There is only one employment agreement under Dutch law, which is regulated in Book 7, title 10 of the Dutch Civil Code (DCC). If a labour relation between a natural person and an organisation fulfils certain criteria, that relationship automatically qualifies as an employment agreement and, consequently, the worker has the status of an employee. Although there is only one employment agreement, there are certain sub-types to which other rules apply with respect to certain elements of the employment agreement, ie agency work employment contracts and the payroll employment agreements (the latter will come into law as of 1 January 2020).
Directors are also considered to be employees with an employment agreement (this is different for directors of listed companies; they are obliged to work on the basis of a management agreement). Their status differs from the status of other employees with respect to dismissal law.
Successive Fixed-term Employment Contracts
Any employment agreement, whether a normal employment agreement or one of the sub-types, can be agreed for a definite period of time, for the duration of a project or for an indefinite period of time. The parties are free to choose which contract suits their needs.
A fixed-term employment agreement between an employee and employer can be concluded for any period of time, eg three months, five years etc; however, the possibility to conclude consecutive fixed-term employment contracts is restricted. In principle, the last employment contract between the parties is converted into a permanent employment agreement (the so-called ‘chain regulation’) when: (i) more than three consecutive fixed-term contracts have been entered into and the gap between each consecutive contract is equal to six months or less or (ii) the repetition of consecutive fixed-term employment contracts exceeds two years (three years as of 1 January 2020) and the gap between each consecutive contract is equal to six months or less. An employer is considered to be a ‘successive employer’ if an employee is hired by this employer and the employee continues to perform the same (or nearly the same) work as he or she performed for his or her former employer. Whether an employer is considered to be a successive employer is also relevant for the allowed trial period, the statutory notice period and the amount of transition payment upon dismissal.
Part-time Employment Contracts and On-call Employment Contracts
There is no specific legal definition for a part-time worker. There are no specific limits on the use of part-time workers and also no mandatory requirements for employment contracts specific to part-time employees. Employers are not allowed to discriminate between employees based on differences between working hours unless such discrimination can be objectively justified. Conditions of employment have to be applied pro rata, unless it is infeasible or discriminatory to do so (eg the working hours an employee is allowed to spend on obligatory training); therefore, part-time workers are entitled to pro rata equal pay, social benefits, paid holidays and leave.
Another contract option is an on-call employment agreement in which parties do not agree on the working hours (a zero-hours employment contact) or only agree to a certain minimum or maximum (or both) number of working hours. In an on-call employment agreement, the parties can agree that during the first six months of the employment agreement the employee will only receive wages for the hours he or she actually works. In collective labour agreements other rules may apply with respect to on-call employment.
Formal Requirements for Employment Agreements
Dutch law does not require that an employment agreement must be concluded in writing. However, some terms of employment do have to be put in writing, eg probationary periods and a non-competition clauses. The employer has to provide each employee with a written or electronic statement containing a specific list of particulars within one month of commencing work (Article 7:655 DCC). However, it is common practice to put most of these particulars in an employment contract. For particulars that are specified in an applicable collective labour agreement or a scheme made by or on behalf of a competent administrative authority, it is sufficient to refer to that agreement or scheme.
The Working Hours Act (Arbeidstijdenwet) provides, among other things, for rules relating to the maximum number of working hours, minimum rest periods, overtime, shift work and night work. The rules about working hours are specified in the Working Hours Decree (Arbeidstijdenbesluit). The Working Hours Decree sets out, inter alia, that most working hours regulations do not apply to workers with a salary exceeding three times the minimum wage. Further, the Working Hours Decree provides additional regulations with regard to healthcare, mining and a number of other sectors. If employers do not comply with some of the rules, this may result in administrative fines or criminal sanctions.
Maximum Working Hours
Under the Working Hours Act, employees are allowed to work for a maximum of 12 hours per day or 60 hours per week (overwork included); the average working hours per week over a 16-week period may not exceed an average of 48 hours or an average of 55 hours over a 4-week period. The normal weekly hours usually vary between 36 and 42. Deviation from these rules shall only be valid if provided for in a collective labour agreement and provided that the works council has given its consent.
In general, employees must have eleven successive hours of rest after each working day, which can be reduced to eight hours with thirty-six successive hours of rest once in a week or seventy-two hours every two weeks if the nature of the work or the company circumstances permit. The legislator introduced this exception for companies that work in shifts where, due to technical reasons, it is not possible to interrupt the production process. This exception enables companies to (i) facilitate the change of shifts and (ii) cope with unforeseen circumstances which lead to overtime, without the necessity to move the starting time of upcoming shifts.
