Update Employment Law – Q2 2018
Employment & Benefits Update
This update is to inform you of relevant developments in the second quarter of 2018 in the field of employment law.
The following subjects will be discussed:
- Self-employed workers without employees (ZZP'ers) – Situation regarding legislation and tightened supervision
- Posting of Workers Directive – Official approval by the European Parliament and Council
- Transport sector – Negotiations for specific Posting of Workers Directive
- Changes to transition payment – Legislative proposal passed by the House of Representatives
- Payrolling – Two bills before the House of Representatives
- Extra paternity leave for partners – Legislative proposal before the House of Representatives
- Powers of the Works Council regarding director's remuneration – Legislative proposal passed by the Dutch Senate
- 30%-ruling – Transitional arrangement?
- Supreme Court 22 June 2018 – Scheme for early retirement and redundant employee replacement scheme
- Supreme Court 22 June 2018 – When does an employee have an acquired right?
- Supreme Court 8 June 2018 – Two rulings on the fair payment
- Arnhem-Leeuwarden Court of Appeal 31 May 2018 – Discussion concerning the applicability of the WNT upon the departure of a director from a healthcare institution
- Supreme Court 18 May 2018 - Court assessment concerning Works Council's right to be consulted
- Supreme Court 20 April 2018 – Exclusion of old-age pensioners from the transition payment
Self-employed workers without employees (ZZP'ers) – Situation regarding legislation and tightened supervision
Successor to The Assessment of Employment Relationships (Deregulation) Act
In our previous newsletter we brought you news of the roadmap for replacing the Assessment of Employment Relationships (Deregulation) Act (Wet deregulering beoordeling arbeidsrelaties, hereinafter: DBA). In the letter to the Lower House of 22 June 2018 the government set out in greater detail the current situation and the next steps, as well as explaining a number of problem areas. Further details of the measures will follow in the autumn.
More extensive supervision
In the letter to the House of Representatives, the government also explained how 'malicious parties' would be subject to enforcement. From 1 July 2018, enforcement will be targeting not only serious cases of malicious intent, but also will be extended to all malicious parties. The Labour Relations Monitoring Plan (Toezichtsplan Arbeidsrelaties) published by the Tax and Customs Administration states that at least 100 commissioning parties will be selected for an inspection visit. This selection will involve parties who have submitted a model agreement, whether or not approved, as well as parties who have not yet come to the Tax and Customs Administration's attention in this context. A number of parties will be selected from each category that the Tax and Customs Administration will visit. The selection will take place in such a way that a variety of branches of industry and sectors will be visited, with the focus on parties who have not yet been identified or who do not yet work with an approved model agreement. The Tax and Customs Administration will discuss with the commissioning parties their working procedures with their contractors. This will be done on the basis of visits to these businesses. The Tax and Customs Administration will begin these visits in July and the aim is to have them completed by the end of 2018. These visits will be in addition to the regular monitoring of withholding taxes, where an assessment of the employment relationship is already a subject of monitoring. If the Tax and Customs Administration suspects during its inspection that an employment relationship does exist, whether or not fictitious and with malicious intent, it will conduct a further investigation. In addition, the Tax and Customs Administration and the Social Affairs and Employment Inspectorate (Inspectie Sociale Zaken en Werkgelegenheid, hereinafter SZW Inspectorate) will examine how the reports of the Tax and Customs Administration and the SZW Inspectorate can be shared between them in a structured way. This will enable the Tax and Customs Administration to assess any infringements identified by the SZW Inspectorate and then decide whether or not a further investigation is appropriate.
Posting of Workers Directive – Official approval by the European Parliament and Council
Following political agreement in March on reforming the Posting of Workers Directive, the European Parliament and the Council officially approved the reform of Directive 96/71/EC dating from December 1996. The text of the new directive, which has not yet been officially adopted, is available via this link. The changes regarding cross-border posting of workers is explained below. The expectation is that directive must be implemented in all EU member states by the summer of 2020.
First 12 or 18 months: equal pay
Article 3 of the current Posting of Workers Directive contains the term 'minimum wage'. This term is being replaced by the term 'remuneration'. What 'remuneration' means will vary from member state to member state. This amendment will not affect posted workers who come to work in the Netherlands. The amendment rather ensures more equal conditions within the European Union, and is more important for other member states who did not have a statutory definition of the term ‘minimum wage’. The reformed Posting of Workers Directive lays down more clearly that certain allowances in connection with the posting – e.g. case compensation for travel, meals and accommodation costs – are also part of the remuneration of posted workers. This is solely for travel, meals and accommodation costs that posted workers incur when they have to travel to and from their normal place of work in the member state in whose territory they have been posted, or when they are sent temporarily by their employer from that normal place of work to another place of work. As regards the costs of travel from abroad to the host members state, the national laws that apply to the employment contract are decisive.
