After eight months of experience, the Work and Security Act is not the success it was expected to be. While eight months is a relatively short period to adequately evaluate an Act of this magnitude, it is ominous that the problems anticipated by the experts have materialised so soon. Of course, the best coaches are always in the stands and the political reality is a reality that does not always have an optimal social result, but this cannot discharge any legislator from the obligation to adequately analyse whether a legislative operation, especially of this scope and in a highly sensitive file, will live up to the promises that were made in this respect. Meanwhile, it is generally known that mistakes were made in this context.
As a response to the criticism from the field, Minister Asscher requested everyone to submit concrete proposals to improve the Act. This is a sensible move. As far as I understand it, it is not the objective to put the fundamental starting points of the Act up for discussion, even though the divide between fundamental and non-fundamental is often difficult to make. As an expert and an academic, I will attempt to summarise in which respects the Act is currently inadequate and make concrete proposals how one can improve the Act, without affecting the commendable objectives that the Act pursues: reducing the difference in legal protection between fixed and flexible employment and simplifying dismissal proceedings. Indeed, let us not forget that the idea behind the Act was commendable and that the Act has also taken care of some issues accurately: the equality in protection between groups of employees has increased, the Redundancy Scheme properly deals with the excess of certain forms of flexible employment and the appeal and the appeal in cassation are indicative of legal civilisation – even though they are not loved by everyone. However, there is quite a number of issues that do not work out as well. In this proposal I will not address small inconveniences that are easy to repair. My concern are the three most considerable problems of the current Work and Security Act.
Problem 1: transitional compensation
If the name is an omen of the success of this new compensation, we should have taken the predictions seriously: the transitional compensation does not promote a transition to a different job at all, since it is paid too late to serve this purpose and there is no control of the way in which it is spent. It does not take the question into account whether the employee requires severance pay and if so, to what extent. To put it bluntly, the amount of the severance pay is linked to the duration of the employment contract. This turns it into a form of social security. Although there is nothing wrong with this, we should call a spade a spade and apply this approach consistently (see below). Due to a lack of a proper basis for this purpose – it is no longer possible to financially settle a poor file – employers who have not paid it before are not inclined to pay it now. This partially explains why employers are not looking for less, but instead, more flexible workers: after all, flexible workers are not entitled to a transitional compensation if they are laid off before 24 months. We could dismiss this as reprehensibly opportunistic behaviour, but let us not forget that prior to the Work and Security Act the majority of employers were not used to paying severance pay at all. 60% of the business community can be categorised as SME employers (as much as 99% of all the business should be qualified as SMEs). The majority of these employers opted for the old Employee Insurance Agency route (UWV), which did not involve any compensation. Now all of a sudden employers have to pay, and the why is not clear. It is an illusion to think that employers will increasingly opt for permanent employment contracts. Making it more difficult to conclude multiple fixed-term contracts will not spur employers to decide otherwise.
Solution: integration into the Unemployment Benefit (WW), possibly only (extra) compensation in case of the a-ground
Admittedly, this is going to be my most revolutionary proposal to date, provided that one considers the transitional compensation as a fundamental basis for the Work and Security Act. If we believe that (nearly) everyone is entitled to some or other compensation in case of dismissal, why not just increase the Unemployment Benefit? After all, the Unemployment Benefit is meant to reduce the consequences a dismissal has on the income, of which the transitional compensation is – excusez mes mots – a very watered-down version. In case of the transitional compensation, the waiting period (of two years) is also integrated into the Unemployment Benefit, albeit in a different manner. This might come as somewhat of a shock in decades of near-continuous cuts in the social security system, but the thought is hardly strange. From 1952 to 1965, the Unemployment Benefit entailed 80% of the last earned-wage (after that it was 75% for years). Now we do not live in 1952 anymore, nor do we live in the 1970s either – when some teachers taught their secondary school students how they could obtain their benefits as quickly as possible. I expect that the new pragmatism that we have come to know for the past two decades will ensure that we do not have to fear the mass use and or misuse of social facilities to the same extent as back then. The wind has changed its direction. Furthermore, if this causes the Unemployment Benefit premium to rise, employers will not get up on their hind legs as quickly – the prospect of abolition of the transitional compensation will probably win them over. The payment of premiums is something employers will get accustomed to and is spread over a longer period of time. However an employer in a small-sized enterprise who sees his pension provisions evaporate because he has to pay a number of severance pays is something no employer will ever get accustomed to.
In my view, the only possible (certainly not: mandatory) exception is the situation of collective redundancy, which after all can also be provided because the employer just wants to be mean and lean; i.e. without the company struggling commercially. In such a case, the dismissal can be quite random. Of course, one could, mutatis mutandis, apply similar reasoning to dismissal on personal grounds, but the fact remains that the European legislator has also provided that something extra will be done for the employers in situations of collective redundancy or as the case may be dismissal for economic reasons, as is evident from the formation of the EU directive relating to collective redundancy. Save the (transitional) compensation for that purpose and have the compensation be exactly such a compensation: to stimulate the transition from work to work. In this situation, the Employee Insurance Agency can continue to play its part as a specialist.
Problem 2: the mouse hole – no additional compensation
The (im)possibility of obtaining an additional compensation on top of the transitional compensation, unless a matter of serious culpability is at play, stands out for its charming simplicity. This is what VNO-NCW’s former leader meant when he said that he would leave lawyers’ hands idle just before the Work and Security Act came into force. It is expected that a maximum of a hundred decisions per year would be rendered in which the employee would be assigned such an additional compensation – after all, it had to concern exceptional cases; the possibility of obtaining additional compensation was to be considered a “mouse hole”. Meanwhile we are getting suspiciously close to that number after eight months already, and there is reason to fear that the small escape option will be stretched to the size of a cat flap within the first year. Courts, after all, also allocate this compensation in situations where serious culpability on the employers’ part is still very much the subject of discussion. That is not strange. For ages it has been a custom for judges to award compensations in cases of breaches of contract, regardless of the type of contract that is breached. There is every reason to do so. It offends the sense of justice if an employer who acted properly loses the same amount as the employer who acted insolently, but whose conduct cannot be qualified as seriously culpable, and whose conduct instead qualifies as “culpable”.
