.

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