UK: HR Law Focus Newsletter 11 July 2013: Dismissals Update

Last Updated: 24 July 2013
Article by Stefan Nerinckx

Dismissals Update: The consequences of 9 July 2013 on the ground

As has been widely publicised, on 7 July 2011, the Constitutional Court issued a ruling which stated that it can no longer be justified to draw a distinction between the treatment of workers depending on whether they carry out manual or intellectual work. The Court gave the protagonists till 8 July 2013 to do away with the inequality in respect of dismissal notice periods and first day of sickness leave.

On 5 July 2013, the social partners –with the help of the cabinet of the Minister of Work - came to produce new regulations in relation to dismissal notice periods and the abolishment of the exemption of salary for manual workers for the first day of sickness leave.

In view of the fact that the new regulations will only come into effect as from 1 January 2014, the consequences of the decision of the Constitutional Court are being pressed for in full by legal practitioners, businesses, HR managers, trade unions and so on as of 9 July. And rightly so! Indeed, the distinction between manual and intellectual workers in relation to dismissal notice periods and first day of sickness leave should have been eliminated by 8 July 2013.

But the Court's decision goes beyond dismissal notice periods and first day of sickness leave. The Court stated in its considerations that it would be inconsistent only to consider the difference in relation to the length of notice periods without taking account of its consequences in other labour law and social security matters, thus indicating that the entire difference between manual and intellectual workers had to be eliminated, including in other matters such as in relation to payment of salary, trial periods, annual holidays, incapacity for work, in-house social elections (separate election colleges) trade union representation, joint committees, separate divisions of the labour courts, and so forth.

Consequences for the future ....

.....for notice periods as from 9 July 2013

If, as of 9 July 2013, a dispute is brought before a labour court regarding the notice period for manual workers, the labour court must disregard section 59 of the Employment Contracts Act. In our view, the labour court will thus be faced with a lacuna in the legislation. The Employment Contracts Act no longer sets out any notice periods for manual workers. This applies not only for the provisions of the Employment Contracts Act but also for notice periods for manual workers set out in royal decrees and collective bargaining agreements.

Faced with the gap in the law, the courts will themselves have to find a solution. However, a court cannot adopt the role of lawmaker and create law itself. On the other hand, the Courts cannot refuse to administer due justice. This means that the Courts will therefore probably themselves have to determine compensation in lieu of notice for manual workers. It is not unthinkable that, as from 9 July 2013, the Courts will apply the rules on notice periods for intellectual workers, as this is probably the only possible solution remaining to them without making law or refusing to administer justice (you can read about the legal reasoning behind this in my article 'Opzeggingstermijnen in de ban van het gelijkheidsbeginsel', Oriëntatie, Kluwer, December 2011).

.... for notice periods as of 1 January 2014

On the 5th of July, only days before the deadline imposed by the Constitutional Court would lapse and after a 27 hour long meeting with the social partners, the Minister of Employment came forward with a compromise with regard to the unification of dismissal notice periods and the first day of sickness leave.

The regulations set forth by this compromise with regard to the unification of dismissal notice periods, which will be of application as from 1 January 2014, can be summarised as follows:

Seniority

Number of weeks

For comparison:
Number of months

1st Quarter

2

0.46

2nd Quarter

4

0.92

3rd Quarter

6

1.38

4th Quarter

7

1.62

5th Quarter

8

1.85

6th Quarter

9

2.09

7th Quarter

10

2.31

8th Quarter

11

2.54

Year 2-3

12

2.77

Year 3-4

13

3.00

Year 4-5

15

2.46

Year 5-6

18

4.15

Year 6-7

21

4.85

Year 7-8

24

5.54

Year 8-9

27

6.23

Year 9-10

30

6.92

Year 10-11

33

7.62

Year 11-12

36

8.31

Year 12-13

39

9.00

Year 13-14

42

9.69

Year 14-15

45

10.38

Year 15-16

48

11.08

Year 16-17

51

11.77

Year 17-18

54

12.46

Year 18-19

57

13.15

Year 19-20

60

13.85

Year 20-21

61

14.08

Year 21-22

62

14.31

Year 22-23

Etc...

