The new Labour Act: ‘Labour Market in Balance Act’

With the introduction of the ‘Labour Market in Balance Act’ (WAB), the legislator aims to balance the Dutch labour market. This is a response to the new labour legislation that came into force in 2015. The main aim of this new law is to turn the tide regarding the increasing number of short-term temporary employment contracts and to make it more attractive for employers to offer permanent employment contracts. The following changes will take effect when the new legislation is implemented.

Extended probationary period

The maximum probationary period will be extended from 2 to 5 months for permanent employment.

For temporary employment contracts, the following probationary periods will apply:

• A contract of 6 months or less, no probationary period is allowed;
• A contract between 6 months and 2 years, a probationary period of 1 month is allowed;
• A contract longer than 2 years, a probationary period of 3 months is allowed.

No probationary period can be agreed if the employment contract succeeds another employment contract with the same employer, unless the new employment contract clearly requires different skills or clearly requires different responsibilities from the employee.

Neither can a probationary period be agreed if the employment contract is a successor to another employment contract with another employer, which should be considered to be the successor to the previous employer with regard to the work performed.

Non-competition clause not valid in case of termination during probationary period

If a non-competition clause has been agreed between employer and employee, such a non-competition clause will become invalid if employment is cancelled during the probationary period. Unless such a non-competition clause is necessary due to compelling business or service interests and the employer notifies the employee in writing or electronically and with motivation. Notification as referred to in the previous sentence shall take place as soon as possible after termination of the employment contract if the employee terminates the employment contract and simultaneously with the notice if the employer terminates the employment contract.

Extension of maximum number of consecutive temporary contracts

New legislation will provide more opportunities to offer an employee temporary employment contracts. The maximum period that employers are allowed to offer the same employee a fixed-term employment contract will be extended to three years. The maximum number of temporary contracts will remain three.

Currently, a maximum of three fixed-term employment contracts may be offered over a period of two years, including intervals of less than six months. This possibility will thus be extended. Derogations are only allowed via collective agreements, with an alternative maximum of 48 months and six different contracts.

Obligation to offer a contract with a fixed number of hours

In the case of an on-call contract, the employer is obliged to offer the employee a fixed number of hours if the duration exceeds 12 months. This offer must be made in writing or electronically within one month for a fixed number of hours. The proposal must be at least equal to the average number of hours worked in the previous 12-month period. For the purpose of calculating the 12-month period, employment contracts, which succeed each other at intervals not exceeding six months, are added together. The period for acceptance of the offer for the employee is at least one month.

Allowing a combination of reasons for termination

An important change relates to the grounds for dismissal. Under current legislation, employers are not allowed to combine the grounds provided by law to base a termination on.

The grounds are currently (summarily described):

1. Reduction in the amount of work available;
2. Long-term disability (> 24 months);
3. Frequent absenteeism with unacceptable consequences;
4. Not functioning well;
5. Guilty conduct or omission of employee;
6. Refusal of work due to conscientious objection without the possibility of adjustment;
7. Disrupted working relationship;
8. Conditions other than a. to g. that are such that continuation cannot be required.

The new legislation introduces a new ground for dismissal (i.) that allows an employment contract to be terminated due to two or more grounds that together form a combined ground for termination. So different situation that are insufficient in themselves to justify a termination may, taken together, constitute sufficient grounds for termination. This makes terminating an employment contract easier for an employer.

Transition compensation

Currently, the employer is obliged to pay the employee a transition compensation upon termination of the employment contract, unless the duration of such employment contract was less than two years. New legislation introduces this obligation to pay the transition compensation even if the duration of the employment contract is shorter than two years.

The method for calculating the transition compensation is also going to change: 1/3 of the monthly salary for each full year of employment and a pro-rata share for the period shorter than one year. Under certain specific circumstances, the employer can claim compensation for a paid transition fee from the UWV.

Required change in the payslip

The new legislation is also going to require employers to indicate the form of the employment contract on the payslip. This means you will have to indicate whether the employee is employed for an indefinite period, a fixed-term term or on a call-off basis.

Find out more about the impact of this law on your business. Contact one of our specialists or call 020 – 52 10 130 directly.