On Tuesday 18 February 2014, the Dutch Lower House voted in favour of a bill relating to the Work and Security Act. If the Upper House also votes in favour, dismissal procedures and the Unemployment Insurance Act will be reformed. The bill also contains measures to prevent the improper use of flexible employment. The changes applicable to fixed employment are planned to come into force partly per 1 July 2014 and partly per 1 July 2015. It is necessary for employers to anticipate these changes.
Five important changes to be aware of:
- Maximum duration: When the aggregate term of consecutive fixed term employment contracts exceeds 24 months, the contract will automatically be converted into a contract for an indefinite period of time.
- Intervals of less than six months are taken into account: The chain of consecutive contracts will only be broken if they are interrupted by a period of six months.
- Trial periods are prohibited for short contracts: A trial period in fixed term contracts with a duration of six months or less will be prohibited.
- Obligation to state reasons for non-competition: A non-competition clause in a fixed term employment contract will only be valid if accompanied by written justification. The necessity of the non-compete clause must be justified, based on substantial business interests.
- Notice period required: The employer will be required to give written notice to the employee one month before the fixed term employment contract ends. Failing to do so will result in an obligation to pay compensation equal to a month’s salary or, in case of delayed written notice, compensation pro rata.
Changes 1 and 2 will come into force per 1 July 2015. Until that date, employers can make use of the current, broader legislation under which a maximum total period of 36 months with intervals of three months is allowed for fixed term contracts. Changes 3 through 5 will apply to all fixed term employment contracts to be entered into after 1 July 2014. Employers will have to consider the impact of the new regulations on their current employees. Should you renegotiate your contracts? Do you already have a notice letter in place? Are your employment handbooks up to date? Can you substantiate your non-competition clause? All relevant action points should be timely addressed so that you are fully prepared.