European (& the GCC) Employment Law Update Jurisdiction: The Netherlands Date: August 2015 Impact date Development Impact Phase 1 - 1 July 2015 Phase 2 - 1 January 2016 Phase 3 - date yet to be determined The Labour Market Fraud (Bogus Schemes) Act The Dutch Labour Market Fraud (Bogus Schemes) Act (Wet Aanpak Schijnconstructies: ‘WAS’) is to come into force in three phases. The first part took effect on 1 July 2015, the second part will come into force on 1 January 2016, and the third part will follow on a date yet to be determined. The WAS, among other things, aims to strengthen the legal position of employees by providing them with the ability to claim an agreed wage from principals of the employer, if they do not receive that (in full) from the employer. Below is an overview of the key measures. · From 1 July 2015, ‘chain liability’ applied to the payment of wages which have been agreed between an employer and employee. Chain liability means that if there is a chain of employers (not necessarily in the same group of companies), the employee can hold all principals in the chain liable for payment of the wage to which he is entitled. The employee must first apply to his immediate employer or its principal. Both are jointly and severally liable for the wage to be paid. If the employee cannot collect the wage from them, for example, due to insolvency or that they no longer exist, he can apply to the next link in the chain. Chain liability does not apply to principals who, as natural persons, do not act in a professional or business capacity (for example, a private person who has a house built for himself). · Since 1 July 2015, the names of enterprises which have received an administrative penalty for non-compliance with rules relating to the employment of foreign nationals or hiring out personnel via intermediaries will be made public. · As of 1 January 2016, the statutory minimum wage may no longer be paid in cash. In order to avoid fraud or forgery, the part of the wage equal to the statutory wage at minimum must be paid by bank transfer. · As of 1 January 2016, it will no longer be permitted to withhold expenses relating to real costs (such as housing, work clothes and travel expenses) from the minimum wage. To promote compliance, employers will be required to specify on the payslips all elements which make up the wage, including expense allowances. Failure to do so could lead to a penalty being imposed by the Social Affairs and Employment Inspectorate (SZW). · In the future (date of effect is yet to be determined), names of enterprises which fail to comply with the regulations relating to the minimum wage, working hours and employment conditions will be made public. 1 July 2015 Secondary legislation with the Work and Security Act On 1 July 2015, secondary legislation with the Work and Security Act in the area of dismissal law entered into force. It concerns the Dismissal Regulation (Ontslagregeling), the UWV (Employee Insurance Agency) Dismissal Procedural Regulation (UWV proceduregeling) and two Governmental decrees on the so-called transitional payment. UWV Dismissal Procedural Regulation Depending on the reason for dismissal, an employment contract may be terminated by giving notice (after permission has been obtained from the UWV) or the Subdistrict Court may set aside the contract. In principle, the UWV is the designated body for handling dismissals based on commercial reasons or long-term incapacity for work. The Subdistrict Court, on the other hand, handles dismissals based on personal reasons (such as unsatisfactory performance or a damaged working relationship).The UWV Dismissal Procedural Regulation contains further rules with respect to UWV procedure. Key rules include: - The application: For submitting an application for dismissal with the UWV, the employer must use a specific digital form. In the application for dismissal the employer must substantiate the reason for dismissal. If the reason for the dismissal is, for instance, a poor financial situation, the employer should be able to show this with financial data. The employee has two weeks to submit a statement of defence. If necessary, the UWV may give both the employer and the employee the opportunity to submit their views a second time. This must be submitted within seven days. - Decision: The basic premise is that the dismissal procedure at the UWV must be completed within four weeks. The procedure will, however, take longer if both sides need to be heard or an opinion of the advisory committee on dismissals is required. The UWV may only invoke the opinion of the committee if the dismissal is based on economic reasons and if it is necessary. Once the UWV permission has been granted, the employer may give notice of termination of the employment agreement. The permission granted by the UWV will be valid for four weeks. Dismissal Regulation The dismissal Regulation contains further rules with respect to the new rules on dismissal, which entered into force on 1 July 2015. Key rules include: - Reassignment and the reasonable period: In principle, an employment contract can only be terminated if there is a reasonable ground for dismissal and reassignment with or without training, to a suitable other position within the company, is not possible or logical within a reasonable period of time. The Regulation