In their coalition agreement, the parties in government VVD and PvdA have indicated ‘the wish to reform dismissal law and to modernize unemployment benefits’. Their objective is to shorten the route ‘from work to work’. The main changes are the following:
- The current procedure before the UWV (Employee Insurance Agency) will be cancelled. It will be replaced by a procedure involving a mandatory request for advice to the UWV. The UWV will be obliged to handle the major part of such requests within four weeks (at present, this term is six weeks). After having received the UWV's advice, the employer can dismiss the employee, on condition that he observes the statutory notice period.
- The rescission proceedings before the Subdistrict Court will be cancelled, except if a prohibition to give notice applies, or if a temporary employment agreement without an early termination clause is terminated early.
- After the advice procedure before the UWV has been completed, an employee who has been dismissed may go to court. The court will review the dismissal on grounds of the same criteria as the UWV, and will attach great weight to the UWV's advice. Employees will not have the option to appeal (as they do have in the present situation, in proceedings for manifestly unreasonable dismissal). The court may award compensation if it considers the dismissal unjustified, or predominantly to blame on the employer. Only(!) if the employer has deviated from a negative advice of the UWV, the court can still undo the dismissal.
- The criteria that dismissals have to meet will be more sharply defined. Dismissals for economic reasons will remain subject to the same criteria.
- The request for advice to the UWV may be replaced by a procedure that is similar in substance and speed, which is set out in a Collective Labour Agreement ("CAO"). Moreover, a CAO allows deviation from the principle of proportionality.
- Employers will have to pay a (statutory) compensation for training in the form of a ‘transition budget’, unless the dismissal was prompted by the bad financial situation of the employer, and the award of this compensation would cause the employer to go bankrupt. The transition budget amounts to one quarter of a monthly salary per year of service, up to a maximum of four monthly salaries. The employer must also pay the transition budget if he does not renew a temporary employment agreement of at least one year. The transition budget will most likely be added on top of the severance payment (if any).
- The severance payment will not exceed half a monthly salary per year of service, up to a maximum of €75,000.
- The dismissal law applying to civil servants will be reconciled with the dismissal law applying to employees outside the public sector.
- The maximum duration of unemployment benefits (in Dutch: "WW") will become 24 months for the newly unemployed. They will be receiving 70% of their last-earned salary during 12 months (though in the first two months, this will most likely still be 75% of their last-earned salary), and after that 70% of the statutory minimum wage during 12 months. After this period of time has passed, the unemployed will have to live on welfare. However, as a result of a modification to the coalition agreement of 12 November 2012, an additional amount of €250 million has been released to soften the painful blows of socio-economic policy. The government will decide in consultation with employers and unions to what extent this amount will be used for a small raise of unemployment benefits after all.
- In the first ten years, an employee will accrue one month's entitlement to WW per year worked; after that time, he will accrue half a month per year worked. Existing rights will be respected (up to 24 months).
- The WW contributions for employers will be raised (the option is even considered of introducing differentiated contributions, to be based on the criteria of good employment practices).
Will the future bring a relaxation?
The changes described above raise a great number of questions and are by no means final. It is not clear yet either how transitional law will be given shape. Furthermore, it is still doubtful whether the coalition agreement will eventually lead to the intended relaxation of dismissal law; dismissing employees may even become harder. Not only because of the strict request for advice to the UWV and the great weight the courts will attach to the UWV's advice, but possibly also because of growing resistance among employees against lower severance payments and unemployment benefits.
All in all, it may still take a while before the coalition agreement will have been transposed into legislation. It is expected that VVD and PvdA will first begin talks with the employers and unions. Subsequently, the Minister will draft a bill, the advice of the Council of State will be sought, and the bill will go to the Lower House of Parliament and the Senate for discussion. Until this happens, it is hard to predict what exactly is going to change, and how such changes can be anticipated.
Judging from the present situation, we are able to provide you with the following conclusions and tips:
Conclusion and tips
- The procedure before the UWV is expected not to include a hearing; this means that the parties will not get the opportunity to explain their respective positions. As a consequence, employers will have to be even more careful to keep a file of written substantiations. In fact, employees should do the same.
- After the advice procedure before the UWV has been completed, an employee who has been dismissed may apply to the Court, which will attach great weight to the UWV's advice. Since the assessment criteria will moreover be the same and no appeal is possible, it seems that the courts will only subject the dismissal to a test of reasonableness. This apparent test of reasonableness will require more clarification so as to take away the current obscurity around manifestly unreasonable dismissal proceedings.
- The coalition agreement does not mention the settlement agreement at all; this is expected to continue in existence as before. If that is the case, the option of agreeing a severance payment exceeding €75,000 also seems to remain.
- The severance payment will be lower than the current one in terms of costs. On the other hand, besides observing the unchanged statutory notice period, employers will have to pay a transition budget for every employee (who has an employment agreement of more than one year) when the employment ends. Add to this the increased unemployment benefit contributions, and employers might very well get a bad bargain.
- It is doubtful whether a transition budget will make employers and employees happy. At present, employees tend to prefer to negotiate financial compensation instead of such an arrangement, which gives them the freedom to decide what to use this money for.
- If the request for the UWV's advice will be replaced by an alternative procedure set out in the CAO, employers and unions must realize that this burdens them with great responsibility for a good-quality procedure. For employers, concluding a CAO may be an attractive option, because it allows them to create their own dismissal procedure - provided that it is quick and of good quality - and to deviate from the principle of proportionality.
- It is not sure whether the amendments meet the requirements of the European Convention of Human Rights ("ECHR"). After all, the ECHR prescribes that there must be a court or tribunal which may subject the UWV's advice to a substantive review, and may reverse the consequences of the advice. Under the coalition agreement, the only choice still open to the courts if the UWV's advice favours the employer is to pronounce an opinion on the compensation. This, and the maximizing of the compensation at €75,000, may be contrary to the ECHR.
- If you consider concluding a social plan, it may be wise, given the intended amendments, not to agree the social plan for too long a term, and to include a provision in it arranging for the parties to reopen negotiations in the event that changes in law or dismissal law occur.