Theme: introduction to the Dutch system of dismissal and its constituents

• 1. Introduction

  Each year, in the four issues, a specific topic is discussed in one of the articles published in Tijdschrift voor Ontslagrecht. This year’s theme is a comparison of different countries and their dismissal law systems. We aim to learn from three surrounding countries in terms of best practices, as well as possible limitations. That is why we have asked three renowned and well-embedded authors to provide insight into current legislation and regulation in their country, the system and its constituents, considered individually and in combination with each other. Interesting topics in our view: What are grounds for dismissal? Are these grounds verified repressive or preventively? And what terms need to be taken into account, such as for terminating the employment contract, paid sick leave and procedural aspects? In order to get the best possible impression on what can and cannot work in the Netherlands, this article starts with a general overview of relevant aspects of the Dutch dismissal system. In addition, we pose some questions that hopefully will be answered in the follow-up contributions. We write this in English, because the subsequent articles will be in English as well.

• 2. Basics of the dismissal law system

  2.1. Preventive dismissal assessment

  As of 1 July 2015, after many years of vivid debate, Dutch employment law, and more specifically dismissal law, has been substantially amended due to the implementation of the Work and Security Act (Wet werk en zekerheid).¹xAct of 14 June 2014, Dutch Official Gazette, 2014, 216. The objective of the amendment was to make Dutch dismissal law simpler, fairer, faster and less costly for employers.²xParliamentary Papers II 2013/14, 33 818, No. 3, 5, 24. In contrast to many previous attempts to change the Dutch dismissal law, the a priori assessment of the reasonableness of the dismissal by the UWV (public authority) or the subdistrict court (kantonrechter) has remained in place. That means that unilateral termination by the employer is only possible with prior permission of the UWV or by dissolution of the employment contract by the subdistrict court. According to the Dutch government, this system of preventive dismissal review not only guarantees the care required of the employer when dismissing an employee – it protects the employee against arbitrariness of the employer – but it also makes an important contribution to the acceptance of the employee if, in the end, a dismissal does occur. As such, this can avoid legal proceedings afterwards.³xParliamentary Papers II 2013/14, 33 818, No. 4, p. 13-14. The Dutch system of preventive dismissal assessment is quite unique. Contrary to the Dutch system, it is customary in other countries that employees have to enforce their rights after termination via initiating legal proceedings (repressive dismissal control). According to Dutch literature, the customary repressive process in other countries, however, carries a high risk of unreasonable dismissals, particularly for employees with a lower socio-economic status who will never be subject to judicial review.⁴xSee for example: ‘In wat voor land willen wij werken? Naar een nieuw ontwerp voor de regulering van werk’, Eindrapport van de Commissie Regulering van Werk, 23 January 2020, pp. 66-67. Therefore, it is highly interesting to verify how foreign countries with such a repressive judicial review system, perceive this risk. Additionally, what procedures do foreign countries have in place to enforce dismissal protection by employees? Can they ensure to have even lower-paid employees having their dismissal subject to repressive judicial review? Are there any other measures foreseeing in this potential gap?

  2.2. Limited grounds for dismissal

  Due to the Work and Security Act employers are no longer able to choose between termination with a priori permission of the UWV or dissolution of the employment contract by the subdistrict court, which deviates from the previous dismissal law. As of 1 July 2015, the termination-route has become dependent on the reason for the dismissal. In addition, the legitimate grounds for termination have been exhaustively listed in the Dutch Civil Code.⁵xThese are: (a) economic reasons, (b) long-term (104 weeks) disability, (c) frequent and disruptive absence due to sickness, (d) dysfunction, (e) misconduct, (f) refusal to perform contractual obligations due to reasons of conscience, (g) disturbed working relationship, (h) other reasons indicating a continued labour relationship cannot be expected. See Art. 7:669 para. 3 Dutch Civil Code. Reasonable grounds (a)-(b) are assessed by the UWV, whilst grounds (c)-(h) are assessed by the subdistrict court. The route of termination with prior consent of the UVW is reserved solely for termination due to economic reasons or in case of long-term disability of the employee (see more on this in para. 5).⁶xArt. 7:671a Dutch Civil Code. In the case of dismissal on grounds relating to the employee or his behaviour, the employment contract can only be terminated by dissolution via the subdistrict court.⁷xArt. 7:671b Dutch Civil Code. The rationale behind comprehensively stating legitimate dismissal grounds is that it creates more legal certainty and it might reduce legal proceedings.⁸xParliamentary Papers II 2013/14, 33 818, No. 3, 43.