provides that another position is “suitable” if it is consistent with the employee’s education, experience and skills or if the employee could become qualified for the position within a reasonable period with the help of training. In some cases, e.g. in the event of unsatisfactory performance, a position below the employee’s job level can also be regarded as suitable. Assessing whether a suitable position is available involves looking at vacancies that currently exist or that might arise within a reasonable period at the company. Also, jobs of employees with a temporary employment contract, on-call workers and hired workers (not being payroll workers) must be taken into account, unless the job is temporary and lasts less than 26 weeks. This could have the result that these employees must make way e.g. for a permanent employee whose job becomes redundant or a permanent employee who performs unsatisfactory. Furthermore, if the employer is part of a group, the other companies belonging to this group will also be involved in the assessment of whether there is a suitable position available. The reasonable period is the same as the statutory notice period for termination, that is, one to four months, depending on the length of employment. Moreover, the amount of time that the proceedings before the UWV or court take must be added. - Flexible contracts: In the case of a dismissal for commercial reasons, permission for termination will only be granted if all the flexible contracts (temporary contracts, temp agency contracts and on-call contracts) have been terminated first. The Regulation provides that this rule does not apply to (i) flexible contracts where the work is temporary in nature, that is, it lasts less than 26 weeks and cannot be made structural; (ii) flexible contracts with a remaining term of more than 26 weeks; and (iii) payroll workers with a permanent or temporary contract with a remaining term exceeding 26 weeks. - Contracting out work: The Regulation provides that in case an employer wishes to contract out work there is only a reasonable ground for dismissing employees if the work is contracted out to improve the efficiency of the operations and not solely to replace permanent employees with flexible and less expensive workers. - Proportionality principle: The order of dismissals for commercial reasons is determined by the proportionality principle. This principle means that, for each age group within a group of interchangeable employee jobs at the business establishment, employees with the shortest period of service are considered for dismissal first. The Regulation provides that “Interchangeable jobs” are jobs within the same establishment which are similar to each other in terms of aspects such as content, knowledge, level and salary. Furthermore, certain exceptions apply to the proportionality principle. For example, employees who have reached the state pension age are eligible for dismissal first, and the proportionality principle does not have to be applied if a unique position (a position held by just one employee) is eliminated or a category of interchangeable jobs is eliminated entirely. Specific groups of employees are not subject to the proportionality principle, either, namely: · employees who are seconded to a third party and cannot reasonably be replaced; · employees who have such knowledge or skills that their dismissal would be too onerous on the company's operations; · employees with occupational impairments; or · employees eligible for dismissal because a wage cost subsidy has been eliminated. Transitional law transitional payment: As of 1 July 2015, employees (temporary or permanent) who are dismissed after two years of service are, in principle, entitled to a statutory severance payment, the so-called transitional payment. The Work and Security Act includes a transitional scheme intended to avoid having to make a contractual payment in addition to a transitional payment. An employee may be entitled to a transitional payment after his or her employment ends and also to payments or facilities under current agreements in the employment contract or agreements in a collective labour agreement (CLA) or a redundancy plan made before 1 July 2015. A severance payment is one such payment. “Facilities” include any agreements which are not payments, such as agreements about retraining or extra training, an outplacement process or a redundancy payment scheme. The transitional scheme distinguishes between collective agreements with trade unions and current agreements formulated in another manner. - Collective agreements with trade unions: As regards agreements made with trade unions, for instance in a CLA and/or redundancy plan, in which the transitional payment is not taken into account, the basic principle is that these take precedence over the transitional payment. Different rules apply, however, to employees with temporary contracts and agreements relating to changes to unemployment benefits. This transitional scheme will apply until such agreements are extended or changed or no longer apply, but in any event until no later than 1 July 2016. This scheme will likewise apply if the employment contract ends on or after 1 July 2016, but proceedings before the UWV or Subdistrict Court were initiated before 1 May 2016. The scheme also comes into play if a CLA