It is no secret that the Work and Security Act (Wet Werk en Zekerheid) has not produced the effects that people had hoped for. While the Work and Security Act was actually intended to have employees advance to permanent contracts more quickly and to make ‘flex’ less ‘flex’, the act seems to produce a different effect in practice. Although the chain provision in the Work and Security Act has been amended, as a result of which contracts attain a permanent status after two years instead of three, the first studies show that employers are not necessarily more inclined to offer permanent contracts after two years. Flex contracts are, to put it mildly, not at all less common than before and the transition to permanent contracts does not improve either.
For this reason, D66 included in its election programme for 2017 a plan to make the gap between permanent and fixed-term contracts as narrow possible. D66 wants to achieve this by using only one type of contract: the employment contract for an indefinite period of time. D66 wants equal security for all employees. Furthermore, D66 wants to get rid of the so-called ‘preventive’ assessment in dismissal law, which, admittedly, exists virtually nowhere else in the world and in the Netherlands does not exist for other forms of contracts either – not to sales contracts, not to rental contracts, etc. According to D66, employers are unsure of the consequences that permanent contracts entail. They often choose to terminate the contract or prefer to look at more flexible constructions after two years, such as self-employed workers without employees, payrolling, contracting and other flex constructions, thereby circumventing permanent contracts. The Work and Security Act has not changed this.
D66’s idea to address this problem, which particularly affects young people, ethnic minorities and less educated people, is in itself not strange or even new. If it works, victory will be glorious. However, many practical questions present themselves when looking at the consequences of such an amendment on our legal order in terms of employment law. A seemingly straightforward amendment may just require an amendment of the dismissal system that is at least as drastic. It would lead us back to the extensive discussion that took place recently, before the Work and Security Act was implemented (Spring Agreement 2012). This discussion between political parties after the Kunduz coalition in the end saddled us with a questionable, possibly even unsatisfactory compromise.
What are the employment-law consequences of the D66?
This is still a matter of conjecture, as the D66 plan has not been fleshed out yet. Taking the current system as a starting point, the preventive dismissal regimen will also apply to these employment contracts once all contracts become ‘permanent’. The case law arising from the Work and Security Act demonstrated that it has not become easier for employers to dismiss employees. There is an exhaustive set of grounds for dismissal and subdistrict courts choose to reject requests for termination more often than before. The motto is to keep employees employed to the fullest extent possible, if need be by means of reassignment or training. Economic dismissal via the Employee Insurance Agency (UWV) requires a lot effort as well and must be applied for by filling out a rather complicated and time-consuming form. The reassignment review, moreover, has a far reach as well and is causing quite some discussion. For these reasons, dismissal cases are settled more often than ever and many cases don’t even make it to the court room. This last part could be regarded as a positive element of the Work and Security Act, but the system does not promote movement in the labour market – especially not towards more permanent contracts, which was, after all, the legislative aim of the Act.
When all contracts are permanent, this rigid dismissal system automatically ensues. It therefore comes as no surprise that D66, in addition to introducing a single type of contract, wants to reform Dutch dismissal law. It wants to get rid of the preventive assessment that requires the prior permission of the UWV or termination by the subdistrict court before employees can be dismissed. D66 wants the procedures in dismissal law to be “shorter and less expensive”. Put simply, it has to be easier, quicker and cheaper to dismiss personnel, so that the permanency of permanent contracts will become somewhat less permanent, which will also promote more movement on the labour market.
D66 therefore advocates an ex-post review of grounds for dismissal, in order to prevent arbitrariness and bulky files – in other words, a “repressive” dismissal system. The question is whether arbitrariness and bulky files will actually be prevented by an assessment afterwards. With a preventive assessment, incurring legal costs is a burden to be borne initially by the employer as soon as a dismissal is on the table. As soon as this assessment is shifted to take place after the dismissal, the employee suddenly becomes the one who has to take action to contest his dismissal and incur costs if he does not agree with his dismissal. Many employees will not have the financial resources to support a legal battle, unless they have a legal expenses insurance. Admittedly, chances are that the number of proceedings conducted might decrease. The question, however, is whether this is desirable and whether it does not promote arbitrariness. We think it conceivable that the risk of arbitrariness, legal disparity and abuse of power by the employer might actually increase in that case. For example, employers can use a ‘skinny’ file to dismiss their employees and take the gamble as to whether or not the employees will challenge their dismissal.
Another problem this system introduces is that employees will leave the service of the employer immediately upon their dismissal, as a result of which reinstatement afterwards will be difficult. Oftentimes, dismissed employees have already been replaced before proceedings have been conducted and a judge has rendered a decision, constituting a “point of no return”. The question that arises, then, is whether an employee will actually get his job back afterwards.
In the short term, the system could possibly be faster and cheaper. After all, the employer can dismiss employees straight away and does not have to incur legal costs prior to the dismissal. The employer should, however, allocate a reserve for potential costs, as it is unsure whether the employee will object to his dismissal. If this happens, the proceedings will not be short at all, as they will be open for appeal, and the files won’t be **less bulky either. As such, that objective of D66 will not be achieved.
According to D66, the accrual of the transitional compensation implemented with the Work and Security Act should start from the first day on the job, demanding that the compensation will be used to guide employees toward new jobs. The former seems reasonable to us, while commenting that employees should only acquire the right after their trial period has ended. The second demand seems unrealistic. The question that arises is what courses employees can take for, say, 1/6 of the monthly salary. It therefore doesn’t seem realistic to add that demand. One could consider introducing a bottom amount, below which one is free to spent the compensation as one pleases. Another, more revolutionary idea is to abolish the transitional compensation altogether. After all, when we look at it realistically, the transitional compensation does not do what it promised it would. In practice, said compensation leads to unequal treatment and considerable discussion.
Flex exists by the grace of permanent
It does sound nice: permanent contracts for everyone. The idea could be successful if the permanency of today’s permanent contract were to become less permanent tomorrow. If this does not happen, employers will keep on looking for ways to avoid the employment protection rules, which are considered rigid by many. It is not a coincidence that the share and number of flex contracts has increased dramatically after more and more rules were added to the permanent contract, which, in the eyes of the employers, were considered rather burdensome. Special reference should be made here to the continued payment of wages in case of illness. This in particular seems to be an element that prevents employers from offering permanent contracts. There is no other country in the world in which employers are obliged to continue the payment of wages in case of illness for up to two years. The Social and Economic Council (SER) is currently working on a plan to shorten this term. D66 proposes that small employers should be able to insure themselves against the second year of illness. This seems to be a step in the right direction, as small employers can be hit especially hard by long-term illness of employees.
Briefly put, the plan that D66 put forward is not new and while it does have some good elements, it has to be worked out in greater detail before it can really be convincing. The abolition of the preventive assessment would signify a revolution in Dutch employment law and the consequences thereof should be analysed thoroughly – the risk of arbitrariness and the legal disparity associated therewith should be taken especially seriously. Other arrangement that render employers less willing to offer the permanent contracts of today should be revised as well. If this happens, the need for flex contracts will diminish. As a result, everyone will indeed be able to obtain that same ‘permanent’ contract.