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Law Work and Security and Dimissal Law

After more than two years of bickering (through the Kunduz agreement, Coalition agreement and Social agreement), our government has now established the new’ Law ‘Work and Security’ (hereinafter referred to as ‘WWZ’), which has become applicable law by means of publication in the Government Gazette (so-called ‘Staatsblad’) on 25 June 2014. The WWZ encompasses changes in law in various areas and these changes also have several different effective dates. The three most important areas of the WWZ are:
  1. Flexible Labour
  2. Dismissal Law
  3. Unemployment Benefits Law (hereinafter referred to as ‘WW’)
  4. This article discussed the changes in the field of Dismissal Law.

2) WWZ and Dismissal Law

Effective 1 July 2014 the Dismissal Law will be changed radically. First, the manner in which an employment agreement can be terminated will be amended. Secondly, a legal entitlement to severance compensation will come into effect; the so-called Transition Compensation (‘transitievergoeding’). Furthermore and in special situations, the Cantonal judge may award additional severance compensation; the so-called Equitable Compensation (‘vergoeding naar billijkheid’). Thirdly, some procedural changes will be introduced.

Terminating the employment agreement

Under current law there are in principle 3 ways to terminate an employment agreement (this excludes termination of a temporary employment agreement by way of law, termination during the trial period, summary termination or termination due to bankruptcy of the employer).
  1. Termination Notification (by the employer)
  2. Dissolution of the employment agreement (by the Cantonal Judge)
  3. Termination by Mutual Consent
a) In most cases, an employer can only give an employee a termination notification if he has obtained a termination permit from UWV. b) A Cantonal Judge can dissolve the employment agreement. He will only do so if he judges that there are sufficient signification reasons present. c) Termination by mutual consent occurs in situations where both employer and employee conclude that continuation of the employment agreement is no longer viable, e.g. when there is a difference in opinion on how the work is to be carried out. In such cases employer and employee often negotiate the terms and conditions of the termination, including an appropriate severance compensation. If agreement between the parties is reached, the employer does not have to apply for a termination permit from UWV nor request the Cantonal Judge to dissolve the employment agreement. The conditions for the termination are written into a so-called Termination Agreement (‘vaststellingsovereenkomst’). To secure the employee’s right to unemployment benefits, this agreement states clearly that the initiative for the termination lies with the employer and that the termination cannot in any way be blamed to the employee.

New form for terminating an employment agreement

The WWZ introduces a new form of terminating an employment agreement; the so-called ‘termination notification with the employee’s assent’ (‘opzegging met instemming van de werknemer’). This means that, if the employee agrees to the termination notification in writing, the employer can legally give the termination notification without prior permission from UWV. This appears to be the same as a termination by mutual consent, but from a legal perspective, these are two different termination routes. Termination by mutual consent involves a dual legal act. This means that employer and employee need each other to reach agreement. Termination notification with the employee’s assent involves two consecutive unilateral legal acts; first the assent and after that the actual termination notification itself. According to our government the termination notification with the employee’s assent will not be favourable or unfavourable as compared to the termination by mutual consent. However, there are differences:
  • A reasonable ground for termination is required for termination notification with the employee’s assent (see further below) and the employee is entitled to the transition compensation (provided the employment has lasted at least 24 months).
  • Termination by mutual consent does not require a reasonable ground for termination, nor is there a legal entitlement to the transition compensation.
Nevertheless, in practice our government will probably prove to be right, since the termination agreement will refer to one of the reasonable termination grounds (see further below). Furthermore an employee will not agree to this termination by mutual consent if he is not offered a (reasonable) severance payment/transition compensation.

