Introduction

According to the Netherlands Statistics Bureau, in August 2018 there were 8.7 million workers on the Dutch labour market. Of these workers, almost 2 million had fixed-term employment contracts and more than 1 million were self-employed. Between 2007 and 2017, the percentage of flexible workers increased faster in the Netherlands than in all other EU labour markets, and the European Commission has stated that this growth of flexible contracts in the Dutch labour market is a problem. Further, the European Commission considers the inequality between flexible contracts and employment contracts for indefinite periods to be a problem. According to the European Commission, the Dutch welfare state – which is based on collective solidarity – is at risk. One of the commission's recommendations for the Dutch government is to tackle the barriers to entering into traditional contracts or employment contracts for indefinite periods and facilitate the transition from definite contracts to employment contracts for indefinite periods.

Work and Security Act

In 2015 the legislature implemented the Work and Security Act (WWZ) in response to the above issues. One of the WWZ's purposes was to limit the gap between traditional employment and flexible contracts. This should have been achieved by:

  • increasing income protection for employees with flexible contracts;
  • reducing disparity between employment contracts for indefinite periods and definite term contracts; and
  • simplifying Dutch employment law regarding dismissals.

Among other things, the WWZ shortened the maximum period for entering into fixed-term employment contracts from three to two years. Further, it introduced a more stringent dismissal system, under which there are only eight limited dismissal grounds, which are interpreted strictly. In addition, under the WWZ, if an employment contract ends or is not renewed after two years and the employee is not at fault, the employee is entitled to a transition payment as compensation for losing their job and to smoothen their transition to a new one.

Act's failure to meet goals

According to statistics and the legislature, the WWZ has not met its goals. As a result, in early 2018 a new legislative proposal – the Act on the Labour Market in Balance (WAB) – was presented in an attempt to mitigate some of the WWZ's shortcomings. The WAB proposes, among other things, to re-extend the maximum period for entering into a fixed-term employment contract from two to three years. It also suggests introducing a ninth ground for dismissal (the so-called 'cumulation ground') in order to make the dismissal system less stringent. Under the WAB, a dismissal can be based on the cumulation ground when it is unreasonable to expect the employer to continue the employment contract due to the accrual of other, insufficiently substantiated dismissal grounds. Further, the WAB states that employees should be entitled to the transition payment from the first day of their employment contract onwards and not only after two years.

Concerns

The online consultation regarding the WAB closed on 7 May 2018. Employment law specialists have mainly argued for a thorough, long-term reform of Dutch employment law instead of the quick fix offered by the WAB. The concerns of employer organisations have mainly concerned traditional employment contracts. According to this group, the necessity of a flexible labour market was underlined in the coalition agreement, but the WAB appears to leave less room for parties to enter into flexible employment relationships. According to one large labour union, the promised balance between flexible and permanent work is absent from the proposed act.

Comment

The WAB has now been submitted to the Council of State for advice. Based on the above, it seems that the legislature has no intention to end traditional employment contracts for indefinite periods. However, no solution for flexible contracts appears to have been found. Considering the statistics regarding the Dutch labour market, which clearly show that the number of flexible contracts is increasing, it is about time a proper legal framework for flexible contracts was introduced.

For further information on this topic please contact Suzanne Bos at AKD by telephone (+31 88 253 50 00) or email (sbos@akd.nl). The AKD website can be accessed at www.akd.nl.

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