The reformed Posting of Workers Directive also offers member states the option to decide that certain collective bargaining agreements apply to cross-border postings of employees, even if these have not been declared generally binding. This possibility is especially meant for members states that do not have the option of declaring collective bargaining agreements generally binding, but it can also be used by member states who have that option, such as the Netherlands.
'Maximum period' of posting?
The current Posting of Workers Directive does not lay down a maximum posting period. The revised Posting of Workers Directive will also not provide a maximum period. The revised Directive only stipulates that after 12 months, member states must guarantee workers more employment conditions, and not merely equal pay. A member state may extend the period of 12 months by a maximum of 6 months, following a reasoned request from a service provider. The maximum period cannot be circumvented by replacing the posted employee with a different posted employee. The directive lays down that the periods in which individual employees are posted are added together if it concerns the same work at the same place. When determining whether it is a case of 'the same work at the same place', the nature of the work, the work that is being performed and the location(s) where the work is being performed will be considered.
After 12 or 18 months: equal employment conditions
After 12 or 18 months, the posted worker has the right to all employment conditions that apply to workers in the host country, except regarding provisions relating to dismissal law, non-compete clauses and provisions concerning supplementary occupational retirement pension schemes. At the moment, a posted worker in the Netherlands has the right to minimum conditions of employment, or to the ‘hard core’ of employment conditions (click here to see the list) that are laid down in a collective bargaining agreement that has been declared generally binding. However, in this situation too competition on employment
conditions is still possible. After all, there will still be differences in wage costs because the costs of social security and pensions are not included.
Clarification of the position of the posted temporary worker
The Posting of Workers Directive provides for various forms of cross-border postings (see here the explanation by the Ministry of Social Affairs on the various forms). Agency workers form one of the group of posted workers. The current Posting of Workers Directive lays down that national laws on the provision of workers by temporary employment agencies also apply to posted temporary workers. The reformed Posting of Workers Directive clarifies the position of posted temporary workers. Posted agency workers in the Netherlands already received equal employment conditions as national agency workers on the basis of Article 8 of the Placement of Personnel by Intermediaries Act (Waadi).
Transport sector – Negotiations for specific Posting of Workers Directive
There will be a separate directive for road transport, in view of the specific character of this work by workers with a mobile workplace. The European Commission had drafted a proposal for this. On the grounds of the Commission's proposal, after three days of a posting in a member state the driver would have a right to the remuneration of the host member state. The two specialist committees within the European Parliament (the Employment and Social Affairs Committee and the Transport and Tourism Committee) had made a substantial number of amendments to the proposal. The two committees subsequently suggested that the proposal they had amended should be discussed in the inter-institutional consultation between the Council of Ministers and the European Committee. However, on 4 July 2018 the European Parliament decided in a plenary session that this would not go ahead. Now the proposal is being sent back to the Transport and Tourism Committee, which must produce a new proposal. Until then, the Posting of Workers Directive will remain applicable as a whole to international transport.
Changes to transition payment – Legislative proposal passed by the House of Representatives
On 5 July the legislative proposal on the changes to the transition payment in the event of long-term incapacity for work and in the event of redundancy on economic grounds was passed by the House of Representatives. We had previously informed you of the bill in our newsletter 2017 Q2, and refer you to this newsletter for the contents of the bill.
Applying for compensation
At the end of May the government also published a draft of the Compensation for transition payment scheme (Regeling compensatie transitievergoeding). Under this draft scheme, from 1 April 2020 employers can apply for compensation. From this date, compensation can be applied for, for both new and old cases. Old cases are those where transition payments have been paid by employers between 1 July 2015 and 1 April 2020. An application period of six months applies for both new and old cases. Applications for the old cases must therefore be submitted no later than 30 September 2020. The moment of payment (the moment at which the payment is made by the employer to the employee) is the moment when the payment is debited from the employer's account. If the transition payment is paid in instalments, the last payment will be regarded as the moment of payment.
Concurrence with the Balanced Labour Market Act
In the preliminary draft of the Balanced Labour Market Act (Wet Arbeidsmarkt in Balans, WAB) the compensation scheme for transition payments in the event of long-term incapacity for work is also discussed. The WAB introduces the right to a transition payment at the start of an employment contract. At present the employment contract must have existed for two years or longer before the right to a transition payment is obtained. The preliminary draft of the WAB proposes that compensation of the transition payment in connection with long-term incapacity for work can only be awarded if the employee has been sick for two years. In this way the government wants to avoid a situation where numerous applications are made for cases involving a relatively short period when wages continue to be paid and involving only a small transition payment.
