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Changing employment conditions

When an employer and employee sign an employment contract, both are bound by this contract, including the terms and conditions of employment. So what happens when an employer wants to change the employment conditions that were agreed?

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When to call a lawyer about work

As an employee, you may be confronted with an unpleasant situation at work, such as a conflict, demotion or change in your employment conditions. In such circumstances, it can be difficult to know how to respond. Read more

The seven things you need to check in your new employment contract

You’ve just got a new job, or perhaps you’re extending an existing position. You’ve just received a new employment contract. Before you sign your employment contract, there are some key clauses to which you should pay attention.

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Things to consider when confronted with dismissal

Even though the Dutch economy is growing again, many companies are still dismissing employees. Godelijn Boonman highlights the top 8 things to consider when confronted with dismissal.

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Employment contract: non-competition clause

The non-competition, or non-compete clause is a clause that can be included in an employment contract between employer and employee. This clause states that the employee is forbidden, both during his period of employment and thereafter, to be employed by or associated with a company that performs work or provides similar services to the business of the employer, and that therefore could be in competition with the business of the employer.

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Dutch labour law and your contract of employment

Your employment contract may determine specific payment and work conditions, but Dutch law determines your rights as an employee in the Netherlands. There are a great many Dutch laws that apply, but some are especially relevant to international workers. Here are some expert tips on evaluating your employment contract under Dutch law.

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Employee or contractor? Recent changes in the Dutch business climate

For companies who are deciding to establish an office in the Netherlands, the legal form of the business is important. Equally important are the people who are going to work for the company: does the company want to hire employees or contractors? These two are very different. 

Employee

The three main features of an employment relationship are: that the work is performed personally; for which the employee is paid; and that a relationship of authority exists between employer and employee.

In the Netherlands, the law protects employees. An example of this protection is that an indefinite contract cannot be terminated without prior approval from the UWV (Employee Insurance Agency) or a sub-district court. Also, an employer is always obliged to withhold payroll taxes (loonheffing).

Contractor

As a contractor (or ZZP’er in Dutch), one does not have to perform the work personally. Furthermore, there is no relationship of authority between the employer and the employee. In other words, a contractor works independently.

An agreement with a contractor can be terminated by giving notice. Generally no compensation is due and termination is possible at all times. Another difference is that the company does not have to withhold payroll taxes. Therefore, it is understandable that many companies hire contractors instead of employees. A contracting relationship can be more easily ended and offers more flexibility to the hiring company.

But how can one be sure that the contractor is indeed a truly independent business person? Until May 1 2016, contractors obtained a so called VAR from the Dutch Tax Authorities. If the contractor was in the possession of a VAR, the company could be sure that this person was truly independent and that they did not need to deduct wage taxes and make social security contributions.

Recent changes in the Netherlands

Since May 1 2017, the VAR no longer exists. A new legislation has been introduced, the DBA (Deregulering Beoordeling Arbeidsrelaties) law. The enforcement of this law has been postponed until July 1, 2018.

This law entails the re-assessment of work relationships. It concerns a system of general fixed contracting agreements in order to gain security over the character of the working relationship and check whether it really concerns an independent contractor relationship (and not an employment relationship).

However, another possibility is for the company to submit its own contract for approval by the Tax Authorities. If this contract is approved or if one uses the model contracts, a company can be sure that it will not be liable retroactively for the payment of payroll taxes. But don’t forget: even when using such a contract, a company must make sure that parties act according to an independent contractor relationship and not according to an employment relationship.

Changes for managing directors

The recent changes also apply in the case of managing (statutory) directors: employees but also directors of a company. Do note that the general meeting of shareholders has authority over the managing director, meaning that they mostly work as employees. The general meeting appoints and dismisses managing directors, taking into account the notice period. No prior approval of UWV or a court is necessary in this situation.

Questions?

If you have any questions about hiring an employee or contractor or if you are a contractor with questions about the implications of new legislation about contracts, please contact one of our lawyers or submit your question online.

 

Update article: November 2017.

Place of work determines applicable law

Which national law is applicable when it comes to international employment contracts? Is this the country of the employer, employee, or the country where the organisation is located?

The Rome Convention determines the law applicable to contractual obligations entered into between 1 September 1991 and 17 December 2009. Both this convention, as well as its modernized successor, the Rome I regulation, contain special rules for individual employment and employment contracts.

How is the country of law decided upon?

In first instance, as is laid out in the Rome Convention, the applicable law concerning employment contracts is the law chosen by the parties. However, the employee cannot be deprived of protection in the absence of a choice of law. In the case the parties did not make a choice of law, there are several elements which can determine the applicable law. The Rome Convention incorporates materially the same rule to sub paragraphs a) and b) but it does not prescribe an order between the two.