Shift Work and Overtime Work
Overtime or shift work pay is not regulated; rules on additional compensation can usually be found either in a collective labour agreement, if applicable, or in the employment agreement. In case no such agreement has been made, employees are entitled to the statutory minimum rate of pay for overtime work or additional time off from work with pay in accordance with, at a minimum, the statutory minimum rate of pay.
It is common practice that the remuneration of higher paid employees is inclusive of compensation for overtime. Contracts for highly paid employees generally include a clause in the employment contract which expressly states that the employee is not entitled to compensation for overtime work.
Minimum Wage and Holiday Allowance
The minimum wage rates are reviewed twice a year – in January and July. The rates are based on a full-time working basis. According to the Minimum Wage and Minimum Holiday Allowance Act, all employees between the age of 21 and 65 are entitled to the minimum wage. The minimum wage does not apply to emoluments such as holiday allowances and year-end bonuses. For employees aged between 15 and 20, the statutory minimum wage applies and is calculated as a percentage of the wage applicable to workers aged 21 years and older.
All employees, regardless of their age, are entitled to a statutory minimum holiday allowance of 8% of their gross annual wage. Benefits such as year-end bonuses and other bonuses are not included when calculating the employee’s holiday allowance. Overtime payments are included when calculating the employee’s holiday allowance since overtime payments have to be paid in accordance with the minimum wage.
If the employee’s salary exceeds three times the minimum wage, the employer and the employee can agree that the holiday allowance is included in their salary and will not be paid on top of the salary.
Collective Labour Agreements and the 13th Month
Most collective labour agreements (CLAs) provide for wages that exceed the statutory minimum wage and are automatically indexed every year. The employer and the employee can agree on a salary which is higher than the minimum provided for in the CLA, unless this is prohibited by the CLA (although uncommon – known as standard CLAs). The statutory minimum wage can only be paid by bank transfer; cash payments are not allowed. If the employer fails to do so, he may be subjected to a fine.
There is no statutory right to a 13th month pay nor are there any rules that regulate such pay. Nevertheless, a CLA may provide for a 13th month allowance.
In principle, there are no legal provisions for determining a bonus. However, some normative provisions may be relevant, such as ‘good employment practices’, which means that the employer must behave like a good employer. This standard can also be applied to the determination of the bonus policy and the granting of a bonus.
Although there is no specific legal provision for ‘entitlement to a bonus’, an employer may still be obligated to pay a bonus if such an agreement is included in in the employees’ employment contract or in a CLA.
If no such agreement has been, the employer has discretionary power to decide whether a bonus will be paid. An exception to this rule may apply if bonuses have been paid over a long period of time, ie a number of years. According to case law, it could be argued that such bonus payments can be considered a so-called ‘acquired right’. This means that the arrangement has become part of the employment contract, the continuation of which the workers can reasonably rely on.
Government Intervention in Compensation
There are two sectors in which the ability to remunerate employees is limited: the public and semi-public sector and the financial sector. Salaries of senior officials in the public and semi-public sector cannot exceed those of government ministers. The exact amount is set each year, eg in 2019 the limit is €194,000. There is also a standard which applies to senior officials’ redundancy payments.
The legislation for the financial sector prescribes, among other things, that:
According to Dutch law, employees are entitled to a minimum annual vacation period, which is calculated by multiplying the number of working days per week by four. Employees who have not been employed for a full year are entitled to a number of vacation days based on a pro-rata calculation. Public holidays are not included in the amount. Therefore, a full-time employee who works five days per week is entitled to at least twenty holidays for which regular wages paid. However, employees are often granted more vacation days under a CLA or based on individual employment contract provisions.
The statutory holidays must be taken within a six-month limitation period, unless the employer and employee have agreed to extend this period. If employees were reasonably unable to take holidays, for example in the case of full incapacity to work, the outstanding holidays will lapse after five years instead of six months. The six-month limitation period does not apply to holidays exceeding the statutory minimum. Provided that the employee maintains the statutory minimum holiday entitlement, sick days can be considered as holidays if the employee agrees.