Solution 2: remove the word “seriously” and link up with breach of contract
Before 1 July 2015, courts had scope to award damages pursuant to article 7:681 DCC (Dutch Civil Code) – manifest unreasonable termination. To say that this “reached unacceptable levels” would be an overstatement. It is estimated that it concerned a few hundred decisions in which the court took scope to take into the account, for example, the weak position of the employee (the abolished, but still underhandedly appearing in recent court decision, consequences criterion) or “loutish behaviour” of the employer – breach of contract. There is nothing wrong with that. In fact, it was a firmly enshrined dogma in our law of obligations. Abolition was not necessary at all; in general, courts handled it prudently. The problem was the overgenerous awarding of payments at the expense of the employer during the termination proceedings The legislator does not want these problems to return and rightly so. We could choose to reinstate the old Article 681 procedure. For that we do not even have to blow the dust off the old article; the minister could also make it clear that the serious culpability compensation (as far as I am concerned: the only compensation, because I think the transitional compensation should disappear) can be awarded more flexibly. Let me be even more clear: remove the word “serious”. This does justice to both the reality in case law that meanwhile exists and because of that the arrangement of compensation will be more in line with those of other contracts—and this will also satisfy the sense of justice to a greater extent. An option for the one solution or the other could be that the culpability must maintain a connection to the termination (article 7:671 subsection c DCC), so that there is no room to take into account the consequences of the dismissal for the employee.
Problem 3: system of grounds
Obviously, the employment contract is not just any contract; after all the employment contract is of too great an importance for our livelihood. For that reason and on the basis of international conventions, the employer must have a good reason. Easy fire, easy hire should therefore clearly be put into perspective—provided that ILO Convention 158 is taken seriously, that is. However, that does not mean that we should impose a straitjacket on the employer in the form of an exhaustive list of grounds for dismissal. In itself, there is not even that much wrong with those grounds – together with a number of students, I could have thought those up in about half an hour. They appeal to grounds already put forward in practice, with a residual category for cases that cannot be easily categorised (the h-ground). The problem is that the bar is set so high by the legislator before a ground can actually be considered to occur. The minister has repeatedly made it clear that for each of the grounds put forward, at least one ground should be fully substantiated and that a poor file is for the account of the employer – read: this employer cannot dismiss an employee. And that is precisely the crux of the matter: the average employer – and oftentimes even the large enterprise with professional human resources departments – does not always keep a personnel file that is kept up-to-date in accordance with the rules. However, courts that are confronted with such an incomplete file must reject an application for termination. In practice, this seems to happen (much) more often than in the past. The h-ground does not offer solace, because the minister holds that it may only be used very little and it is definitely not intended as a catch-all. This system condemns parties to each other for longer than necessary, especially in the SMEs where suitable reassignment does not and cannot occur as often.
Solution 3: ease the system of grounds or abolish it and replace it by a system with one reasonable ground
Why go beyond ILO Convention 158? Courts are very well equipped to consider whether the employee has valid grounds for dismissal. We can do two things: ease the grounds for dismissal; in particular, the h-ground. The minister can do this with one stroke of the pen. Or abolish them. I have never heard anyone in actual practice say they were really looking forward to these regulations nor have I ever heard anyone sing its praises. Subsequently, the choice is if the preventive assessment by the Employee Insurance Agency (economic dismissal, where dismissal is assessed is the same to me) or the subdistrict court judge (in respect of all other grounds) must continue to exist. I understand that this is a sensitive political subject, but I must remark that a system of preventive assessment is essentially alien to Europe.
The abovementioned large issues can be countered by relatively simple solutions. Two of the three – the return of the doctrine of the manifestly unreasonable termination/ the removal of the requirement of serious culpability and an easing of the grounds/ an open ground for dismissal – factually entail a return to the old situation in which this situation was no problem at all and did not need to be repaired therefore. In my proposals we still get rid of the high severance pays, considerable legal uncertainty, lack of appeal and cassation, unbridled use of flex contracts and the option of buying off protection, matters which luckily enough, belong to the past with the Work and Security Act. The increase of the unemployment benefit – as a trade-off for the lapsed transition compensation – is new, but from a historical perspective it is not remarkable, nor is abolishing the severance pay which after all came into being as a response to the long drawn out completion time of the Employee Insurance Agency procedure in the 1970s, after which it became perceived as a right (which it was certainly not for everyone). In the past it was primarily applied in the case of collective, economic dismissal (later an extension took place), a situation in which I think the transition compensation will be of good service.
What we do not get rid of, however, is the scheme that continues to have its impact in the background, and which indirectly influences the right of dismissal to a large extent: the long obligation to continue to pay wages in case of illness and the connected prohibition of termination (which has now been partially enforced even more than before the Work and Security Act). Although the minister is well aware of the objections, I still remark the following for the sake of the balance of my contribution: said scheme is no longer justified and for an important part it explains why employers do not offer permanent contracts, also where they would prefer this – let us not forget – since every employer aims for loyal employees and continuity in the business operations. If we want dismissal law to actually work, the minister will have to tackle this subject. Moreover: higher premiums (for a new, more expensive Sickness Benefits Act which enters into effect after, say, 12 weeks) will not result in blockades. They will be accepted thankfully in exchange for the abolition of a scheme that is unprecedented internationally and which results in great incomprehension with many employers.