Below is a discussion in outline of the following topics:
- Notice periods
- Duty of notification of the employer in the event of fixed-term employment contracts
- Special clauses, more specifically the clauses on probationary period and non-competition
- Provisions on succession of fixed-term employment contracts (when is a fixed-term contract converted by law into a contract for an indefinite term)
Termination or setting aside of the employment contract is only possible if:
- there is a reasonable ground, and
- reassignment of the employee to another suitable position within a reasonable period, whether or not after training, is not possible or reasonable (what is known as the ‘reassignment duty’); and
- no prohibitions on termination apply.
The parties must observe the statutory or contractual notice period, subject to payment of a fixed compensation of up to one month’s salary.
The law provides an exhaustive list of reasonable grounds for dismissal. Other grounds than those listed below can therefore not be regarded as ‘reasonable grounds’ for dismissal. The following grounds are prescribed:
- commercial reasons;
- long-term incapacity for work;
- frequent sickness absence;
- inadequate performance;
- imputable acts or omissions;
- conscientious objection;
- damaged working relationship;
- conditions other than those listed in a up to and including g, which are such that the employer cannot reasonably be required to continue the employment contract (‘catchall ground’).
Which procedure for dismissal must be followed, depends on the ground for dismissal. In the event of a reorganization or a dismissal for commercial reasons (ground a) and dismissal for long-term incapacity for work (ground b), permission from the UWV (Employee Insurance Agency) is required.
If the ground for dismissal is associated with the person of the employee (grounds c up to and including h), the matter must be submitted to the subdistrict court.
In by far the most cases, the employment contract ends by mutual consent. In that case, both parties declare that they want to terminate the employment contract. This results in an agreement, which is called a termination agreement or settlement agreement. In the event of termination by mutual consent, permission from the UWV or the subdistrict court is not required.
Both the employer and the employee must observe the statutory notice period in the event of dismissal. The duration of the statutory notice period depends on the total duration of the employment.
- In the event of notice of termination by the employee: 1 month;
- In the event of dismissal by the employer:
- employment less than 5 years 1 month;
- employment 5 years or longer 2 months;
- employment 10 years or longer 3 months;
- employment 15 years or longer 4 months.
The period to be observed by the employee (1 month) can be deviated from in writing. On renewal, however, this period may not be longer than 6 months and, for the employer, not shorter than twice the period to be observed by the employee. For example, if the parties agree a notice period of 3 months for the employee, the notice period for the employer must be at least 6 months.
The statutory notice period to be observed by the employer may only be shortened in that case by a collective bargaining agreement (CBA) or by regulations issued by or on behalf of an authorised administrative body, provided that the period is not shorter than the period to be observed by the employee. In short, it can be agreed in the CBA that the employer and the employee must observe the same notice period (e.g. both 3 months).
Duty of notification in the event of a fixed-term employment contract
The employer that has concluded a fixed-term employment contract with an employee with a term of six months or longer, must no later than one month before the end of the employment contract (provided that the end is set on a calendar date) inform the employee in writing (i) whether or not it wants to continue the contract and if it wants to continue the contract, (ii) on what conditions. This duty also applies in the event of successive fixed-term contracts with a term of six months or longer.
A failure to comply with the duty of notification, or late or incomplete compliance, is subject to various sanctions:
- if the employer has not informed the employee in any way at all of whether it wants to continue the contract (under i), it must pay the employee one month’s salary;
- if the employer informs the employee late, it must pay the employee one day’s salary for each day it is late with this information;
- if the employment contract is continued without the employer having fully complied with its duty of notification (under i or ii), then contract is continued for the same term, but no longer than one year, on the old conditions. So if an employer wants to continue an employment contract, but on changed employment conditions, it is important that it communicates this in good time.
If an employer fails to comply with the duty of notification, the employee can bring a claim for payment of the salary due before the subdistrict court within two months after expiry of the employment contract. The duty of notification does not apply to fixed-term employment contracts that do not stipulate a fixed end date (for example, an employment contract to replace a sick employee or for the duration of a project).
Employees are entitled to the statutory transition payment if:
- the employment contract has lasted at least 24 months (this requirement will disappear when the Balanced Labour Market Act comes into effect; from then on, employees will build up the right to a transition payment from the start of their employment contract, including during the probationary period);
- termination has taken place on the initiative of the employer, unless the termination is the result of serious imputable acts or omissions on the part of the employee, or
- termination has taken place on the initiative of the employee as a result of serious imputable acts or omissions on the part of the employer.
This applies both to termination by notice (with the consent of the employee or the permission of the UWV), setting aside (by the subdistrict court) and to not continuing a fixed-term employment contract.
