Plans on drastic modification of Dutch dismissal law and the Unemployment Insurance Act
Background and Importance of Reform Plan
On 18 June 2012, the Dutch Minister of Social Affairs and Employment, Henk Kamp, sent a memorandum to the House of Parliament in which he elaborated on the agreements made in the Spring Agreement of the Dutch government with regard to dismissal law and the Unemployment Insurance Act. The intention of these amendments is a substantial reform of Dutch dismissal law. According to the Minister, there is little occupational mobility in the Netherlands. This applies especially to older employees and employees with a permanent contract. This is closely connected to the great extent of protection against dismissal enjoyed by these groups of employees. On the other hand, workers with a flexible contract are much less protected. In addition, on average they earn less, are being trained less, and rely on social security more often. With his proposals the Minister intends to improve occupational mobility and make it more attractive for employers to offer permanent contracts. The Minister also intends to make dismissal law more transparent and to lift the legal inequality that exists as a consequence of the current two routes of dismissal.
The Most Important Elements of the Memorandum in Broad Outline
According to the memorandum of the Minister, in broad outline new dismissal law shall look as follows.
One main route for dismissal:
- The preventive review of dismissal by UWV Werkbedrijf and the Court will disappear. Therefore, an employer may terminate the employment agreement without prior consent.
- As a replacement of the preventive review, before giving notice of termination of the employment agreement the employer will have to inform the employee in writing and hear the employee about the intended dismissal.
- In all cases, the notice period for both the employer and the employee will be two months.
- When the employee disagrees with the dismissal or the dismissal conditions, he may have the dismissal reviewed by the Court. The Court may allow a (higher) severance pay or may reverse the dismissal.
- It is possible to bring an appeal against the judgment of the Court. In these proceedings only the severance pay will be discussed. For instance, the Court may not reverse the dismissal still. It is possible to bring an appeal before the Supreme Court against the judgment in appeal.
- The rescission proceedings pursuant to Section 7:685 of the Dutch Civil Code will only continue to exist for some specific situations, for instance in the event that a prohibition to give notice applies.
- Every employee whose employment agreement is terminated involuntarily is entitled to a transition budget from the employer. This also applies to employees with a fixed-term employment agreement that is expiring. The purpose of this budget is to replace the severance payment.
- The budget consists of a compensation that must be used, in principle, for employee education or an outplacement program.
- The compensation amounts to one quarter of a monthly salary per year of service with a maximum of half an annual salary.
Unemployment Insurance Act:
- The unemployment benefit will be recovered from the last employer for at most six months. The intention of this recovery is that the employer will invest in the employability of the employee.
- It is being examined whether an exception can be made for certain businesses, for instance in the small and medium sized businesses sector.
Because of the importance of the amendments, the current Cabinet wishes to obtain the opinion of the SER (the Dutch Social and Economic Council) and other relevant parties before elaborating the proposals in a concrete bill. It is intended to send the bill to the House of Parliament this fall. It is hard to say whether all proposals will be implemented in the bill and to what extent this bill will have a chance of being adopted. What is clear is that the proposals have already caused quite a stir. Just before the announcement of the Minister's memorandum, a large number of scientists have sent a letter to the House of Parliament to state their objections against the plans formulated in the Spring Agreement. Various trade unions have also turned against the plans. The objections are mainly aimed against the cancellation of the preventive dismissal review. On the other hand, a lot of political parties are aware of the need to modify the outdated dismissal system. At this moment, a bill has already been presented to amend dismissal law, which includes the cancellation of the preventive review. It is the intention of the Minister to incorporate the starting points of his memorandum in this bill and to present it as a new bill. A lot will depend on the upcoming elections. If the parties to the Spring Agreement obtain sufficient seats, it could very well be that in the near future Dutch dismissal law will be amended significantly.
First published in the Kennedy Van der Laan newsletter - July 2012
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