EurWORK European Observatory of Working Life

Flexicurity Act makes major changes to labour law

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From 1 January 1999, the date on which the Flexibility and Security Act came into force, several areas of Dutch labour law have begun to look quite different. There has already been a degree of controversy about some of the potential effects, such as the cost of terminating an employment contract. At this initial stage at least, the social partners have reacted quite differently to the Act that they were themselves largely responsible for creating.

On 1 January 1999, the Flexibility and Security Act (Wet Flexibiliteit en Zekerheid) took effect (NL9706116F). Even before this date, however, there had been a degree of controversy about the new "Flexicurity" Act. The transition from one system of labour law to another created much uncertainty. Furthermore, at the end of December 1998, there was a larger than usual wave of attempts by employers to terminate employment contracts through the subdistrict court system. Some trade union organisations reported that temporary employees were being dismissed en masse immediately before the law took effect. The main points of the Act and its implications for both temporary employees and dismissal law are outlined below.

Flexibility and Security Act: the main points

The Act aims to bring about a new balance between employers and employees in the labour market. It has made "fixed" employment more flexible and has increased the security of flexible employees. The Flexibility and Security Act is linked to the new Act governing temporary employment agencies (WAADI), which came into force on 1 July 1998 and offered these companies greater freedom (NL9711144F). The two Acts have modified Dutch labour law on many counts, including the following:

  • companies can use temporary employment contracts more than they could in the past;
  • a series of consecutive temporary employment contracts will, under certain conditions, lead to a permanent employment contract;
  • agreements between employees and temporary employment agencies will now be considered as employment contracts;
  • notice periods are shortened and simplified;
  • procedures for dismissal on economic, technical and organisational grounds are shortened; and
  • unemployment benefits are reduced if the employer awards severance pay.

Temporary employees

The Flexibility and Security Act offers temporary employees prospects for permanent employment. The conditions for this are that they have worked at a temporary employment agency fairly continuously for a long period of time. Temporary employees who have not worked for a particular agency for very long will after an initial period have a right to training and then to a right to continued payment if - through no fault of their own - no work is available.

Media reports have claimed that the introduction of the Act has prompted some temporary employment agencies summarily to dismiss their workers, sometimes having served the company for as long as nine years. In one such case, after the largest Dutch trade union, FNV Bondgenoten, had threatened strike action, the temporary employment agency, Werknet, offered all 68 of its personnel, who were then in danger of dismissal, a permanent contract. FNV also reported that workers in another firm were being offered predated temporary contracts. By predating the contract to before the entry into force of the Flexibility and Security Act, employers had hoped to deprive their workers of their right to a permanent contract. The FNV union confederation has now opened a special information line for flexible workers. According to FNV, temporary employment agencies employ many different tricks to prevent their workers from receiving permanent contracts.

Both the largest employers' organisation in this sector, the Algemene Bond van Uitzendbureaus (ABU) and the Bedrijvenbond CNV trade union deny that flexible workers are being dismissed en masse as a result of the new Act.

Compensation for dismissal and unemployment benefits

Certain lawyers expect the new Act to make it more expensive for companies to dismiss employees. Terminating an employment contract often takes the form of taking the case before a subdistrict court judge, who usually rules that a form of compensation should be paid relative to the employee's pay, length of service with the company and age. The new Act requires that, before such employees receive a right to unemployment benefits, they must first partially deplete their compensation payment. Lawyers therefore expect this to cause workers to demand more compensation before they agree to the termination of an employment contract. However, a spokesperson for the largest employers' organisation, VNO/NCW, has completely rejected this line of reasoning, on the grounds that subdistrict court judges will determine the level of compensation no differently from how they have in the past. Indeed, VNO/NCW expects that dismissals will become less expensive for a variety of reasons: the procedures have been shortened and workers can no longer protract the process by going sick. Moreover, there are now more ways to terminate consecutive temporary contracts. This allows both employers and employees to understand better the implications of their actions, and should, it is hoped, help to avert dismissal situations.

Commentary

It is still too early to estimate the quantitative effects that the new Act will have. It is clear, however, that it has produced a number of unexpected results. The opinions of the social partners are quite varied. On the union side, FNV is very critical while CNV is more reserved. On the other hand, VNO/NCW stresses the positive sides of the new Act and rightly points out that employers and employees were to a large extent responsible for drafting it.

The new Act seems to affect particular categories of temporary employees differently. It appears that the negative effects of temporary employment agencies' fears of permanently employing their workers will fall most heavily on less educated workers, especially after recent inauspicious economic forecasts. Not much will change for highly educated or sought-after employees; even before the Flexibility and Security Act had taken effect, these people were already often being offered permanent contracts by temporary employment agencies (and of course other companies).

At present, most of the attention has been focused on incidents surrounding the temporary employees themselves. It will take more time before the other long-term effects of the new Act emerge, particularly with regard to whether the wishes of employers to adapt their workforce structure to fluctuations in demand for products and services can be combined with increased security for flexible workers. In this respect it must be noted that the Act was drafted at a time of economic prosperity and increasing scarcity on the labour market, but came into force at a time when economic prospects seem less promising. (Robbert van het Kaar, HSI)

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