63

14.54

Past performances

The agreement provides that the rights build up in the past with the same employer will be treated according to the existing rules (articles 59 and 82 of the Act of 3 July 1978 for agreements entered into before 1 January 2012 and articles 65/1 and subsequent and 86/1 and subsequent of the Act of 3 July 1978 for agreements executed as from 1 January 2012). The question remains what will happen with contracts starting 9 July 2013?

The agreement provides furthermore that manual workers – who in the past had less protection against dismissal - will gradually (measures becoming applicable between 1 January 2014 and 1 January 2017 depending on the seniority build up) receive the same protection as if they would have worked their whole career with application of the new rules.

.... compensating the cost increase....

No negative financial impact for the company: any pecuniary complements to the unemployment benefits (or similar) provided for by the sector of industry (Collective bargaining agreement concluded in the Joint Committee) will be considered part of the termination pay/notice period (and so can in principle be deducted of these).

The budget for the 'termination allowance' for manual workers will be continued (it is not yet clear whether this amount can be deducted of the new notice/severance).

Outplacement will become an entitlement for everyone who has started his 7th year of seniority. As from 6 months notice/severance, the 4 week outplacement is part of the notice period/severance pay (i.e. a 7 months notice is composed of 6 months notice and 1 month outplacement). Employees who have to work during their notice period will have to take the outplacement course during their solicitation days off (if they are entitled to a notice of at least 7 months).

The sectors of industry have a 5 year period to agree on measures to stimulate the integration of employees on the labour market (read stimuli to take up more rapidly a new job); the cost will be born by 1/3 of the notice period or severance pay if the employee is at least entitled to a 6 months notice.

Possible negative financial impact for the company: the contributions to the company's medical (external) service will be reviewed and a special employer's contribution on the amount of termination to pay to the Fund for closing of companies will be introduced (to be used to lower the contributions to the FCC for companies with 20 or less employees).

....but also increasing the cost of dismissal?

Just at a time when the compensation payable upon dismissal of manual workers will rise due to the equality between manual and intellectual workers' statuses for a dismissal on or after 9 July 2013 (and as from 1 January 2014 probably by law), it appears that the government has requested the National Labour Council to issue an opinion (opinion 1856) in connection with a draft royal decree under which all payments due further to termination of an employment contract (including payments made in the context of a non-competition agreement entered into after the end of the employment contract) will be subject to social security payments (with a few exceptions such as the specific compensations for closure and for collective dismissal.). The opinion of the NLC on the draft Royal Decree was divided, but it can nevertheless be expected that certain payments made further to dismissal will be subject to social security. We will keep you updated.

..... grounds for dismissal – developments

In the agreement reached on 5 July 2013 it is stated that the social partners within the National Works Council will have to conclude a Collective Bargaining agreement applicable in principle as from 1 January 2014 which will provide for specific regulations and exceptions in respect of motivation of the termination.

The clock is ticking though.... Indeed, a reference has been made to the ECJ for a preliminary ruling (C-488/12 CJEU) on whether article 30 of the European Union's Charter of Basic Rights, under which all workers are entitled to protection against any form of manifestly unfair dismissal, means that the reasons only have to be stated in the case of an unlawful and unfounded dismissal, the reasons have to be stated in writing at the time of dismissal or whether they can also be communicated later.

.... And exceptions to the proposed agreement items....

Last but not least the social partners will determine the criteria for the sectors falling out of the scope of the new regulations.... (it appears from general press already that the construction sector will negotiate for different dismissal notice periods).

Alternative?

The agreement reached last Friday is still very basic. A lot of legislative work has to be done yet and an awful lot of details have to be discussed still between social partners.

Also, a number of other discrepancies between manual and intellectual workers still need to be addressed, i.e. additional pensions, holidays, payment of salary, ....

Furthermore, in addition to laying down a reasonable notice period, endeavours should also be made towards measures for the encouragement of finding new jobs (quicker), as well as working longer. This comes down to a balanced and very topical exercise in light of the economic crisis, ageing and the battle against excessively low levels of employment.

Watch this space for further follow up....

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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