Plans likely to lead to more lawsuits, less transparency and higher costs 

Last year we informed you that as a result of the coalition agreement of the then new government, new proposals were made which were supposed to change the manner in which employers would be able to dismiss employees. Since that time no new proposals to legislation were made, but the government chose to ask the trade unions and the representatives of the employers in The Netherlands, to negotiate about what is called the social agreement, which should cover changes to the Dutch labor market. After a couple of weeks, on 11 April 2013, an agreement between said parties was made and presented. Although the social agreement consists of various chapters, for the purpose of this article, I will focus on the chapter regarding the proposed reforms of the Dutch dismissal practice. Apparently, one of the goals parties have tried to realize is that the dismissal practice in The Netherlands would stay as much as possible away from the legal landscape, more transparency and lower (legal) costs. The plans, however, seem to have the opposite effect. Depending on the reasons for dismissal, the employer can only opt for one procedure. Either the governmental body (UWV) which assesses requests based on dismissal after two years of illness and / or reorganization, or, in case of underperformance or any other reason linked to the individual employee, the employer should seek termination through the court. It is remarkable to note that in the social agreement, it has been proposed that both the employer as the employee may at all times appeal to the decision of the UWV, but also the decision by the court. Currently, the termination through a court procedure is not open for appeal and the procedure usually takes approximately 6 to 8 weeks. If the future plans would materialize into legislation, then these procedures may take a year, which would lead to uncertainty whether or not at the end of these procedures the employee is entitled to continue his position with the employer.

Almost evenly remarkable is the proposal to obligate employers to pay a so-called transition payment to all employees older than 18 years who after two years (irrelevant whether or not the contract is a fixed term or indefinite) are being confronted with an involuntarily termination of their employment agreement. Currently, almost needless to say, an employee who has a temporary contract is not entitled to any kind of remuneration if the employer decides not to continue such contract. Although from a brighter (employers’) perspective the transition payment is capped in the amount of € 75,000.- gross or in case the yearly salary is higher than said amount, capped to one yearly salary, the courts may award an employee an uncapped severance if the employer is to blame for the termination of the employment agreement. Apparently, an employee may be entitled to receive both the transition payment as such severance. For some, unclear, reasons, the social agreement states that in case parties reach a settlement based on which an employment agreement ends by mutual consent, such employee is not entitled to any kind of severance, based on the assumption that this would equal a voluntarily termination of the employment agreement which in practice is not the case. Any employee who leaves voluntarily gives notice.

The list with “solutions” for a labor market which are highly unlikely to be laid down in new legislation is too long for one article. It seems that the main result of the social agreement is the fact that the trade unions and representatives of the employers have finally again found each other. The trade unions have also emphasized in the social agreement that a large number of the proposals can be softened if laid down in collective labor agreements. With the numbers of trade union members falling down rapidly, it makes sense that the social agreement is to be seen as an advertisement for employees to become a member of the trade unions. The social agreement proposes to the government to ensure that changes to the dismissal practice are implemented as per 1 January 2016. At least until that time the Dutch dismissal practice will remain unchanged.