A pending bill will change Dutch employment law as relates to fixed-term employment agreements. Most notably, the criteria for the automatic conversion of fixed-term contracts into permanent contracts will change. The bill also provides for notification and limitation of trial periods and non-compete clauses in fixed-term employment contracts. The stronger position of the flexworker means employers need to review their staffing policies.
The bill for the new Employment and Security Act (WWZ) introduces new provisions with regard to fixed-term employment agreements. These provisions are expected to come into effect on 1 July 2014.
Chain of fixed-term employment agreements
According to the bill, a chain of successive fixed-term employment agreements converts to a permanent employment agreement:
- upon entering into a fourth successive fixed-term agreement (this does not change), or
- after two years have passed since first entering into an employment agreement.
Employment agreements are “successive” if six months or less have passed between two consecutive employment agreements. The goal of this bill is to better protect flexible workers against dismissal. However, these changes might be reason for employers not to offer flex-workers another fixed-term agreement in order to avoid conversion, thus resulting in shorter employment relationships.
Currently, a chain of successive fixed-term employment agreements converts to a permanent employment agreement:
- upon entering into a fourth successive fixed-term agreement, or
- after three years have passed since first entering into an employment agreement.
Employment agreements are “successive” if three months or less have passed between two consecutive employment agreements.
It will remain possible to offer a one-time fixed-term employment agreement for a longer period (for example, four years) without this agreement converting to a permanent employment agreement.
For employment agreements commenced prior to 1 July 2014 that have not passed the two-year mark at this date, the former provisions remain in place. This means that the employment agreement will automatically end on the date agreed on. However, successive agreements commencing after 1 July 2014 will fall under the scope of the new legislation.
To break the chain of successive employment agreements, the period between the employment agreement ending before 1 July 2014 and an employment agreement commencing after 1 July 2014 should be at least six months. Subsequent employment agreements entered into before 1 July 2014 with a gap of three to six months will not be regarded as part of the successive chain under the new legislation.
Chain of fixed-term employment agreements and collective labour agreements
Currently, it is possible to deviate from the provisions on succession of fixed-term employment agreements to the detriment of the employee by way of a collective labour agreement. The bill limits these possibilities. Expanding the maximum number of successive fixed-term employment agreements and the period after which those agreements convert to a permanent employment agreement is only allowed if:
- the employment agreement qualifies as a temporary employment contract, or
- the “intrinsic character” of the employer’s business requires this.
Only in these cases can the collective labour agreement expand the chain to (a) a maximum of six fixed-term agreements, and (b) a period of four years.
It will also become possible to deviate from the provisions on succession of fixed-term employment agreements with directors in collective labour agreements without any further limitations with regard to maximum period or maximum number of consecutive agreements.
The deviations included in collective labour agreements agreed on and commencing prior to 1 July 2014, will remain in effect until the end date of the collective labour agreement. Therefore, it may be advisable to agree on a new collective labour agreement prior to 1 July 2014.
Observing a one-month notice period
If the bill is adopted, the employer would need to give one month’s notice for fixed-term employment agreements of six months or longer. The employer would also need to inform the employee in writing whether the employment will be continued and, if so, under what terms and conditions. Employers who do not comply with this provision risk being held liable for up to one month’s salary. If the employer confirms continuation of the employment, but does not indicate under which terms, the previous employment conditions apply. Although this obligation is intended to be in effect as of 1 July 2014, it does not apply to employment agreements that end before 1 August 2014. Employers would be wise to have an updated review system in place by June 2014 to ensure compliance.
No trial period allowed
If the bill is adopted, fixed-term employment agreements of six months or less entered into as of 1 July 2014 may not include a trial period, as they will be considered invalid. Employment agreements commencing before 1 July 2014 will not be affected. If a collective labour agreement provides exceptions under existing law, these will remain in place and unaffected after 1 July 2014 until the expiry date of the collective labour agreement, but no later than 1 January 2016. If parties to a collective labour agreement are planning to enter into a new collective labour agreement before 1 July 2014, they could anticipate this when agreeing on transitory law.
No non-compete clause allowed
If the bill is adopted, fixed-term employment agreements commencing as of 1 July 2014 may not include a non-compete clause, unless the non-compete clause outlines substantial business interests for its inclusion. The justification of the non-compete clause can be tested by the courts and risks being declared invalid as well as the non-compete clause. If passed, this provision will take effect as of 1 July 2014, which again means it does not apply to employment agreements that started before this date. If a collective labour agreement provides exceptions under existing law, these will remain in place and unaffected after 1 July 2014 and until the expiry date of the collective labour agreement, but no later than 1 January 2016. However, non-compete clauses in individual employment agreements entered into under the operation of a collective labour agreement as described will remain in force, even after the expiry date of the collective labour agreement and after 1 January 2016. Employers would be wise to carefully review their standard non-compete clauses, determine whether they would meet the new requirements and, if not, change them accordingly.