The Situation: Several changes to Dutch employment law took effect January 1, 2020, most notably those resulting from the Labor Market in Balance Act.
The Result: Businesses in the Netherlands must be aware of and comply with various new legislative developments, including changes in the law governing termination grounds, transition payments, and fixed-term and on-call employment contracts.
Looking ahead: Additional employment law changes will take effect in the coming months. For example, employers who post workers in the Netherlands will be obligated to notify Dutch authorities. Additionally, starting in April 2020, companies may be able to submit claims for reimbursement of transition payments made to long-term disabled employees.
Various Dutch employment law changes took effect on January 1, 2020, and several more take effect in the coming months. We summarize many of these changes below.
The Labor Market in Balance Act
The Labor Market in Balance Act ("WAB") took effect January 1, 2020. As explained below, the WAB creates an additional ground for termination, changes how to calculate the statutory severance (called a transition payment), and modifies requirements applicable to fixed-term and on-call employment contracts, among other changes.
Additional Termination Ground. The Dutch Civil Code previously provided eight statutory reasonable grounds for dismissal (i.e., a-h grounds). The WAB introduces an additional groundthe i-groundthat enables employers to combine different grounds for dismissal into one. The i-ground may be used only if the request for termination is submitted after January 1, 2020. If the request is submitted before that date, an employer cannot combine different grounds for dismissal even if the appeal is submitted after that date.
Calculation of Transition Payment. The WAB modifies the transition payment. If the termination procedure is initiated after January 1, 2020, the new calculation method applies, while the old method applies if the termination procedure was initiated before that date. The new calculation method is one-third of monthly gross salary for each full year of service and pro rata for each month or day of service.
Duration of Successive Fixed-Term Employment Contracts. As of January 1, 2020, employers can use the extended period of 36 months for fixed-term employment contracts. The maximum number of consecutive fixed-term contracts, three in total, remains unchanged.