The Work and Security ActWet Werk en Zekerheid

The new dismissal law

23 September2015

mr. Leon PeetersEmployment and Pension lawyer

Dismissal law revised

• Aims: - more honest, simpler, cheaper dismissal law- from job security to work security (focus on

transition)• System:- dual dismissal law remains- preventive test remainsConclusion: no relaxation, just ‘reorganization’

Fairer: •compensation via both routes•appeal possible (including higher Courts)•legal position of flexible workers improvedSimpler: •clear compensationCheaper: •lower compensation for dismissal•Unemployment Act [WW] focuses more on getting people back to work quickly

Background: Work and Security

The real problem?Country Wages paid during sick leave (weeks) Australia 2.0 Austria 0-6/6-10 Belgium 4.3 Canada 0-12 Denmark 2.0 Finland 1.8 Germany 6.0 Greece 2.0 Iceland 2.4 Luxemburg 15.4 Netherlands 104.0 New Zealand 1.0 Norway 2.3 Spain 3.2 Sweden 2.8 Switzerland 3.0 United Kingdom 28.0

Principal changesPricipal changes as of 1 January 2015

• Probationary period• Non-competition clause• Notification duty• On-call contract

Principal changes as of 1 July 2015• Chain system• Dismissal law• transition compensation

02-05-23

Probationary period• Pobationary period prohibited in temporary contracts of 6

months or less• Existing jurisprudence settled:

– probationary period invalid in case of series of contracts (unless genuinely different skills required)

– dismissal while on probation: no test for reasonableness• Variation under cao (collective labour agreement)• Transitional law: old law remains effective for

contracts signed before date of introduction.

Non-competition/non-solicitation clause

• Non-competition clause prohibited in temporary employment contracts, unless the employer claims compelling business or service interests in non-competition clause itself

• Sanction: non-competition clause annulled• No effect in case of termination or non-prolongation

due to serious shortcomings employer• Transitional law: law prevails that is valid on

datdate employment contract signed

Notification duty (new!)• The employer is obliged as follows, one month in advance:

– to inform the employee in writing whether or not the employment contract is to be extended;

– to notify the conditions under which contract is extended.• Not applicable to:

– Employment contracts that do not terminate on a given calendar date (e.g. project or replacement for sickness)

– Employment contracts of shorter than six months’ duration• Sanction not notified (in time): one month’s compensation (or pro-rata if not

in time).• Decree defining wage concept, period of notice and transition compensation

Training requirement

• New article 7:611a Civil Code [BW]:– Training requirement during employment

• Transition compensation decree(employee’s agreement)

On-call contract

• Art. 627 BW repealed, art. 628 BW to be principal rule (burden of proof reversed!)

• para 5: 6 months in variation from para 1• para 7: variation under collective labour agreement

(cao), provided work in post is incidental and not fixed as to amount

Changes as of 1 July 2015

11

Chain system

• 3x3x3 become 3x2x6• The period between contracts viewed as a single

chain is increased from three to six months. This may not be varied under a cao

• The maximum length of a chain is reduced from three to two years

• Variation under a cao of maximum extent and maximum number of contracts is subject to conditions (6x4x6)

Chain system

Exception: chain systemdoes not apply to: •employees younger than 18 who work an average of at most 12 hours a week•directors (bestuurders)•employees in the education sector•other cases as the Minister shall specify

Dismissal law

14

15

Current dual dismissal system

Unilateral dismissal

UWV (notice of termination)

6 BBA

Canton Court (dissolution)

7:685 BW

All grounds

No compensation unless dismissal evidently unreasonable (KOO)

Compensation according to Canton Court Formula

Dismissal lawSystematics of new dismissal law:•Dual dismissal law remains•Preventive test remains•Not relaxation, more ‘reorganization’

Employer can no longer choose:dismissal on grounds a) and b) UWVdismissal on other grounds Canton Court

Grounds for dismissala) Headcount reduction for business reasons (redundancy)b) Long term (two year) disability

c) Frequent and disruptive sickness absenced) Dysfunction after improvement measurese) Culpable action or inactionf) Conscientious objectiong) Disturbed working relationshiph) Other circumstances

Notice of termination• Basic premise: notice of termination with employee’s

consent(Consent may be withdrawn without reason within two weeks)

• Agreement not required provided:• Permission UWV• Probationary period• Instant dismissal for urgent cause• Household personnel• Director (foreign) legal entity• Employee holds spiritual office• AOW

Termination agreement

• termination agreement remains option• employee gets two weeks for consideration when

agreement can be dissolved in writing without stating reason

• make explicit reference, or time period becomes three weeks

• only once in six months

Dismissal: UWVa) Redundancy for business reasonsb) unfit for work longer than 104 weeks

Sanction for not requesting permission from UWV:– Court annulls dismissal, or– Court awards reasonable compensationNote! employee must file claim at the Court within two

months of dismissal date

Dismissal rules• Rules partly in Civil Code [BW], partly in Ministerial

regulations: existing rules largely retained• Reflection principle made more flexible: 10% talent rule• Flexible Reflection principle under cao

Variation under cao:• Own dismissal authority• Own dismissal rules Briefly: own dismissal law!• Own transition compensation

Dismissal rules procedure• Digital request via request form• Question – supplement, start decision period• Assessment by dismissal staff member, not dismissal advisory

committee• Rejection when dismissal prohibited -> Canton Court

(immediately clear: employee not requested to provide defence)

• Permission valid for 4 weeks, not 8• Statutory proviso for return to work• Rules for payroll employers

Dissolution route • Dismissal due to employee’s character,

Note: grounds for dismissal listed exhaustively in Act (art. 7:669 BW).

