On March 8 2013 the Dutch government, which has been in power since November 2012, started negotiations with the unions and employer representatives to reform key aspects of the employment legislation. This update considers the main changes proposed by the government in its coalition agreement, with a focus on the dismissal system.

The Dutch dismissal law is known for its dual system, which enables the employer to dismiss an employee either if it has been granted a permit by the UWV WERKbedrijf (the public employment service), or through the termination of an employment agreement by the subdistrict court. The coalition agreement proposes to abolish this dual dismissal system and to replace it with a preventive review of a dismissal by the UWV. Although the employer will be obliged to obtain advice from the UWV, it may decide to ignore such advice and make a different decision. In order to speed up the process, the proposal requires the UWV to provide its advice within four weeks of request. However, given the current processing time of UWV, it is highly unlikely that this is feasible. The preventive UWV test will not apply if an equal procedure is provided for in a collective labour agreement, provided that it is similar in terms of content and duration.

If, after receiving the advice, an employer terminates an employment agreement, the employee may contest the dismissal at the cantonal court, which will take into account and attach major weight to the UWV’s advice. If the cantonal judge concludes that the dismissal was unfair, or if the judge believes that the dismissal was mainly attributable to the employer, it may award a severance payment to the employee. The severance payment will be calculated on the basis of half a month’s salary for each year of service, with a maximum of €75,000 (presumably gross). This maximum is disadvantageous for older employees. Only if the employer has dismissed the employee despite the UWV recommending against it may the judge decide to reinstate the employee in his or her previous job. As such, this would not be the case in the event of a dismissal on the spot. Even if the judge deems the dismissal to be unfair, no reinstatement seems possible. The judge’s decision cannot be appealed.

The employer can still revert to the subdistrict court for the termination of an employment agreement, but only if:

  • there is a prohibition on termination; or
  • the employer intends to terminate a fixed-term contract that does not provide for early termination.

In case of an ‘involuntary dismissal’ (including a dismissal for economic grounds) or if a fixed-term contract of at least one year is not renewed, the employer will also have to pay a transitional sum to the employee, which the employee may use only for job-related educational purposes. The extent of the budget is calculated on the basis of a quarter of a month’s salary for each year of service, with a maximum of four times a month’s salary, unless the payment of such transitional sum will lead to the employer’s bankruptcy.

A further proposed change deals with the principle of proportionality, which requires employers to dismiss their employees proportionally in terms of their age. The proposal maintains this principle, but states that it can be deviated from if agreed in a collective labour agreement. This provides the employer with a key instrument to deviate from the existing system, which is sometimes seen by employers as inflexible and leading to unworkable results.

In addition to the reform of the dismissal system, the coalition agreement proposes to reform the unemployment benefits system. The period in which unemployed people will receive income supplements will be limited to 24 months. During the first year, the unemployment benefits will be linked to the person’s last salary, while in the second year the benefits will be 70% of the legal minimum wage. The employer’s premium will be augmented. The government announced that it will investigate the possibilities for premium differentiation on the basis of good employment standards. It is unclear how this should work in practice. Finally, the definition of ‘suitable labour’ will be tightened up; after six months, all forms of labour will be regarded as being suitable – this will have severe consequences for unemployed people.

Further, the Participation Act has been announced. In future, 5% of the workforce of companies employing 25 or more people will have to comprise people with an occupational disability.

The government is trying hard to introduce its proposed measures, but it faces serious opposition. Although the coalition partners have a majority in Parliament, they do not have a majority in the Senate, through which legal reforms must also pass. Moreover, the government has indicated that it aims to obtain the consent of the unions regarding its plans. However, the unions have been highly critical, stating that they will not support the plans as proposed. Therefore, it is highly likely that the proposed measures will be amended before becoming law.