The employee and employer will decide together on which date the holidays shall be taken in accordance with preferences of the employee, unless major causes prevent this. The request of the employee can only be rejected if the employer puts forward good reasons (subject to a high threshold as evidenced by case law) within fourteen days.
The Netherlands has a number of generally recognised public holidays: New Year’s Day, Good Friday, Easter, King’s day, Liberation Day, Ascension Day, Whitsun and Christmas.
Although it is common in practice, there is no legal right to extra pay for working on a public holiday. Whether employees are entitled to public holiday leave is indicated in the individual employment contract, the CLA or the personnel manual. If this is the case, these days may not be deducted from the total number of statutory holidays.
Other Types of Leave
Besides annual leave, there are various other types of leave: pregnancy leave, maternity leave, adoption and foster care leave, paternity/partner leave, parental leave, sick leave, short-term care leave, long-term care leave and leave with respect to an emergency.
Confidentiality and Non-disparagement
Dutch employment law contains a provision (Article 7:611 DCC) which states that the employee must behave like a 'good employee' during the course of his or her employment. This standard may lead to a duty of confidentiality whereby an employee may not disclose or use confidential information belonging to the employer; the scope of this article is broad and applies to all information that may cause damage to the employer if disclosed. Even if the employer and employee have not explicitly agreed to this, this obligation also applies after the termination of employment, as demonstrated by case law.
It is common practice to include confidentiality clauses in individual employment contracts. This enables employers to claim contractual damages in the event of a breach of confidentiality obligation. To that end, employers may establish a confidentiality policy that lays down the rules governing the use and disclosure of information.
In addition to standards of good employment practice, the duty of confidentiality is also be derived from Article 7:678(2)(i) DCC. It follows from this article that a violation of this obligation may provide a valid ground for immediate dismissal. According to Article 6:162 DCC, a violation of this obligation could also be seen as a wrongful act.
The Trade Secret Protection Act contains several ways in which to obtain recovery from those who unlawfully contravene trade secrets, such as allowing trade secret holders to take legal action and to claim compensation subject to certain circumstances.
The general rule for employee liability is laid down in Article 7:661 DCC: an employee who, in the performance of the employment contract, causes damage to the employer or to a third party to whom the employer is obliged to compensate such damage shall not be liable to the employer for this unless the damage was a result of his or her intent or deliberate recklessness. Article 7:661 DCC has to be read in conjunction with Article 6:170 DCC, which stipulates that the employer is liable for the fault of subordinates who cause damage to a third person, provided that the fault was made during the performance of the subordinate’s duties.
Contract for Definite Period of Time
In principle, non-competition clauses cannot be included in fixed-term employment contracts. However, such a clause may only be allowed if it is justified by a compelling business interest. In that case, the employer has to explain in writing to the employee, by means of a clause in the employment contract, why the clause is necessary. This clarification has to explain, as comprehensively as possible, why the employee could prejudice the employer’s market position if he or she goes to work for a competitor or keeps in contact with his or her former employer's clients. If the employer does not provide such an explanation, the non-competition clause is null and void. An employee may submit a request to the court to partially or completely annul the clause if he or she believes that the stipulated reason insufficiently substantiates the necessity for the non-competition clause.
Contract for Indefinite Period of Time
A valid non-competition clause in an indefinite period of time employment contract must be made in writing and signed by both parties. In addition, the employee has to be 18 years or older. However, a court may determine the employee is unfairly prejudiced by such a restraint and may (partly) annul the non-competition clause (eg with respect of its term).
The court will weigh all of the interests put forward by the parties, such as the interest of the employer in protecting sensitive business information and a reasonable fear of harm. The improvement of the position of the employee, such as better employment conditions or the ability to find new employment, may be considered typical interests of an employee. The burden of proof falls on the employee; however, it can be concluded from case law that a non-competition clause entered into for the period of more than one year, is generally considered unreasonable.
In principle, an employer does not have to pay any form of compensation during the period the non-competition clause is in force after termination of the employment contract. Nevertheless, a court may order an employer or ex-employer to pay damages to the employee upon his or her request if the effect of the restraint is such that it restrains the employee from working to a significant degree. The sum of the damages awarded will be what the court deems equitable in the light of the circumstances of the case.
In most cases, an interlocutory injunction is awarded in respect of violations of restrictive covenants by employees. The court may, for instance, restrain the employee from taking up a job with a competitor of his or her former employer or from soliciting his or her clients. In addition, the employer can claim compensation from the employee, although it is not easy to prove that financial losses were caused by the employee’s violation of the covenant. Therefore, it is quite common for employers to agree on a damages clause with the employee, which is triggered by a breach of the restrictive covenant (the employer does not have to prove that actual damage occurred).
