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Netherlands: Dutch employment rules change drastically: are you prepared?

27/07/2015

As of 1 July 2015, the legal landscape for employers in the Netherlands will change drastically with the introduction of new dismissal rules. Some of the most important changes are outlined in this article.

Employers in the Netherlands were already faced with some changes as of 1 January 2015, one of which was the obligation to inform an employee with a temporary contract in a timely manner that the employer does not intend to continue the employment relationship or in case the employer intends to continue the employment relationship, of the applicable terms and conditions. Recent case law has provided more clarity on the topic. The employer must ensure that it is able to prove that the employee has been notified in writing and that such notification has reached the employee.

Although the Dutch Government is claiming that the changes will provide for more flexibility and lower costs for employers, lawyers and judges all expect the opposite effect. Contrary to the situation before 1 July 2015, employees will be able to challenge termination decisions in appeal procedures in court and with more and more employees taking out insurance coverage for legal assistance, employers fear an increase of legal procedures and legal costs. One thing which all sides agree on is that as of 1 July 2015, employers must ensure that they are well prepared before presenting a case for the termination of an employment agreement to the Cantonal Court or the UWV (a governmental body). The employer is also obliged to substantiate that it has offered sufficient training to the employee and that there is no alternative position for the individual within the group of companies. With our schooling- and replacement tool CMS Netherlands can determine for you whether these
obligations are implemented sufficiently in your organisation.

In the case of a reorganisation the employer can no longer choose to file a dismissal case with the Cantonal Court since only the UWV will be competent to decide in that case whether the employment agreement can be terminated or not. However, in the case of unsatisfactory performance of the part of an employee or conflict with him/her the case may only be presented to the Cantonal Court.

The current non-statutory Cantonal Court Formula which determines the amount of a severance payment in the case of a termination of an employment agreement will be replaced by a statutory transition payment. An employee whose employment agreement has been terminated by the court or by notice following the permission of the UWV is entitled to a transition payment capped at EUR 75,000 gross (or at the yearly income should this exceed EUR 75,000). The latter change seems to be the only upside for employers to the new legislation since it lowers the amount of a severance payment by two-thirds compared to the amount payable under the Cantonal Court Formula.

Another thing to bear in mind is that with the introduction of the new legislation, some of the current articles in the Dutch Civil Code ("DCC") change as well. Article 7:685 DCC for example is cancelled and article 7:669 is introduced. This change is important because in some employment or shareholder agreements reference is made in good and bad leaver terms to the applicability of article 7:685 DCC. We recommend reviewing these terms and, if necessary, amending them to ensure that the current wording is aligned with the new legislation.

The new dismissal rules seem to provide the (appointed) managing director some comfort since failure by the shareholder or the supervisory board to comply with the new dismissal rules could lead to an obligation to pay the managing director damages in addition to the transition payment. Although the position of the managing director is the 'easiest' position to terminate due to the fact that if the corporate procedural steps are followed the employment relationship ends automatically, one needs to bear this in mind when considering such a termination after 1 July 2015.

You will find all topics set out on our website specifically designed to provide you with practical information on the changes to employment law. For more information on the changes, please visit Changes to employment law (http://www.cms-dsb.com/Employment-Pensions/Wet-Werk-en-Zekerheid_en) and contact us for any questions you may have.

Authors

Katja-vanKranenburg-CMS-NL
Katja van Kranenburg - Hanspians
Partner
Amsterdam