Scheme Termination Routes and Reasonable Termination Grounds as of 1 July 2015

Under the current law the employer’s motive for termination of the employment agreement does not dictate the termination route to be chosen. The WWZ will change this and effective 1 July 2015 the employer is no longer entitled to chose the termination route. Instead, the termination ground will determine the termination route, as per the following Scheme;
  1. Termination Permission from the UWV (or a termination committee installed through a collective bargaining agreement) is required for the following termination routes:
    1. Redundancy of the position due to economical/financial circumstances of the employer
    2. Long term occupational disability
  2. Dissolution of the employment agreement by the Cantonal Judge will become the mandated termination route for the following termination grounds:
    1. Regular sick-leave
    2. Performance issues
    3. Culpable acts or negligence on the part of the employee
    4. Refusal to work on the basis of serious scruples
    5. Disturbed relationship
    6. (Any) other circumstances whereby the employer cannot reasonably be expected to continue the employment agreement (such as detention of the employee or lack of a required work permit)
  3. and 4. As described here above, the possibility of termination by mutual consent will remain, added to which the new form; termination notification with the employee’s assent.

Reflection Period

The procedures mentioned under 3) and 4) feature another important addition: the employee will have the right to a reflection period of 14 days, within which period he may revoke his assent. The employee will not be required to give a reason for revoking assent. In case he does so, the notification of termination will be deemed not to have occurred and the employment agreement is thus not terminated. The employer must inform the employee of the right to the 14-day reflection period in writing and within two working days of signing the termination agreement. If the employer fails to do so, the reflection period is extended to three weeks. If, within six months after the first revocation, the employee gives his assent again, he cannot revoke yet again.

Right to Unemployment Benefits at termination notification with the employee’s assent

An employee who accepts termination notification with the employee’s assent, is not considered culpable in terms of the Unemployment Benefits law, just like this is the case now for termination by mutual consent, because it is the employer who has taken the initiative for the termination. The Unemployment Benefits law dictates that in these situations there can only be a situation of culpable unemployment if the termination is based on a compelling reason (such as summary termination) for which the employee can be blamed for (article 24, second section, sub b, of the Unemployment Benefits law.

Transition Compensation

Under current law there is no legal entitlement to severance compensation. Only a Cantonal Judge can sentence an employer to pay severance compensation in a dissolution of employment procedure. This also means that, at present, a termination procedure at UWV does not lead to an obligation for the employer to pay severance compensation. In a situation of termination by mutual consent however, parties often negotiate severance compensation, frequently based on the so-called Cantonal Formula (‘kantonrechtersformule’). Social plans are also often based on this formula. Under the WWZ and effective 1 July 2015, employees who have been employed for more than 24 months, gain a legal entitlement to severance compensation, by means of the so-called Transition Compensation (‘transitievergoeding’). The employee is entitled to this compensation if the employment is terminated by the employer after having obtained permission by UWV, is dissolved by a cantonal judge at the request of the employer or in case of a temporary employment agreement ending by way of law which the employer does not wish to extend. The employee is entitled to spend the transition compensation as he sees fit and is not obliged to use it for training, outplacement or other external form of assistance in finding a new job.

Amount Transition Compensation

The current Cantonal Formula (‘kantonrechtersformule’) expires at the effective date of this part of the WWZ, i.e. 1 July 2015. The amount of the (gross) transition compensation (gross) will be calculated as follows:
  • During the first 10 years of employment (‘= during the first 120 months), the employee builds up a transition compensation equal to 1/6th of the monthly salary after each period of 6 months, or 1/3 monthly salary per annum worked.
  • As of the 10th year of employment (= as of month 121), the built-up accelerates to 1/4th of the monthly salary after each period of 6 months, or ½ monthly salary per annum worked.
  • The built-up period of 6 months means a full period of 6 months, no round-up of time worked will be done.
  • The monthly salary for this calculation will consist of the gross monthly salary and other fixed salary components such as holiday allowance, structural overtime compensation, 13th month payments and fixed shift allowance.
  • The Transition Allowance is maximized at (gross) Euro 75,000, or 1 annual salary maximum if the annual salary supersedes the amount of Euro 75,000.
  • In case the employee is 50 years of age or older at the moment of the termination of the employment agreement ánd the employment agreement has lasted at least 10 years, the transition compensation as of the 11th year of employment will be built up on the basis of ½ monthly salary after each period of 6 months, or 1 monthly salary per annum worked. This rule does not apply to small businesses/employers (with an average of less than 25 employees).