Non-solicitation of Customers
Non-solicitation of customer clauses are deemed to be a form of a non-competition clause. The above-mentioned rules apply to non-solicitation of customers. In general, a restraint period for a maximum of 12-months will usually be deemed acceptable. Subject to the circumstances, non-solicitation of customer clauses may also cover prospective customers. It is not required that the employee must have effective contact with the customers for the clause to be enforceable.
Non-solicitation of Employees
Non-enticement/non-solicitation restraints are capable of enforcement and, moreover, are customary. In general, Article 7:653 of the DCC does not apply to this type of restraint as it is not deemed to impact the employee's freedom to work. As such, employers have, in principle, a reasonably wide discretion to enforce the restraint. However, in exceptional cases, a court may come to the conclusion that the restraint does in fact impact the employee’s freedom to work; recent case law shows the restraint may nevertheless fall within the scope of Article 7:653 DCC, eg when the employee is a recruiter (and in that case the above-mentioned rules in 2.1 Non-competition Clauses apply). In principle, no compensation is chargeable in relation to this type of restraint.
The General Data Protection Regulation
On 25 May 2018 the General Data Protection Regulation (GDPR) was implemented in all European countries and the Dutch GDPR Implementation Act came into force in the Netherlands. The GDPR replaced the Dutch Data Protection Act (Wet bescherming persoonsgegevens).
Under the GDPR, member states may provide for further specific rules on privacy in the context of employment (Article 88 GDPR). However, Dutch legislators have not, as yet, availed themselves of this provision, but the introduction of a bill introducing such provisions has been announced for the near future.
Under the old regime as well as under the GDPR, personal data may only be processed on the basis of one of the legal grounds as provided for by Article 6 of the GDPR. The GDPR requires, among other things, that data controllers (such as employers) have to keep a register of all processing activities so that the supervisory authorities may be provided with relevant information upon request.
In the case of a personal data breach, the data controller shall notify the Dutch Data Protection Authority (Autoriteit Persoonsgegevens) without undue delay (not later than 72 hours after having become aware of the data breach), unless the data breach is unlikely to result in a risk to the rights and freedoms of the data subjects. Although there is no general standard included in the GDPR, as a general rule it is important that data should not be kept longer than is necessary for the purpose the data was compiled. Furthermore, there are certain data retention periods included in, among other regulations, tax laws.
Consent by Works Council
In order to provide a standard for a selection procedure that is both fair and transparent, The Dutch Association for Personnel Management and Organisational Development (Netwerk voor HR-professionals, ‘NVP’) has set up a code in collaboration with the Dutch Labour Foundation (Stichting arbeid). This code is available in English on the NVP website.
As a rule, both a work and residence permit is required for foreign workers. This requirement does not apply to EU member states, the European Economic Area (EEA) and Switzerland. Both the work and residence permit shall be applied for by the employer (the organisation for whom the work is actually being carried out) and issued by the Immigration and Naturalisation Services (Immigrate- en Naturalisatiedienst, ‘IND’).
A residence permit will be granted after several conditions have been met and, usually, after a work permit has been granted. A residence permit is obligatory for foreign nationals who want to reside in the Netherlands for a period exceeding 90 days for a specific purpose, such as work, study or family reunification. In most cases, an employee who wishes to obtain a residence permit must first apply for an entry visa (Machtiging voorlopig verblijf, ‘MVV’), although this is not required for nationals of EU member states, the EEA states or Switzerland, the US, Canada, Australia, New Zealand, Japan, South Korea, Monaco and Vatican City.
Work permits are required for regular employment, part-time employment, jobs aimed at gaining work experience, training on the job and voluntary work. The employer has to prove that no EU workers were available to do the job before a permit can be granted. There are some exceptions. In some cases, a work permit is not required in the following situations:
Mandatory Employment Law
In general, it is not necessary to conclude a Dutch employment contract with a foreign worker who habitually works outside the Netherlands; however, when a foreign national works in the Netherlands, certain requirements of Dutch employment law apply, regardless of which law is applicable to the employment agreement. Certain provisions in Dutch law and, if applicable, in a collective labour agreement that has been declared as generally binding apply to the employment agreement of each employee who works in the Netherlands. These provisions concern:
When a foreign employee begins work in the Netherlands, the (foreign) employer is required to register as a withholding agent with the tax authorities for wage taxes and, if applicable, social security contributions (including the employer’s contribution to health care insurance). If none of the employees are subject to tax and or covered by Dutch social security legislation, such a registration is not required.