The contract shall be governed by the law of the country:

a) in which, or from which, the employee habitually carries out his/her work.
b) where the place of business through which the employee was engaged is situated.
c) when it appears from the circumstances that the contract is more closely connected to a country other than that indicated in paragraphs a or b, the law of that other country shall apply (rule of exception).

Modernization by the European Court of Justice
In 2013, in two cases concerning the transport and maritime sector, the court ruled that sub-paragraph b) only becomes relevant when it is not possible to determine the applicable law using the criterion of the place “where the employee habitually carries out his work”. This criterion must be interpreted broadly, which is especially relevant in relation to the transport and the maritime sector, as employees often work in many different countries in these sectors.

Indicators include the place where from the employee embarks the means of transport and whereto he returns afterwards, the place where he takes instructions, where he organizes his work and/or where tools are stored.

Only if these indicators do not allow the determination of the applicable law, does b) apply: the law of the place of business of the employer. Only procedural facts are to be taken into account when determining the place of business, not factors related to the work of the employee. Furthermore, the place of business must have a permanent character.

Killing two birds with one stone
With the ruling above, the court has given an important interpretation to the Rome Convention, as well as to Rome I. Firstly, the Rome Convention is now modernized, as a fixed order must be deemed to exist between sub-paragraph a) and b). Secondly, it seems reasonable that the indicators which are to be taken into account when applying sub-paragraph a) and b) are also applicable in relation to Rome I.

Furthermore, a third ruling is expected, as the Dutch Supreme Court has posed prejudicial questions concerning the rule of exception. Hopefully, this ruling will introduce even more clarity in relation to the Rome Convention and Rome I. To be continued.

Please, do not hesitate to contact us if you have any questions.

Update article: December 2017

 

The choice of law in the employment agreement

When parties conclude an employment agreement, they can agree that this agreement shall be governed by a law chosen by them. Such choice of law applies when the employment agreement is international in nature. When all connecting factors point to one country, the obligatory provisions of that country are not set aside by the choice of law in the contract.

Explicit and implicit choice of law

Usually, a choice of law is explicitly taken up in a clause in the international employment agreement. Nevertheless, a tacit choice of law is also possible. This must be clearly demonstrated by the terms of the contract or the circumstances of the case. Examples of such indications are: a jurisdiction or forum clause, and references to a section of law of a country.

The impact of the choice of law

When the international employment agreement contains a valid choice of law, this does not mean this law actually governs the whole contract.

First of all, the application of overriding mandatory provisions of the law of a country cannot be restricted. Important sections of Dutch law which are considered overriding mandatory provisions are provisions regarding working conditions, working hours, and minimum wage. These provisions apply irrespective of a possible choice of law when the situation falls within the scope of Dutch law.

Second, a choice of law may not deprive the employee of the protection afforded to him by obligatory provisions under the law that would have been applicable to the contract without the choice of law. Most of Dutch labour law consists of obligatory provisions, and, most important, Dutch dismissal law is fully mandatory. This means that even when the law of another country is chosen by the parties in the employment agreement, it is possible that (parts of) Dutch law applies as well.

In conclusion

When no choice of law clause is taken up in the contract, this does not necessarily mean no choice of law has been made. Furthermore, when a choice of law is agreed upon, this does not always exclude the applicability of (parts of) the law of another country.

Not sure about which law applies to the employment agreement? Contact us for advice.

Changes in Dutch employment law

Starting January 2015 a new Dutch employment law will be the source of many changes. This new law will have a large effect on employment contracts. 

Changes in employment law

  • Obligation of notification of termination. One month before the termination of a definite contract of 6 months or longer, an employer must notify the employee whether the employment agreement will be extended. If the employer does not notify the employee, he has the right to claim salary during the period in which the employer is too late. He can claim up to a maximum of one month’s salary. This obligation enters into force on January 1st 2015;
  •  Prohibition of a trial period in fixed term contracts of 6 months or less. This prohibition will be applicable to contracts that will commence after January 1st 2015;
  • Prohibition of a non-competition clause in fixed term contracts (unless the contract specifies the necessity of such a clause in light of severe company interests). Applicable to all contracts that are entered into after January 1st 2015;
  •  The current stipulation, “no labour, no salary”: an employee is not entitled to salary when not performing activities, will change. From now on it will be “no labour, still salary, unless the non-performance is seen as at the risk of the employee”. This change will secure a deviation of the burden of proof in favour of the employee. It is still possible to exclude applicability of this clause for the first 6 months of the contract. However, the exclusion can no longer be extended indefinitely by collective labour agreement.