Equitable Compensation

Next to the Transition Compensation there can be special circumstances which may cause the Cantonal Judge, as an exception, to award the employee an extra, so-called Equitable Compensation (‘vergoeding naar billijkheid’). The WWZ describes these special circumstances as follows; Dissolution or termination as a result of seriously culpable conduct on the side of the employer If, at an appeal procedure, it is determined that the cantonal judge has unjustly dissolved the employment agreement and the cantonal judge has not sentenced the employer to reinstate the employment Termination of the employment agreement as a result of a reorganization whereby the employer recruits another employee for the same position within 6 months after termination Termination by the employer without a permit from UWV* Termination by the employer in violation of a termination prohibition (such as illness)* Termination by the employer in violation of a discrimination prohibition* In case the employer does not abides by the obligations under the Collective Dismissal Law (‘Wet Melding Collectief Ontslag)*. * In these situations the employee can first have the termination nullified by the judge and thus have his employment reinstated. The equitable compensation will be awarded in case the employee has not done this.

Procedural Changes

  • The employer can appeal the decision of UWV) or the termination committee installed through a collective bargaining agreement) not to give permission for the termination of employment at the Cantonal courts by means of requesting dissolution of the employment agreement.
  • The termination prohibition due to illness of the employee will also apply to termination resulting from economical/financial circumstances of the employer, even if the illness of the employee is indeed proven not to be the reason for the termination. An exception to this rule is only possible in case of company closure.
  • In case an employee does not agree to a summary termination, he must start an actual legal procedure for employment reinstatement within 2 months after the summary termination. Writing a letter to the employer voiding the summary termination will no longer be sufficient.
  • An employee can also appeal the decision of UWV (or the termination committee installed through a collective bargaining agreement) to give permission for the termination of employment at the Cantonal courts by means of requesting reinstatement of the employment agreement. The employee must however be able to prove that there are significant grounds for this request and must file his request within 2 months after the termination date.
  • As of 1 July 2015, a decision by the cantonal judge on a request for dissolution of employment can first be appealed (‘hoger beroep’) at a higher court and second can be submitted to the Supreme Court for reversal (‘cassatie’), provided the procedure is started within 3 months after the cantonal judge’s decision. This also applies in the situation where the employee requested the dissolution of employment, however both procedures can only address the amount of the awarded severance compensation, not the dissolution itself.
  • As of 1 July 2015, the current subpoena procedure will be replaced by petition procedures. This applies to procedures pertaining to termination of the employment, transition compensation, equitable compensation, fines due to untimely notification in temporary employment contracts and non-competition clauses. This change enables the cantonal judge to deal with these matters at the same time.

Most Important Changes – Effective Dates

1 July 2015 Termination ground determines termination route 1 July 2015 Reflection period employee applicable to termination by mutual consent and termination notification with the employee’s assent 1 July 2015 Right to Transition Compensation replaces Cantonal Formula severance compensation 1 July 2015 Next to right to Transition Compensation possibility for cantonal Judge to award Equitable Compensation in exceptional cases 1 July 2015 Possibility for employer to appeal decision UWV not to grant termination permission at cantonal judge 1 July 2015 Termination prohibition during illness also applicable to termination resulting from economical/financial circumstances of the employer 1 July 2015 Employee must start actual legal procedure to reinstate employment against summary dismissal within two months after dismissal 1 July 2015 Employee can appeal termination permission of UWV to reinstate employment at cantonal judge 1 July 2015 Appeal and Reversal procedures possible against cantonal Judge decision if filed within three months 1 July 2015 Petition procedures will replace subpoena procedures For a complete overview of the effective dates of the new WWZ please see: Law Work and Security, Overview Effective Dates