The following conditions have to be met before the employee can begin work:
The interests of individual employees or groups of employees may be represented by trade unions. Trade unions are particularly important for representing the collective interests of employees in particular industries or sectors. They negotiate with a specific (large) employer or with one or more employers' associations, and possibly other trade unions, on the collective terms and conditions of employment required to conclude a CLA, which may apply on a company-level or industry wide. In addition, trade unions may assist in the negotiation of redundancy schemes and advise on forced redundancies within organisations. Furthermore, unions have the power to deviate from some of the statutory employment laws in a CLA.
Companies with 50 employees or more are obliged to establish a works council comprised of elected employees. If a company fails to comply with this obligation, every interested party, whether an employee or trade union, may initiate court proceedings in order to have a works council established.
The works council has a number of rights and obligations, the most important of which include the following:
A company that has established two or more works councils may set up a central works council or a group works council, provided that this is conducive to the proper application of the Works Councils Act (Wet op de ondernemingsraden) with regard to those enterprises.
Employee Representative Body (PVT)
A company that maintains an undertaking in which there are at least ten but fewer than fifty persons employed and no works council has been set up, the organisation may be required to establish an employee representative body consisting of at least three persons directly elected by secret voting.
The Collective Agreements Act (Wet CAO) states what is to be understood by a collective labour agreement (CLA) and who is authorised to conclude one. CLAs are agreements made between one or more trade unions and one or more employer organisations. CLAs regulate many different aspects of the employment relationship, such as wages, working hours, pension schemes, holiday entitlements and social issues.
There are two different types of CLA. If the CLA has a minimum character, it is permitted to differ from the CLA in a company scheme or individual employment contract in a way that is favourable to the employee. However, deviating agreements that are disadvantageous to the employee will be declared null and void. If the CLA has a standard character any deviating terms are null and void.
If the employer is a member of an employers’ union that concludes a CLA, it has to apply the terms of the CLA to its own employees. Furthermore, a CLA can be declared binding by the Minister of Social Affairs and Employment upon the request of the parties to a CLA. This means that the CLA is declared applicable to the entire sector, regardless of whether or not the employer is a member of an employers’ association that was party to the CLA. If the activities of the employer fall under the scope of the CLA, the employer has to apply the terms of the CLA within the company.
Termination of an Employment Agreement
The termination of an employment contract must comply with certain statutory rules which provide far-reaching protection for employees. Dutch law provides for a system of a priori control of dismissals.
A fixed-term employment contract terminates, in principle, by operation of law, as per the expiration of the agreed period without notice being required. However, the employer must inform an employee with a fixed-term contract in writing, at least one month before the contract expires, whether the contract is to be continued or not and on what terms. If the employer does not do so, the employee is entitled to compensation equal to one month’s salary.
In principle, indefinite term employment contracts may only be terminated if the employer has a reasonable ground for dismissal. An employer also needs a reasonable ground for dismissal if he or she wishes to terminate a fixed-term employment agreement prematurely. An indefinite term contract can be terminated by:
In case of dismissal for economic reasons or long-term illness (more than two years), the employer has to submit a request to the UWV to obtain permission to dismiss the employee. The employer has to prove that one of the grounds for termination exists and that they have fulfilled their reinstatement obligations in order to be granted permission from the UWV.
In the application for the UWV permission, the employer has to explain the reason for dismissal. If the reason for dismissal is, for instance, a poor financial situation, the employer should be able to demonstrate this with financial data.
The employee has the opportunity to respond to the application made by the employer. In principle, the UWV procedure takes four weeks; however, the UWV may ask questions and take more time to decide. Should the UWV grant permission, the employer may terminate the employment contract. Notice must be given at the end of the month unless the parties have agreed otherwise in writing. The time taken for the procedure at the UWV may be deducted from the notice period, as long as a one month notice period remains.
