Dismissal of workers to be simplified

The Netherlands’ Social Affairs Minister Henk Kamp has won cabinet approval to amend employment laws so that workers can be dismissed without a judicial review. The VNO-NCW employers’ association says this is a positive response to its long-standing call for changes, while the three biggest trade union federations are outraged. The government says the move will increase employee mobility, a claim disputed by a number of experts who are calling for it to be abandoned.

Background

The outgoing cabinet of the Rutte coalition gave the green light to Henk Kamp, the Social Affairs and Employment Minister, to simplify dismissal law. The main change is that employers may dismiss employees without a judicial review. Employers will pay unemployment benefit for up to six months and employees will receive financial compensation intended to help them train and find a new job. The proposals were agreed between the outgoing cabinet and the three opposition parties – Democrats 66 (D66), GreenLeft (GroenLinks) and the Christian Union (ChristenUnie) – following the withdrawal of support for the coalition from the Party for Freedom (PVV) (NL1205019I) which caused the collapse of the Rutte government. The changes could be before the House of Representatives by the end of 2012.

How the dismissal system works

The present system is characterised by two different dismissal routes:

• through the Institute of Employee Insurance (UWV).

• through the courts.

Besides being unnecessarily complex, this can lead to different outcomes under the same circumstances. The new proposal puts forward a single dismissal route, no longer requiring judicial review. A notice period of two months will be required for employers or employees to terminate an employment contract. Employers will be required to give grounds for dismissal in writing. A hearing will follow during which the employer will warn the employee of impending dismissal, providing an opportunity for a response. If the employee disagrees with the grounds for dismissal, he or she can bring the case before the courts. If dismissal is deemed unreasonable, the courts may award dismissal compensation, unlike the previous system where an employee could, in theory, keep his or her job. The new rules will not apply to collective redundancy. The last-in first-out principle will remain in force. The ban on dismissing employees who are ill will also remain.

Employers have to pay

Employers will be responsible for the costs of any initial period of unemployment for dismissed staff on temporary or permanent contracts, but it is foreseen that the lower dismissal costs of the new system will compensate them for any extra costs. At the same time, employers will be motivated to help employees find a new job quickly. In time, the measure could save the government €1 billion in unemployment benefits. Under the new dismissal system, both permanent and temporary employees would be allocated a transition budget, calculated as a quarter of a month’s salary for each year worked, capped at half a year’s salary. At present, the court determines the level of compensation and this generally turns out to be higher than the proposed transition budget. This makes it expensive for employers to dismiss staff with permanent contracts, and makes it less likely that the employee will seek another job quickly. The cabinet hopes to stimulate employers and employees to invest in training during and following employment so that employees will quickly find a new job.

Employers and employees divided

The Confederation of Netherlands Industry and Employers (VNO-NCW) is in favour of relaxing dismissal law, but the moves are not backed by all employers. Some object because they will be given a key role, financially or otherwise, in finding jobs for former employees. While the law regulating dismissal is unnecessarily complex at present, they say it could be simplified without shifting financial responsibility. Employers find it strange that, having let staff go, they have to pay unemployment benefit as well as assuming responsibility for finding a new job for former employees.

The three trade union federations – the Dutch Trade Union Federation (FNV), Christian Trade Union Federation (CNV) and Federation of Managerial and Professional Staff Unions (MHP) – have objected strongly to the changes. In a letter listing 10 points of criticism and 100 questions, they have made their position clear to the minister, saying that the employee’s legal position will be eroded while that of the employer will be strengthened.

While some claim that the new legislation will increase employee mobility, unions feel this is unlikely. There will also be a significant impact on older employees with long employment at the same company, because severance payments will be far lower under the new system. Following dismissal, older employees may have only a slim chance of finding a new job, while the government wants older people to work longer.

In an open letter to the minister, researchers representing different disciplines have called for him to abandon or, at the very least, adjust the plans. In addition to this unusual form of collective opposition, labour experts from different disciplines point out that the proposal will create uncertainty and discontinuity rather than the employee mobility and production innovation that its supporters hope for.

Marianne Grünell, University of Amsterdam