Proposals to change dismissals law

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In November 2000, a government-appointed committee issued its recommendations on amending Dutch dismissals law. It proposes ending the current "dual system" by omitting the current test for "reasonable cause" before dismissal occurs. The new system is designed to bring Dutch legislation into line with that of other EU countries. The recommendation was presented to the social partners in the bipartite Labour Foundation. The response from employers' associations was overwhelmingly positive, but trade unions reacted less enthusiastically, questioning whether the new policy offers employees sufficient security.

Since the end of the Second World War, Dutch employees have enjoyed legal protection from unilateral termination of their employment contract by the employer thanks to a "dual system", in that the "reasonable cause" (redelijkheidstoets) behind the dismissal is tested beforehand in administrative and/or private law (NL9909160F). An employer who wishes to terminate an open-ended employment contract must request permission from an administrative legal authority, the head of the District Employment Services Authority (Regionaal Bestuur voor de Arbeidsvoorziening, RBA), which assesses whether there is reasonable cause for the termination. Implementation of this procedure proved controversial in the early 1980s when the dire economic situation saw the number of requests to terminate contracts quadruple within a short period of time. In some districts, the procedure took months to complete and employers heavily criticised its already disputed legitimacy.

In this context, an increasing number of employers opted to make use of another procedure, originally designed for exceptional cases, by which they could file a request to a magistrate to dissolve the employment contract based on "compelling grounds" or "changed circumstances" (Article 7: 685 of the Dutch Civil Code). Although exercising this option means that the chances of terminating the contract, as well as the speed of the process are greater for employers (and their lawyers), there is often a catch in terms of the severance pay that must be awarded to the employee.

This system offering the employer a choice between two paths has been criticised by many as complicated and opaque, while others have gone so far as to deem it unjust and denounce it entirely. Furthermore, critics claim that the fact that an administrative body and not the court has the final say in this matter is completely at odds with the current role of government authorities, and that it puts the Netherlands out of step with other EU countries.

Various attempts to abolish the prior administrative test for dismissals have been made since 1945. While other countries, such as France and Spain, succeeded in doing away with a similar system, the situation remains unchanged in the Netherlands, partially due to a coalition of trade unions and small and medium-sized businesses. These groups have managed to garner support for their interests - however diverse - in maintaining the administrative procedure from the bipartite and tripartite bodies which make up the Dutch consultation system.

In the context of the recent parliamentary discussion on "flexibility and security" legislation (NL9905140F), the government promised to appoint a committee of experts to report on the future design of dismissal law. The goal was to create a more transparent system adapted to an increasingly flexible labour market. At the same time, the new system would uphold a number of interests, including those of individual employees (particularly those with a precarious position in the labour market) and of employers by offering flexibility and speedy procedures, not to mention the general interest of a achieving smoothly functioning labour market, stimulating employment and preventing an influx of social security claimants.

End of the dual system

Chaired by a former labour law professor, Max Rood, the expert committee started work in 1999 (NL9909160F) and recommended abolishing the dual nature of the system in its final report, issued in November 2000. The government has now presented the report to the social partners within the Labour Foundation (Stichting van de Arbeid, STAR) with a request for a recommendation by 1 April 2001.

The committee has explored two possible models. Both call for the introduction of a new procedural prerequisite: employers must always make the decision to terminate a contract known to employees first, granting them an opportunity to react either in writing or face to face, depending on personal preference. The committee suggested only a few minimum demands for this prerequisite, leaving its further elaboration to the social partners. Implementation of this prerequisite, along with a legal ban on victimisation and discrimination, would enable the Netherlands to ratify the 1982 International Labour Organisation Convention No. 158 on termination of employment.

The first proposed model is a variation on the current dual system. Although the administrative test would remain intact, the model would add the option of objection and appeal to administrative decisions in order to protect rights and promote uniformity. In addition, measures are proposed to prevent such procedures being implemented solely because employees claim that they could become ineligible for unemployment benefits due to their culpability for losing their job.

The second proposed model is a new system, whereby the courts may test dismissals only after the fact. Employers could terminate a contract without involving a third party as long as their decision were based on "reasonable grounds". In this case, employees should be fully informed and given ample opportunity to express their opinion, otherwise termination could be reversed. Although the proposed legislation does not state the amount of severance pay to be awarded to the employee in such cases, it does spell out which factors should be considered in calculating the sum. If employees feel the termination was unreasonable or that they have received insufficient severance pay, the onus should be on them to initiate legal proceedings. The possibility of annulment by the court remains, but applies only to fixed-term contracts and cases in which a legal ban on termination exists.

The committee prefers the second model, partly due to its belief that the Netherlands can no longer have a dismissal system that deviates so sharply from those in force in other EU countries.

Social partners' reactions

Overall, employers' organisations have reacted positively to the committee's recommendation, although the small and medium-sized business sector is concerned that employee claims will increase. Trade unions appear to accept the end of the administrative test but wish to maintain the preventative element in one form or another. After all, a test at an early stage is the best way to ensure that employees actually hold onto their jobs if the grounds for dismissal are unreasonable. The Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV) urges stricter criteria for the efforts that employers must make to retain employees or help find appropriate work for them elsewhere.

Commentary

It appears that any last foundation for upholding the administrative test for dismissals has fallen away. The forthcoming debate about a new test to determine reasonable cause for dismissal will mainly revolve around its degree and the form that it takes. In this sense, the government's request for a recommendation from the Labour Foundation may be considered as an invitation to the social partners. If they manage to reach a consensus on the proper design of the internal appeal procedure against dismissal, the proposal stands a very good chance of being adopted; otherwise, it will simply be the latest failed attempt to change Dutch dismissal law. (Robert Knegt, HSI)

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