Employers are not free to decide on which employees are to be made redundant in the case of dismissal for economic, technical or organisational reasons. Employers have to apply the so called ‘balancing system’. Under the balancing system, the employer is required to divide employees performing interchangeable positions equally between five age categories (15-24 years, 25-34 years, 35-44 years, 45-54 years and 55 years and older). In turn, the last-in-first-out system must be applied within each age category: the employees with the shortest employment will be the first to be dismissed. The balancing system is applied per company unless the functions to be made redundant relate to one branch office of the employer's company. In this case, only the branch office will be considered.
In the event that the UWV or a redundancy committee does not grant permission for dismissal, the employer can still ask the sub-district court to set aside an employment agreement. The sub-district court’s decision may in turn be appealed. In the event that the dismissal is based on a cumulation ground, the court may award an extra payment to the employee, up to a maximum of 50% of the transition payment to which the employee is entitled (see 6.2 Notice Periods/Severance).
Employers can submit a request to the sub-district court to set aside an employment agreement in cases of dismissal for personal reasons. The most common dismissal grounds include poor performance, a breakdown in the working relationship or a seriously culpable act/omission committed by the employee. The employer has to prove that there is a reasonable ground for dismissal or, as of 1 January 2020, a combination of several reasonable grounds for dismissal (new legislation enters into force on 1 January 2020 allowing a cocktail dismissal ground). The employer must also show that it has fulfilled his obligation to investigate reinstatement possibilities.
In case of dismissal due to poor performance, the employer has to prove that the employee was timely informed about this and was given sufficient opportunity to improve his or her performance and that the poor performance was not the consequence of insufficient attention to training or working conditions.
If an employer seeks to dismiss the employee because of a serious culpable act or omission committed by the employee, it must be shown that the employee was aware of what he or she was or was not allowed to do. There are exceptions to this rule, such as in the case of theft. The employer’s obligation to investigate reinstatement possibilities does not apply in the case of a culpable act or omission committed by the employee.
In principle, the prohibitions on dismissal (see 6.5 Protected Employees below) apply to court proceedings as well. The procedure takes on average six weeks.
The prior permission of the sub-district court or the UWV is not required in cases where the employee resigns.
If an employer decides to dismiss a significant number of employees within a period of three months , the provisions of the Dutch Notification of Collective Dismissal Act (Wet melding collectief ontslag) and certain provisions of the Dutch Works Councils Act (Wet op de ondernemingsraden) apply if the employer contemplates the termination of at least 20 employees who work within one of the regions of the UWV.
The Act aims to bring together employers, trade unions and the government to try to prevent dismissals insofar as is possible and to diminish the negative consequences thereof. Therefore, a certain procedure must be followed in the event of a collective dismissal. The employer must notify the UWV in writing of its intention; simultaneously, the trade unions must be sent written notification of the employer's proposed action, with a view to consultation.
The employer will often negotiate and agree on a social plan with the trade unions. There is, however, no obligation to actually reach an agreement.
In general, a one month waiting period will start from the date of notification to the UWV of the employer’s intention to proceed with the redundancies. During this period, the employment agreements of the employees who will be made redundant cannot be terminated.
If the UWV or a redundancy committee does not grant permission for dismissal, the employer may still ask the sub-district court to set aside the employment contracts. The sub-district court’s decision may in turn be appealed.
Usually, the notice periods for employers and employees are defined in the employment contract or in a CLA. The statutory minimum notice periods for employers are:
The notice period for employees is one month.
Employment contracts and CLAs may provide for longer notice periods if several rules are taken into account, eg the notice period for the employee cannot exceed six months and the employer’s notice period has to be twice as long as the one for employees if the notice period of the employee is more than one month.
In circumstances where the sub-district court dissolves an employment contract, it will, in principle, provide that the employment contract will end on the date on which the contract would have ended following proper observance of the notice period. The time taken for the proceedings can be deducted in full from the notice period. However, the notice period must be for at least one month.
If the employer fails to observe the notice period, the employee can request the court to award compensation equal to the value of salary he or she would have been entitled to for the period of notice that the other party failed to observe. The concept of pay in lieu of notice is not recognised under Dutch law.
Severance Payment (Transition Payment)
At the moment, employees (temporary or permanent) with at least two years’ service are entitled to a transition payment upon termination of employment (except in certain cases such as seriously culpable behaviour or if the employee voluntarily terminates the employment agreement).
As of 1 January 2020, all employees will be entitled to a transition payment, regardless of the duration of their service. The amount of the payment will depend on the duration of employment and the monthly salary.