Payrolling – Two bills before the House of Representatives
In our newsletter Update employment legislation – Q4 2017 we had already discussed a private member's bill that was submitted to the House of Representatives to amend the Placement of Personnel by Intermediaries Act (Wet allocatie arbeidskrachten door intermediairs, Waadi). The Council of State's recommendations on this private member's bill were published on 6 April and an amended bill was submitted to the Lower House. At around the same time the government published the draft bill the Balanced Labour Market Act (Arbeidsmarkt in Balans, WAB), which also deals with the subject of payrolling. This has resulted in the situation where two bills on the same subject are before the House of Representatives (see also our BenefitsBit on this subject).
Criticism of the proposed legislation
Experts in labour law have expressed considerable criticism of both bills. This criticism is directed, amongst other things, against the definition of the payroll agreement that is to be introduced. This definition is felt to lack distinctiveness, so that the new rules would be easy to circumvent and the flexible temporary employment regime could still be exploited. The Advisory deparment of Council of State takes the view that even if the definitions are tightened up, the intended object – the protection of payroll workers – would not be achieved. Employers would use other constructions and seek other ways of getting round this. According to the Council of State, the problem must be tackled in conjunction with the broader discussion of the labour market, aimed at reducing the differences between permanent and flexible labour relationships. It therefore remains to be seen what will happen with payrolling.
Extra paternity leave for partners – Legislative proposal before the House of Representatives
Legislative proposal in the Netherlands
In our newsletter 2018 Q1 we brought you news of the preliminary draft of the Introduction of Extra Paternity Leave Act (Wet invoering extra geboorteverlof, WIEG). On 13 June 2018 the government submitted the bill to the Lower House. For the content of the bill, we refer you to our BenefitsBit.
Meanwhile, a directive is being discussed at European level that would lay down, amongst other things, that partners would have the right to at least ten days of paternity leave, paid for by national governments. The majority of European Ministers of Social Affairs – with the exception of the Dutch Minister of Social Affairs – approved that plan on 21 June 2018. Once the European Parliament has decided on its position, the Council and the European Parliament will negotiate further the details of the plan.
Powers of the Works Council regarding director's remuneration – Legislative proposal passed by the Dutch Senate
In our newsletter of September 2016 we had already brought you news about the legislative proposal for extending the powers of the works council regarding the remuneration of directors of large companies. The legislative proposal was passed by the Dutch Senate on 12 June 2018. The date on which it will enter into force is not yet known.
30%-ruling – Transitional arrangement?
On 20 April the government announced that as from 1 January 2019 the duration of the 30%-ruling would be reduced from eight to five years. For more information on the contents, we refer you to our news item. Many parties – including the largest employers and employee trade unions in the Netherlands, argue for a transitional arrangement for the expats who fall under the existing arrangement. We wait to see what plans the government will present on 18 September 2018 at the State Opening of Parliament (Prinsjesdag).
Supreme Court 22 June 2018 – Scheme for early retirement and redundant employee replacement scheme
On 22 June 2018 the Supreme Court ruled that the inclusion in a social plan of a possibility for voluntary termination of the employment agreement to replace a colleague who should be made redundant based on the ‘reflection principle’ (afspiegelingsbeginsel – balancing principle used for redundancy selection) should not automatically result in the social plan to be considered a pre-retirement scheme (Regeling voor Vervroegde Uittreding, ‘RVU’), on which the employer must pay 52% wage tax in addition to the wage tax charge on the employee (RVU heffing). Briefly, what is important is whether the purpose of the financial arrangement itself is meant to enable the employee to bridge the gap until retirement or state pension age. What matters most are the objective conditions and features of the scheme. Why the employee makes use of the arrangement is not important, nor is the ultimate effect of the arrangement (how many older employees make use of it, does the severance payment that is paid in fact correspond to the amount needed to bridge the gap). The conditions and objective features as set out in the arrangement are important. It should also be noted that according to the Directive of the State Secretary of Finance of 8 December 2005, a RVU does not apply if the reflection principle is applied in the event of a reorganization, where according to policy of the tax authorities a deviation of up to 10% is permitted when determining whether the arrangement should qualify as a RVU.
Supreme Court 22 June 2018 – When does an employee have an acquired right?
In a company, there are two groups of employees who earn a salary above the collective bargaining agreement (“CAO”) threshold or whose position does not come under the CAO. The salary of these employees – around 185 of them – had been increased each year, at least on a regular basis, for a very long time in line with the increase in the CAO, while nothing had been laid down in writing about this in their employment contracts. Similarly, as far as is known, this was not communicated in writing by the employer. Does this habit of the employer over many years lead to an acquired right for this group of employees? The Amsterdam Court of Appeal held (ruling of 8 November 2016) that this was not the case, because additional circumstances are required that were not given or shown. The Supreme Court gave additional explanation in its ruling of 22 June 2018. The Supreme Court answered the following question: When can a course of action pursued by an employer towards an employee for a certain period of time give rise to an employment condition (supplementary to the employment contract) becoming applicable between the parties? The Supreme Court held that this question cannot be answered in a general sense, and that it comes down to the meaning that the parties have given to each other's actions (and statements made in that respect) and should reasonably have given to them in the given circumstances. The Supreme Court formulated six points of view that are important: (i) the contents of the course of action, (ii) the nature of the employment contract and the position adopted by the employer and employee towards each other, (iii) the length of time that the employer has pursued the relevant course of action, (iv) declarations made, or precisely not made, by the employer and employee towards each other in connection with this course of action, (v) the nature of the advantages and disadvantages arising for the employer and employer from the course of action, and (vi) the nature and extent of the group of employees towards whom the course of action is pursued.