The current regulation stipulates that an organisation can hire an employee on the basis of fixed term contracts three times and/or for a maximum period of 3 years. Also, the chain is cancelled when there is a minimum period of 3 months and one day between following contracts. As of July 2015 this will be changed. Now, an employment agreement for an indefinite period is established when:

  • a maximum of three contracts is exceeded;
  • the maximum time frame of 2 years is exceeded;
  • and in both of the abovementioned situations there is a period of no more than 6 months and 1 day in between two following contracts.

To sum up: the amount of temporary contracts remains the same. However, the period that those contracts comprise, cannot be more than 2 years. Furthermore, the employer will need a “time-out” of at least 6 months and 1 day to cancel the chain. For example, as of July 1st 2015 it is possible to get a fixed contract of 6 months wich is then extended with another 6 months, to end with a contract of 1 year. A chain of consecutive 1-year-contracts will however result in an agreement for an indefinite period after 2 contracts (i.e. after 2 years).

Termination of employment agreement 

There are various routes for termination of employment agreements, depending on the cause of termination. Termination based on extensive incapability ór economic reasons, must be executed through UWV. Termination based on “personal” reasons, like malfunctioning, disturbed relationship, must be addressed by the Cantonal Judge. Please note this change will leave the possibility of an amicable settlement unaffected.

Also, as of 2015, the employer does not need consent of UWV or the Cantonal Judge in order to terminate the employment agreement once the employee has reached the AOW eligible age.

Irrespective of the termination-route (UWV of Cantonal Judge) the employer will have to pay a “transition compensation” (transitievergoeding). This compensation replaces the severance payment (ontslagvergoeding) and is calculated differently.

The transition compensation is calculated as follows: for every year of service less than 10 years, the employee receives 1/3 of his monthly salary. For every year of service that exceeds 10 years, half of his monthly salary is granted. In 2017, in total a maximum of € 77.000,- applies, unless the employee’s yearly salary exceeds that amount (in which case this higher amount counts as maximum).

The transition compensation is not due in case of severe fault of the employee, for example in case of termination due to an urgent cause. Temporary employees are also eligible for the transition compensation, as soon as the temporary employment relation reaches a period of two years (without renewal/extension of the contract).

  • In case of severe culpability of the employer, a Judge may grant the employee an additional “reasonable” compensation;
  • Given the above, the sub-district Judge formula no longer apply in procedures that are entered into after July 1st 2015. In negotiations on amicable terminations, the transition and possible additional compensation will be leading;
  •  The procedure of “manifestly unreasonable dismissal” no longer exists;
  • In case of amicable termination (mutual consent, settlement agreement), a reconsideration period of 14 days will be introduced on behalf of the employee. Within those 14 days, the employee may withdraw his consent, which leads to continuation of the employment agreement or reopens negotiations. The employer is obliged to inform the employee about that possibility;
  • Obligation to provide education. This stipulation will especially be of importance in cases concerning malfunctioning. The present practice already requires the employer to provide a malfunctioning employee with sufficient tools to improve, but our expectation is that the legal stipulation will be applied more strictly in those circumstances;
  • All termination decisions (Cantonal Judge, as well as UWV) can be appealed in front of the Court of Appeal and the Supreme Court.
  • The Extraordinary Labour Relations Decree 1945 (BBA 1945), is extinguished.

Observation of new regulations

Finally, we would like to make some observations regarding these new and expected changes. Employees can ask for golden parachutes when they negotiate their employment terms. Especially employees who have high salaries and who do not want to be “punished” by only being paid the transition compensation, will want to agree upon a severance upfront.

We expect further complications with regard to the fact that there will be only one route which an employer must take when wanting to terminate an employment agreement. As most cases are not clear cut in the sense that they are either requested because of economic reasons or extensive incapability (which would mean the UWV-route) or personal reasons (meaning the route of the cantonal judge).

Employers will want to prevent having to go to court. Employees can use this to negotiate a higher compensation. We expect that most employers will not want to deviate from the transition compensation calculation, especially because a judge will only grant an additional compensation in case of severe culpability of the employer.

Of course we will keep you informed of developments, such as on transitional law and the relationship between the changes and ongoing collective agreements.

 

Contact

If you have any questions or would like more information, please do not hesitate to contact us.

This article was updated November 2017. 

 

‘It’s my way or the highway’ approach costs employer small fortune

In the unlikely event you are faced with the dissolution of your employment contract because of (alleged) malfunctioning, it is good to know that judges might grant ample compensation when your employer lacks a complete personnel file of malfunctioning and has not given enough opportunity to improve yourself.

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Expat employment contract means temporary contract?

In a 2013 case, a judge in Rotterdam decided that the expatriate employment contract under which a Cape Verdean employee performed work in the Netherlands, was a temporary employment contract. According to the judge, this expatriate employment contract was only a temporary addition to the permanent employment contract, which was concluded on Cape Verde.

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