For dismissal initiated in 2019, the years of service and the employee’s age can lead to a higher transition payment. During the first 10 years of service, the employee is entitled to a transition payment equal to one-sixth of the monthly salary for every six months of service (or one-third of the monthly salary for each year of service). After 10 years of service, the employee is entitled to one-quarter of the monthly salary for each six months of service (or one-half of the monthly salary for each year of service). After 10 years of service, if the employee is aged 50 years or older, the employee is entitled to half of his or her monthly salary for each six months of service. The transition payment is capped at EUR81,000 (2019 figures) or one year’s annual salary, whichever is higher.
For dismissals initiated on or after 1 January 2020, the employee is entitled to one-third of his or her monthly salary for every year of service. When calculating the transition payment, amounts are not rounded to whole years, months or weeks worked. The amount to which the employee is entitled is calculated proportionally.
For the calculation of the transition payment, salary should include base salary, holiday allowance, fixed fringe benefits (such as overtime pay and shift allowance) and variable fringe benefits (such as average bonus, profit distribution and year-end bonus for the last three years).
A higher payment can be agreed in the employment or settlement agreement.
A “serious or urgent cause” means conduct by the employee which the employer cannot reasonably allow to continue in the workplace. The law gives several examples of urgent cause circumstances, eg theft and crimes involving a breach of trust. What qualifies as an urgent cause depends on the facts and circumstances of the case. It is good practice to include a non-exhaustive list of seriously culpable acts and omissions in the personnel manual.
Procedure of Dismissal for Serious Cause
If such a situation arises, prior permission from the authorities to terminate the employment contract is not required, therefore the threshold to qualify as an urgent cause for dismissal is high. If it turns out that there was no question of a justified dismissal for serious cause, the dismissal can be annulled by the court afterwards. The judge will take several aspects into account.
First, the urgent cause had to be material. All relevant circumstances of the specific case must be taken into account in determining whether an urgent cause existed. For example, the nature and gravity of the urgent cause, the nature of the position, the duration of the employment relationship, the way in which the employee has performed his duties and the employee’s personal circumstances (eg age, private situation and the impact that summary dismissal would have on the employee).
Second, the employee needs to be informed and offered the possibility to respond as soon as possible upon discovery of the urgent cause situation. If the termination for urgent cause is not immediately communicated to the employee, it can be argued that the cause for termination was not adequately urgent. The abovementioned communication may be delayed, but only after a prompt investigation into the circumstances.
An employee may also summarily terminate a contract of employment without notice where an urgent cause exists. Examples of urgent cause include situations when the employer mistreats or intimidates the employee or when the employer grossly neglects its obligations under the employment contract.
In addition to the UWV and court proceedings, the parties may also terminate an employment contract by mutual consent, ie by entering into a settlement agreement in which the terms for the mutual settlement are laid down. Termination by mutual consent is the most usual way to terminate an employment contract in case of a (possible) employment conflict. In such a case, the approval of the UWV or sub-district court is not required. A social plan, if applicable, generally provides for the termination of an employment agreement by mutual consent.
Settlement agreements are only valid if they are concluded in writing. Further, employees have two options to terminate settlement agreements within fourteen days without giving reason(s), ie by withdrawing their consent or by recalling the settlement agreement out of court. If the employer did not indicate the recall option to the employee, the termination period of fourteen days extends to three weeks.
An employer is not allowed to give notice of termination in the following circumstances:
These prohibitions apply to both UWV and sub-district court procedures. The “during” prohibitions, however, do not apply if the employee’s contract is terminated by mutual agreement, during the probationary period, because of an urgent cause, because the employee has reached the retirement age or state pension age and in specific, limited situations regarding dismissals for commercial reasons. The “because” prohibitions are not subject to any exceptions.
Notwithstanding the above-listed general exceptions, the sub-district court may dissolve the employment contract if: (i) the termination request is unrelated to the circumstance to which the prohibition pertains or (ii) the circumstances are such that the employment contract should end in the interests of the employee (eg for health reasons). However, these two specific exceptions will only apply to a "during" prohibition, such as pregnancy or membership in the works council. These specific exceptions are not applicable in cases of dismissal for economic reasons.