• Also when UWV refuses permission andtemporary employment agreement without termination clause.

• Canton Court may only impose dissolution after a period equivalent to notice (minus time in Court).

• Note: dismissal prohibited (esp. illness).Employee dismissal for business reasons not possible!

Ground for dismissal c)

Frequent and disruptive sickness absence•Regularly unable to work due to sickness•Unacceptable consequences for business operations•Employer displays adequate concern for employee’s working conditions•No recovery within 26 weeks and failure to perform required work within this period, even in modified form

Ground for dismissal d)

Dysfunction after improvement measures1.Plausibly demonstrate inadequate functioning2.Employee has been informed of inadequate functioning3.Adequate improvement measures adopted and executed4.Dysfunction not result of insufficient training5.Dysfunction not caused by poor working conditions6.Relocation investigated7.With training assistance8.Appropriate function

Case building

Dismissal requires the reasons to be well substantiated. A case must be made.•Function of evidence•Demonstrate dysfunction for:

– end of employment contract– changed employment conditions

Case building

•Hearing witnesses almost impossible in dissolution proceedings•Evidence must be drawn from written documents•Statements by third parties (colleagues, company physician, etc.)

Case building

Employee’s functioning depends partly on elements within the employer’s area of risk, such as:•adequate job description(NB: amend when job changes)

•presence of company conduct rules(intolerable behaviour, internet use, alcohol and drugs)

•Company culture(keep to the rules, consistent implementation)

Case building: improvement plan

Improvement plan•Objective and measurable•Employer can take initiative•Initiative can be left to employee•Keep written records•Must be concerned with improvement: concrete work agreements•Training/support•Deadline•Evaluation moments (do not just record these)

Record when case buildingRecording•Important to record everything (!) in the employee’s file. Records in personnel department reports or management reports for own use is not sufficient.•Copies given to or sent to employee (e-mail).•Not necessary to have employee countersign every record to signify consent: signature implies record has been seen.•Discussions (re. functioning and assessment) preferably held with two people present.

Case buildingWhen is it sufficient to keep written records only?No unequivocal answer, standards from jurisprudence :•Employee must be told of poor behaviour in clear language•Employee must be offered the opprtunity to change his/her behaviour•Employee must have been offered the chance to tell his/her story (principle of hearing and cross-examination)•Employee must have been informed of the consequences if he/she fails to improve: dismissal / different function

Pitfalls when building a case

• No witness evidence• Third-party statements• Building a case with a view to future dismissal

proceedings is punishable• A final warning can be issued only once

Ground for dismissal e)

Culpable actions or negligence•Misbehaviour / urgent reason•Employer cannot be expected to allow the employment contract to continue•No immediacy requirement

Ground for dismissal f)

Conscientious objections•Refusal to work for serious reasons of conscience•The work demanded cannot be changed

Ground for dismissal g)

Disrupted working relationship•Irreconcilable characters•Violation of trust•Recovery is no longer possible•Affective relationship

Ground for dismissal h)

• Safety net clause• Example: detention• Not: a little of this, a little of that

Appeal and cassationUWV:

- Business reasons- Longer than 104 weeks ill

Appeal Court

Supreme Court

Canton Court:- Other reasons for dismissal

Appeal Court

Canton Court

Claims• Employee:

– Reinstatement of employment contract– CompensationNB: Court may decide (possibly ex officio) on reasonable

compensation rather than reinstatement of employment contract

• Appeal and cassation against dissolution granted at employee’s request may relate only to the amount of compensation granted.

(Ontslag)vergoedingen in 2015

Severance pay

CompensationA) transition compensation (no statutory requirement as to purpose)

and

B) Reasonable compensation (in case of serious culpability)

•Note: serious culpability is a very severe test. No connection with KOO, consequence criterion absorbed in transition compensation.

Transition compensationWho?• All employees involuntarily dismissed (without culpability)

with work record of at least 24 months(including temporary contracts and after 2 years’ illness)

How much?• first ten years: 1/6 monthly salary per six months worked• thereafter: ¼ monthly salary per six months worked• maximum € 75,000 or one year’s salary (if higher)• but … minus (collective) efforts/ costs of employability.

Who else?• 50+ on 1 july 2015 and with ten years’ serviceWhat?• transitional scheme until 2020• 1/2 monthly salary per six months worked for

service beyond 50 years of ageBut…• not for SME < 25 employees• here too a ceiling of € 75,000 or annual salary

Transition compensation

Not for the following employees• employees <18 jaar max. 12 hrs / week• seriously culpable actions of employee• reaches pensionable age (= AOW)• bankruptcy / suspension of payment

Possibility to vary transition compensation by agreement

Transition compensation

In case of serious culpability or in place of annullment of termination. Examples:

• employer presents false grounds for dismissal; • employer discriminates;• employer violated reintegration duty; • gross failure of employer to meet obligations

under the employment contract;• reprehensible behaviour on part of employer.

Reasonable compensation

• How big is the mousehole?• No room for reasonableness:

Court will reject• Higher compensation in any case?• Evaluation in 2017 at the latest

Exception or rule?…?