Netherlands: Unexpected problems with Work and Security Act

There have been unexpected problems following the introduction of the new Act on Work and Security in the Netherlands. The act, which changes employment and dismissal law, came into force on 1 July and aims to create a new balance between ‘insiders’, permanent employees who have high levels of protection, and ‘outsiders’, flexible workers who have little or no protection.

The new Work and Security Act (WWZ) will introduce a number of changes. It alters the balance between employees with permanent contracts and employees with (different types of) flexible contracts. It also sets out changes in entitlements to unemployment benefits and to redundancy payments. Another major feature is the entitlement of employees to 'transition payments' which will replace, to a great extent, existing arrangements on redundancy payments.

Bill altered as problems mount

However, the speed of bringing in the new WWZ has led to an increasing number of omissions and unintended consequences being pointed out, both from the academic world and employers and unions. The bill has had to be altered, and more changes are expected. Some of the alterations are highly technical, but issues raised include:

  • the entitlement of certain categories of employees with a fixed-term contract to a transition payment even if their contract has expired;
  • transition payments in relation to current social plans and collective agreements.

Changes made to stop seasonal workers losing their jobs

Lodewijk Asscher, Minister of Social Affairs and Employment, announced foreseen amendments to the WWZ in February 2015. According to a ministry press release, changes would be made to avoid situations where seasonal workers would not be rehired due to WWZ provisions (in Dutch). Under the original WWZ, these types of employees would be entitled to a transition payment when their total employment history exceeded two years and their contract was not renewed. However, under the new rules, the period of employment history taken into account has been shortened. Moreover, entitlement to the transition payment ceases to exist when the employer guarantees a new contract within the next six months.

Avoiding double redundancy payments

Another change to the WWZ has also been announced by Minister Asscher to avoid double redundancy payments (in Dutch). This arises from the fact that many large companies have agreed (usually with the unions, but sometimes with the works council) to a long-term social plan. However, several employers have expressed fears that they would have to pay both the transition payment (to comply with the WWZ) and a redundancy payment based on the social plan. Under the changes, current social plans and collective agreements will take precedence (with employers not having to pay transition wages) until the expiry of the collective agreement or social plan, or 1 July 2016.

In case of individual arrangements, the employee has to choose between the transition payment and the alternative agreed.

Dismissal of temporary workers 

The Act also affects the rights of temporary agency workers. The aim of the 1998 Flexicurity legislation (Wet Flex en Zekerheid), was to allow such workers to accrue more rights depending on how long they had worked for an employer. Under the 1998 law, temporary workers have no dismissal protection during their first 18 months, but from then on are allowed eight consecutive contracts in a two-year period (under the new WWZ this changes to six consecutive contracts). Thereafter, they are entitled to a permanent contract with their agency. This system has resulted in permanent agency contracts for 5% of the total population of 230,000 temporary workers. The WWZ contains a clause that flexworkers are entitled to the transition payment when they have worked two years or more for the same company and do not get a subsequent contract.

However, according to Dutch News, companies tried to get round the new WWZ rules by sacking temporary workers before it came into effect to avoid having to give them permanent contracts. Minister Asscher criticised bailed-out bank ING (the largest bank in the Netherlands) for dismissing 300 long-term temporary workers, saying that firms should follow not only the letter, but also the spirit of the law and the underlying social pact. ING insisted that the dismissals were not related to the WWZ, but were a consequence of a larger restructuring operation, but it eventually promised to give the dismissed workers redundancy payments.

The newspaper de Volksrant reported that temporary workers had to switch to different agencies at Nationale Nederlanden (NN), a large insurance company, to maintain their temporary status (in Dutch). However, the WWZ forbids these 'revolving door' methods. The National Federation of Christian Trade Unions in the Netherlands (CNV) has criticised the NN for its actions, and Minister Asscher prepared a statement for parliament on the situation at NN (in Dutch, 56 KB PDF) .

Commentary

Several MPs have voiced their doubts over whether the WWZ will improve the position of temporary workers. They fear its rules on the maximum duration of a series of fixed-term contracts could result in dismissals. They also question what will happen in sectors where fixed-term contracts are common, such as sports, recreation, hotels, catering and restaurants, agriculture and education. Minister Asscher has tried to deal with these issues in his parliamentary answers about the law's effects in the education sector (in Dutch, 77 KB PDF).

In February 2015, in another statement to parliament, Minister Asscher stressed that social partners could deviate from the new legislation in collective agreements (in Dutch, 132 KB PDF), as is already often the case, in practice.

In May, the minister announced a new consultation round (Voorjaarsoverleg) between the central employer organisations and union federations to tackle the problems with the WWZ.

The unexpected consequences of the WWZ originate in tensions between the spirit and the letter of the new legislation, and the diverging preferences of employers who want more flexibility, and employees who want more security.

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