This article takes a look at employment law reforms planned in the Netherlands by the coalition government formed by Prime Minister Mark Rutte in October 2017.

By: Hylda Wiarda

Firm: Bronsgeest Deur Advocaten

Deregulation of the Labour Relations Assessment Law (law applicable to contractor agreements)

As of 1 May 2016, the law on Deregulation of Labour Relations Assessment (‘Wet DBA’) replaced the Employment Status Declaration (‘VAR’). This law is aimed at making both parties to a contractor agreement jointly responsible for defining their working relationship. This means that both parties may be obliged to pay levies to the tax authorities should those authorities be of the opinion that an employment relationship exists. The aim of the law is to prevent false self-employment and to avoid people being exploited by companies.

As a result of the ambiguity surrounding this law, its enforcement had already been postponed until 1 January 2018 and subsequently until 1 July 2018. Recently a further postponement was announced until 1 January 2020. However, even before the law enters into force malicious companies will not be exempted from enforcement and will be subject to regular checks by the tax authority. It will be interesting to see how this unfolds in relation to companies such as Uber and Deliveroo.

The new cabinet aims to replace the Wet DBA with a system in which there are three distinguishable situations:

1. Employment relation by definition

  • An agreement for a duration of more than three months with a moderate rate of remuneration, presumably between EUR 15 and 18 per hour;
  • Conducting regular business operations.

2. No employment relationship

  • An agreement shorter than one year at a high remuneration rate, presumably over EUR 75 per hour;
  • Not conducting regular business operations.

3. Client statement

For any scenario not covered by the previous two situations, the client needs to request a statement using an online tool that has not yet been launched. This statement serves to replace the tax authorities’ current model contracts.

Clients will of course be granted time to adjust to the new regulations. During the first year following implementation the tax authorities will exercise restraint with regard to checks and will not immediately impose penalties. The date for implementation of the new arrangement is now set at 1 January 2020.

The Rutte III coalition agreement: the new government’s labour law plans

On 10 October 2017, the government presented its coalition agreement. It contains a number of plans regarding the labour market. These include the following:

Cumulative statutory grounds for dismissal

The Work & Security Act (‘WWZ’), introduced in July 2015, has had the effect of making it more difficult to dismiss an employee via the sub-district court route, since there always needs to be a ‘mature’ termination ground. This means that all the (strict) criteria relating to the relevant ground must be fulfilled. The intention is to introduce a ‘cumulative ground’, permitting the court to dissolve an employment contract on a combination of grounds, each in itself not sufficient for termination, but possibly sufficient when grouped together.

In that case, however, the court can only award additional compensation of at most half the statutory transition payment on top of the transition payment already owed.

Better ‘balance’ in the statutory transition payment

  • Employees will be entitled to a transition payment on termination of their employment from the start of the employment agreement as opposed to after two years employment under the current system.
  • The transition payment for each year of service will amount to 1/3 monthly salary, even for contracts of ten years or more (that is a cut for employees as compared to the present system). The transitional arrangement for people over 50 will be continued.
  • The option to deduct educational or training costs from the transition payment is broadened. Education and training within the organisation aimed at finding an alternative position may also be deducted from the transition payment. This must be agreed upon with the employee beforehand. Costs related to schooling or training aimed at increasing employability in the employee’s current position cannot, as previously, be deducted from the transition payment.

Bill on compensation transition payment after two years of illness pushed forward

This bill compensates the employer for (a large part of) the transition payment paid on dismissal of an employee after two years of illness, subject to certain criteria. The bill provides for compensation for employers paid from the General Unemployment Fund (‘Awf’). This would, however, mean an increase in the (harmonised) premium for the Awf, which applies to all employers. The bill covers the period from implementation of the WWZ; it is therefore the intention that dating back to 1 July 2015, all employment contracts terminated on the grounds of two years of illness will be compensated by the Awf. The aim is for this to come into force on 1 July 2019.

Chain of employment rule

The period after which consecutive fixed term employment agreements become an indefinite contract will be extended from two years to three. The starting point remains that where there are consecutive contracts the chain will only be broken by an interval of six months. On a sector basis, it must be made possible to deviate and shorten that interval where the job or industry so requires.

Probationary period

Where an employer immediately offers an indefinite contract (as a first contract), it should be possible to include a probationary period of five months. For multi-year contracts (more than two years) this will be a maximum of three months. In all other cases the probationary period arrangements remain as they are at present.

Payroll agencies and zero-hour contracts

‘Payrolling’ (the Dutch term for the practice of outsourcing staffing and the associated administrative responsibilities) and zero-hour contracts should not hinder employees’ labour market opportunities. This is why the government is introducing a bill in relation to payrolling that aims to give payroll employees the same status as employees directly employed by the hiring company, at least as far as employment conditions are concerned. The government also wishes to prevent employees on zero-hour contracts from being obliged to be permanently available to the employer where the nature of their activities does not require it.

Extension of parental leave and adoption leave

From 1 January 2019, the government plans to extend parental leave for partners from two days to five, while employers continue to pay full wages. As of 1 July 2020, partners will also be allowed five weeks of additional parental leave to be taken within six months following birth, against continued payment of up to 70% of their daily wage. These five weeks are to be paid by the UWV. Under these plans, adoption leave would also be extended from two weeks to six.

Additional rights for Works Council on remuneration of directors and board members.

Recently the House of Representatives accepted a bill that obliges undertakings to discuss pay and remuneration ratios within the company, including those of the board. Obliging an undertaking to have a consultation meeting on the topic with the Works Council should prevent the differences in remuneration between the board and the employees of a company becoming too high. The bill is currently being presented to the House of Parliament for approval.

Note that whether the above plans will indeed come into effect and if so, when is as yet unknown.