The build-up is as follows:
|A||years of service x multiplying factor (rounding is downward), in which:
first 10 years of service = each period of 6 months = 1/6 of the B-factor (= 1/3 of the B-factor per full year of service)after 10 years of service = each period of 6 months = ¼ of the B-factor (= 1/2 of the B-factor per full year of service)exception = up to 1 January 2020, employees of 50 years and older with at least 10 years of service build up a transition payment of ½ of the B-factor per period of 6 months after their 50th birthday (= 1 B-factor per full year of service).
|B||Gross monthly salary increased by a number of fixed and agreed salary components, such as holiday allowance, 13th month, structural overtime pay, fixed shift allowance, fixed profit share or bonus (granted on an annual basis). It does not include the employer’s contribution to the pension, company car, expense allowances, the employer’s contribution to the health insurance premium and incidental salary components.|
|Max||The maximum transition payment is €81,000 gross (maximum for 2019) or one year’s salary (if > €81,000). The maximum amount is indexed each year.|
After the coming into effect of the Balanced Labour Market Act, the build-up will throughout the duration of the employment relationship be 1/6 of the monthly salary per period of 6 months (so 1/3 monthly salary per full year of service). Furthermore, employers will be compensated for making the transition payment, if they dismiss an employee after two years’ sickness
The employer must pay the transition payment to the employee no later than one month after the day on which the employment contract ended. From that time, statutory interest is due on the amount of the transition payment. If the employer does not pay the transition payment or pays a transition payment that is too low, the employee may bring a claim for payment of the transition payment before the subdistrict court within three months after the day on which the employment contract ended.
On top of the transition payment, fair compensation may be due. This is the case if the employer has committed a serious imputable act.
A special form of termination is termination during the probationary period. The employer and the employee can agree a clause on a probationary period in the employment contract. During the probationary period, the parties are free to terminate the employment contract with immediate effect, without applicability of the normal dismissal rules, provided that this does not involve discrimination and the standards of good employment practices apply.
A probationary period must be agreed in writing and is subject to statutory maximum periods, as follows:
- no probationary period is allowed in an employment contract for a fixed term of six months or shorter;
- 1 month is allowed in an employment contract for a fixed term of longer than six months but shorter than 2 years;
- 1 month is allowed if the end of the fixed-term employment contract is not set on a date
- 2 months is allowed in an employment contract for longer than six months or a contract for an indefinite term.
The probationary period for the employer and the employee must always be of the same length. A clause on a probationary period in which the above conditions and periods are not observed, is invalid. In that case no probationary period applies.
Incidentally, it is possible to deviate from the statutory provisions in a way unfavourable for the employee by CBA. However, agreeing a probationary period of longer than two months, probationary periods of different lengths for the employer and the employee or a probationary period in an employment contract for six months or shorter is never allowed.
Incidentally, the proposed Balanced Labour Market Act allows for a probationary period of up to 5 months if an employer immediately offers an employment contract for an indefinite term. For employment contracts entered into for more than two years, the probationary period is extended to 3 months. This will bring the Dutch legislation in line with that in the surrounding countries.
It is no longer possible to include a non-competition clause in fixed-term employment contracts concluded on 1 January 2015 or a later date, unless the clause is necessary because of substantial business or service interests.
If an employer nevertheless wants to include a non-competition clause in a fixed-term employment contract, then it must explain in writing which interests are at stake and why those (substantial) interests make it necessary to include the non-competition clause. Case law shows that the employer cannot confine itself to general generic wording, but must tailor the explanation to the person and position of the employee. The same applies to the inclusion of a non-solicitation clause.
This can lead to the following scenarios:
- the substantiation of substantial interests is lacking: the clause is void (not valid);
- the substantiation is included, but the court finds that the clause is not necessary in view of the interests stated by the employer: the court sets aside the whole clause;
- the substantiation is included, but the court finds that the employee is unduly prejudiced by the non-competition clause relative to the employer’s interest in maintaining the clause: the court sets aside the whole or part of the clause.
Provisions on succession of fixed-term employment contracts
The provisions on succession of fixed-term employment contracts regulate when the last fixed-term contract in a series must be converted into an employment contract for an indefinite term.
The current provisions on succession of fixed-term employment contracts provide that a fixed-term contract can be extended twice (so three fixed-term contracts in total), but the total duration of the series is limited to 2 years. A new series starts only after there has been an interruption of six months (or longer). If the employer remains within these limits, the fixed-term employment contracts always end automatically. However, a contract automatically becomes a contract for an indefinite term:
- when the successive fixed-term contracts exceed the period of 2 years; or
- when a 4th fixed-term contract is concluded.
The provisions on succession of fixed-term employment contracts also apply in the event of what is known as a successive term of employment, on the understanding that in that situation not only fixed-term contracts are counted for the series, but also contracts for an indefinite term. There is question of a successive term of employment, if the employee concludes an employment contract with another employer for (virtually) the same work, requiring the same skills and responsibilities from the employee. If the employee enters the employment of a new employer entirely on his own initiative, then according to the Minister, there is no question of a successive term of employment.