remains in force or is tacitly extended. Finally, collective agreements with trade unions may state that the transitional provisions will remain in effect if part of the agreements are extended or changed or no longer apply and that is not the case for the other elements of the agreement. - Employees with temporary contracts: If collective agreements include payments or facilities for employees with temporary contracts, that are more limited compared to those for employees with permanent contracts, these will not take precedence over the transitional payment. The employee will therefore retain the right to a transitional payment. - Agreements in connection with changes to unemployment benefits: Collective agreements with trade unions in connection with changes to unemployment benefits, which are solely intended to compensate employees for the slower accrual of unemployment benefits and the shortened maximum benefits period, will be owed in addition to (and not instead of) the transitional payment. - Other current agreements: As for other current agreements, that is, agreements made individually (in the employment contract, for instance) or with the works council, the basic premise is that the employee may choose between the transitional payment and the payments or facilities under these agreements. This transitional scheme will apply until such agreements are extended or changed or no longer apply. The end date of 1 July 2016 does not apply here. - Duty to inform: To ensure that the employee does not agree to a choice which is disadvantageous to him or her, the employer has a duty to inform the employee. The employer must provide the employee with written information about: · the consequences of his or her choice (if the employee does not waive his/her claims under the other current agreements, the employee’s right to the transitional payment will be extinguished); · the time period within which the employee must state his or her choice; · the amount of the transitional payment to which the employee is entitled; and · the payments and facilities to which the employee is entitled under the other current agreements. The employer need not, though, inform the employee about the amount of these payments and facilities, as the scope or value of such agreements cannot always be quantified. The employee must state his or her choice in writing no later than four weeks after the employer provides the information. If the employee does not make a choice, the employee's right to the transitional payment will be extinguished. Of course, the employee will in that case still be entitled to the payments and facilities under the other current agreements. As long as the employer does not provide any information to the employee, the employee will retain the right to both the transitional payment and the payments and facilities under the other current agreements. If the employer provides incorrect or incomplete information to the employee and, based on this information, the employee makes a decision, this decision may be nullified pursuant to a claim of vitiated consent (threat, fraud, abuse or mistake). Vitiated consent may also be invoked if the employee, without knowing the consequences, waived the right to the transitional payment without having received information from the employer. Overlap: If the current collective agreements with employee associations overlap with other current agreements, the current collective agreements will take precedence over the transitional payment and the transitional payment will not be owed. In these situations, the options model (until 1 July 2016 at the latest) will not apply. Besides the collective agreements, the employee will retain the right to the individually agreed severance payment. Deduction of transitional and employability costs The employer may deduct “transitional” and “employability" costs from the transitional payment. The Decree on deduction of transitional and employability costs provides under which conditions these cost may be deducted. Under this Decree transitional costs are regarded as costs incurred in terminating or not extending an employment contract which are aimed at preventing or curtailing unemployment. Examples include training and outplacement costs, as well as costs for observing a notice period that is longer than what is applicable between the parties, with the employee being free to look for another job. Employability costs are costs incurred during the employment contract and which are aimed at increasing the employee’s employability outside the employer’s organisation. One example is an accountant who wants to pursue a course on coaching skills, even though the accountant's current position provides no reason to do this. Costs incurred for increasing possibilities for internal reassignment, or which are directly related to the employee’s responsibilities, may not be deducted, however. Under the law the employer must actually already incur such costs. Employability costs likewise include costs for dual programmes, such as vocational learning programmes. The primary requirement for deducting transitional and employability costs from the transitional payment is that the employee needs to have consented to this in writing beforehand. Such consent might be laid down in a training agreement or in the employment contract (or an addendum to it). Consent is not necessary if the employer incurs costs in connection with collective agreements by which it is bound. The transitional and employability costs must also be reasonably proportional to the goal for which the costs were incurred. Employability costs may not be deducted, either, if they were incurred more than five years ago, unless the employer and employee agreed to another period. Finally, transitional costs consisting of costs which are related to the employer’s applying a longer notice period may only be deducted if the employee is exempted from performing work during this longer notice period. 