Grounds for a Wrongful Dismissal Claim
If an employee believes that he has been unfairly dismissed, he or she can take action on several grounds, eg:
Consequences of a Wrongful Dismissal Claim
In the case of a wrongful dismissal, the employee has two options: (i) he or she may file a request with the sub-district court to declare the termination null and void or (ii) he or she can request that the sub-district court award him or her fair payment (also referred to as fair compensation) instead. This request must be filed with the sub-district court within two months of the employment contract ending. If the reinstatement requirement is breached, the limitation period will not start running until the date that the employee is aware or could reasonably have been aware of the situation, but in any event no later than eight months after the employment contract was terminated.
If the employee claims fair compensation, there is, in principle, no standard for calculating that compensation. The calculation of fair payment is highly dependent of the circumstances of the case and the assessment of the court. The Supreme Court provided a non-exhaustive list of point of views for determining the amount of the fair payment:
Employees are protected against discrimination during the recruitment process, employment (eg remuneration, dismissal) and post-employment activities (eg references).
Claims of discrimination are common in the Netherlands, especially claims filed with the Netherlands Institute for Human Rights (College voor de rechten van de mens). This institute protects, monitors and provides information on human rights in the Netherlands, including the right to equal treatment. The Institute assesses individual cases to determine whether the equal treatment legislation has been violated. It determines whether discrimination has taken or is taking place and may issue a recommendation to prevent discrimination against the complainant in the future. This decision is not legally binding, but in practice most companies follow the Institute’s decision. All decisions are published in a database on the Institute’s website, including the name of the organisation involved. Court proceedings regarding this issue are relatively unusual.
Grounds for Claims on Anti-discrimination Grounds
The ban on discrimination is laid down in several specific equal treatment laws, such as the General Act on Equal Treatment (AWGB), the Equal Treatment of Men and Women Act (WGB), the Equal Treatment of Disabled and Chronically Ill People Act (WGBH/CZ) and the Equal Treatment on Age in Employment Act (WGBL). The Dutch Civil Code also provides for a number of provisions on equal treatment.
The rules on equal treatment prohibit both direct and indirect discrimination. Direct and indirect discrimination regarding working hours, temporary employees and age are only permitted if such discrimination can be justified objectively. This means that the difference in treatment must be justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.
Burden of Proof
If an employee believes that he has been a victim of discrimination, he or she must demonstrate that the discrimination was based on prohibited grounds. The employer must prove that no discrimination took place or that the discrimination can be justified by an objective goal and the means applied to achieve that goal were justified, proportionate and necessary.
Employment Law Proceedings
In the event that legal disputes arise from an employment relationship, such disputes are resolved before the competent sub-district court (kantonrechter) at first instance, but can be appealed before the competent Court of Appeal (gerechtshof). The case may then be referred to the Supreme Court (Hoge Raad), but only on a point of law.
If the parties have not agreed on which court is competent, the court in the district where the work is usually carried out shall be declared competent. Sub-district court judges hear cases on their own, but appeal cases are heard by a multi-judge panel.
Contrary to appeal proceedings, the parties are not obliged to be represented by a lawyer before the sub-district court.
With respect to employee participation law, ie the Works Councils Act, some claims have to be filed with the Netherlands Enterprise Court at the Amsterdam Court of Appeal (Ondernemingskamer).
Class Action Claims
A provision of the Dutch Civil Code makes it possible for an interest group to seek a declaratory judgement stating that a party acted unlawfully by causing mass damage, ie the so-called collective action. If liability is established and the parties cannot agree on compensation for the damage caused, the extent of the (individual) compensation(s) must be decided in a separate procedure.
According to Dutch employment law, arbitration may be used in employment disputes, although this process has not often been used. Pre-dispute arbitration agreements are enforceable. However, the condition for arbitration is that both parties must agree on submitting the case to the arbitration court. If only one party applies to the court, it is up to the court to examine whether the other party is prepared to cooperate in the arbitration procedure. If this is the case, the application is, as it were, a bilateral one and the arbitration proceedings can commence. If the other party is not to be willing to cooperate in the arbitration proceedings, the applicant will still have to initiate regular proceedings.
The general principle is that each party bears its own attorney’s fees, irrespective of who wins the case. Thus, if an employee loses a court case against the employer, he or she must bear his or her own costs but not the employer’s costs. Equally, an employee will not usually be entitled to recover legal fees if he or she wins. However, the judge decides who has to pay the costs of the proceedings and may order the losing party to compensate the counterparty for court and attorney’s fees. The attorney fees are determined on the basis of fixed rates that are in general (much) lower than the actual legal fees for the proceeding.