Supreme Court 8 June 2018 – Two rulings on the fair payment
On 8 June 2018 the Supreme Court gave two rulings on the fair payment (billijke vergoeding). For a discussion of one of the rulings we refer to our BenefitsBit. The other ruling concerns the fair payment on appeal, after it has become apparent that in the first instance the employment contract was wrongly terminated. See our overview (in Dutch) for all categories of fair payments. The Supreme Court's ruling makes clear that the Appeal Court is not obliged to choose between awarding a fair payment or reinstating the employment contract. The Appeal Court also has a third option: neither of the two. In this case, the Appeal Court had set the fair payment to nil because the employment contract no longer had any financial value. Because of his prolonged period of incapacity for work, the employee no longer had a right to wages.
Case law from the lower courts shows that it also happens from time to time in the other categories of fair payments that the fair payment is set to nil.
Arnhem-Leeuwarden Court of Appeal 31 May 2018 – Discussion concerning the applicability of the WNT upon the departure of a director from a healthcare institution
This case focuses on the dismissal of a director under the articles of a care institution and possible severance pay under the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act (Wet normering bezoldiging topfunctionarissen publieke en semipublieke sector, WNT). Read the HealthBit about this case.
Supreme Court 18 May 2018 - Court assessment concerning Works Council's right to be consulted
In this ruling, the Supreme Court gives its opinion on the assessment by the Netherlands Enterprise Court in disputes between an employer and the works council on the grounds of Article 25 of the Works Councils Act. The question that the Enterprise Court needs to answer follows from Article 26(4) of the Works Councils Act: Could the employer, when weighing up the interests involved, reasonably reach his decision? The Supreme Court emphasises in this ruling that it concerns a test for reasonableness the Enterprise Court of the employer's decision-making process. The Supreme Court holds that the employer is obliged in his decision-making process to involve all known, justified interests involved in the company. The Supreme Court also emphasises that the employer, when making his decision, cannot take account of objections which he does not know about, nor does the employer need to take account of objections that were put forward at an earlier stage but were not included in the opinion. In principle, the works council can only lodge an appeal against the decision of the employer on the grounds of objections contained in its opinion. Objections put forward by the works council in the appeal proceedings before the Enterprise Court and which are not apparent from the opinion must be ignored. An exception is where the objections arise from facts and circumstances that the works council did not know about, or did not need to know about, when issuing its advice, or if there are essential shortcomings in the request for an opinion.
This ruling indicates the importance for a works council to ensure that all the interests and objections involved are included in its opinion. Ultimately, the opinion of the works council determines the extent of the debate before the Enterprise Court.
Supreme Court 20 April 2018 – Exclusion of old-age pensioners from the transition payment
Is the exclusion of old-age pensioners from the right to receive a transition payment a form of prohibited age discrimination? Read in our BenefitsBit what the Supreme Court ruled on this question.
Should you have any questions regarding this update, please contact the contact persons below or your trusted adviser of our Employment & Benefits team of Loyens & Loeff.
Hermine VoûtePartner Attorney at law
P. Hermine E. Voûte, attorney at law, is member of the Employment & Benefits practice group in the Netherlands and chairwoman of the Diversity & Inclusion committee. She has over 33 years’ all-round experience in employment law, with a particular focus on high-profile dismissals, restructurings and collective dismissals, and co-determination procedures.T: +31 20 578 59 75 E: [email protected]
Klaas WiersmaPartner Attorney at law
Klaas Wiersma, attorney at law, is the chairman of the Employment & Benefits practice group in the Netherlands. He has over 20 years’ all-round experience in employment law, with a particular focus on the employment aspects of, mostly international, M&A-deals, co-determination procedures, restructurings and collective dismissals, and cross-border employment.T: +31 20 578 59 60 E: [email protected]
Hans van RuitenPartner Tax adviser
Hans van Ruiten, tax adviser, is a member of the Employment & Benefits practice group in our Rotterdam office. He has a wide expertise (over 30 years of experience) in employment taxation matters. An important part of his practice is regarding equity incentives.T: +31 10 224 64 18 E: [email protected]