1 July 2015 Changes to minimum wage rates The rates of the minimum wage are readjusted twice a year, i.e. in January and in July. The rates are based on working on a full-time basis. The gross minimum wage rates as per 1 July 2015 (in Euros): Age Monthly Weekly Daily 23 years and over 1,507.80 347.95 69.59 1 January 2016 Independent Contractor Status Assessment Deregulation Act On 2 July 2015, the House of Representatives passed the bill ‘Independent Contractor Status Assessment Deregulation Act’ that will abolish the VAR statement (Statement of employment Relationship issued by the Tax Authorities). This statement provides clarity on the fiscal status of the employment relationship between self-employed contractors and clients, so clients know whether they are responsible for the levying and payment of income tax and social insurance contributions. The VAR statement will be replaced by a (voluntary) approval procedure from January 2016 (target date). There will be no transitional provisions. Under the new bill, Interest groups representing independent contractors or clients, sectoral organisations or individual clients or independent contractors will be able to submit contracts to the tax authorities. These will be assessed in terms of whether or not there is a duty to withhold wage tax and social security contributions. If not, this provides certainty for the parties concerned. If necessary, the contract can be amended in consultation with the tax authorities, in order to obtain approval. The contracts submitted will be disclosed online by the tax authorities. The tax authorities will also publish cross-sectoral model contracts online. Assuming that no provisions are added that deviate from the content of the model contract and that this contract is actually taken as a basis, the use of this contract will result in exemptions from income tax and social security contributions. Approval will be granted for a maximum period of five years. The State Secretary expects that the first (forty) model contracts will be able to be published in October. It is essential that the contract is followed in practice. The client is responsible for ensuring this. A one-off deviation from the contract does not affect the exemption, provided that it is reasonably argued that this concerns a one-off event or a temporary situation. If the approved model contract is not followed, no exemption applies. The tax authorities can then claim income tax and social security contributions from the client. If, following a dispute relating to employment law, the courts rule that a contract of employment exists (or existed in the past), the tax authorities cannot claim payment of the wage tax or social security contributions. The approval is then withdrawn. Certain types of ‘notional employment’ for wage tax purposes will be covered by the approval procedure and therefore exempt from employer deductions. However, the remuneration of a supervisory director/non-executive board member (deemed employment relationship) will always be subject to wage tax withholding. 2016 House for Whistleblowers Act On 2 July 2015, the House of Representatives passed the amended bill on whistleblowing. Initially, the initiators of the bill “House for Whistleblowers Act” proposed to place the House for Whistleblowers under the authority of the National Ombudsman (an independent functionary who deals with citizens’ complaints against the government). However, following criticism of the Senate, the initiators have changed the House of Whistleblowers into a special independent administrative body. The bill will probably enter into force somewhere at the start of 2016. The Act aims to set up an independent House for Whistleblowers which investigates wrongdoings and assists employees in disclosure proceedings. The guiding principle of the Act is that employees first have to report wrongdoings internally, so that the employer has the opportunity to eliminate wrongdoings himself. External disclosure to the House is only possible if internal disclosure was not treated properly (e.g. not within a reasonable term) or if specific circumstances require an immediate external disclosure. For example, if there is an immediate threat involving a serious and urgent public interest or if the management of the company is involved in wrongdoing. External disclosure must be made in an appropriate and proportionate manner. If the disclosure was made in good faith and in accordance with the relevant procedures, the employee is protected from dismissal or other less favourable treatment due to his disclosure. Furthermore, all companies with at least 50 employees are required to put in place an internal whistleblowing procedure.