  Soon after the implementation of the Work and Security Act, however, the limited grounds for dismissal have been criticized. For example, the closed system of reasonable grounds was considered as too restrictive for the employer.⁹xParliamentary Papers II 2018/19, 35 074, No. 3, p. 54. Additionally, various studies showed that after implementation of the new law the subdistrict court has rejected more requests for dissolution than before.¹⁰xSee J.H. Bennaars e.a., Evaluatie ontslaggronden WWZ, HSI 2016; AR. Houweling, M.J.M.T. Keulaerds & P. Kruit, VAAN-VvA Evaluatieonderzoek WWZ, 2016, A.R. Houweling, P. Kruit & I.H. Kersten, ‘Evaluatieonderzoek ontbindingspraktijk 2015-2018’, TAP 2018/266; P. Kruit & I.H. Kersten, ‘Statistiek Ontbindingsprocedure 2018-2019: de Wwz werkt toch! Of toch niet…’, ArbeidsRecht 2020/16. As a result, and in order to make the dismissal system a bit more flexible, the legislature added an additional ground for dismissal to the list of reasonable dismissal grounds: the cumulation ground (cumulatiegrond – further explained in para. 6).¹¹xAct of 29 May 2019, Dutch Official Gazette 2019, 219. Until 1 January 2020, it was not possible to combine reasonable grounds for dismissal in order for the employer to get the employment contract terminated. Lawful dismissal was only possible if all the requirements of at least one of the reasonable grounds were fully met. As of 1 January 2020, dissolution of the employment contract by the subdistrict court is also possible in the event of a combination of circumstances mentioned in two or more grounds (that are not fully met),¹²xThe grounds for dismissal a, b and f are excluded from cumulation. in such a way the employer cannot reasonably be expected to continue the employment contract.¹³xArt. 7:669 para. 3 under i Dutch Civil Code. In light of the criticism on the closed system of dismissal grounds, how do foreign dismissal systems deal with this? Do other countries also have limited grounds for dismissal, and if so, are there similar criticisms as there are in the Netherlands? If not, how is this perceived from the view of legal certainty?

• 3. Prohibitions of termination

  Article 7:670 of the Dutch Civil Code sets out the prohibitions of termination. These prohibitions of termination are applicable to all terminations by the employer, including a premature termination of a fixed-term contract.¹⁴xThis means that the prohibitions of termination do not apply if the employee enters into a settlement agreement with the employer. The purpose of the prohibitions of termination is to protect the employee against dismissal during a certain period or on a specific capacity. They generally concern cases where the employee is particularly vulnerable, either because of circumstances of a personal nature or capacities, or because of activities in the public interest.¹⁵xG.R. Oldenhuis, Employment contract, Article 7:670 of the Dutch Civil Code, note A.

  3.1. During or because of an applicable matter

  A distinction is made between ‘during’¹⁶xThe ‘during’ prohibitions of termination: sickness, pregnancy or maternity leave/sickness due to pregnancy, military service, membership of the works council and employee representation, membership of the works council preparatory committee, period that employee has been on the list of candidates or has been a member of a works council or employee representation body or occupational health and safety officer for less than two years, period that employee is a data protection officer and the period during which the employee is a member of the board of a pension fund (Art. 108 of the Pension Act). and ‘because of’¹⁷xThe ‘because’ prohibitions of termination: because of trade union membership and activities, political leave, care leave, parental leave, adoption leave and leave to take up an adopted child, transfer of undertaking, refusal to perform Sunday work, the various discrimination prohibitions (Arts. 7:646, 7:648 and 7:649 of the Dutch Civil Code), request for adjustment of working time (Art. 3 of the Flexible Working Act). prohibitions of termination. The ‘during’ prohibitions of termination are, in principle, absolute. They apply during the period that a certain circumstance occurs. In principle, it is not possible to give notice during this period, even if there is a legitimate reason for termination. In the case of ‘because of’ prohibitions of terminations, a certain circumstance or capacity may not be the reason for terminating the employment contract. The employment contract may be terminated during the existence of that circumstance or the possession of a certain capacity of the employee, as long as the reason for the termination does not lie in that specific circumstance (e.g. transfer of undertaking) or possession of a certain capacity (e.g. membership of the works council).¹⁸xParliamentary Papers II 2013/14, 33 818, No. 3, p. 101.

  The distinction between prohibitions of termination as set out above, is also important because the ‘during’ prohibitions of termination do not apply in several cases. First, this is the case if the employee has agreed to the termination in writing. The written consent of the employee must be clear and unambiguous. However, the employee may revoke this consent without further notice of the underlying reason, within two weeks and by means of a written statement addressed to the employer. If the employee makes use of this right, the termination should be considered as never having taken place. A clause which excludes or restricts this right of the employee, shall be null and void. Therefore, the ‘during’ prohibition revives in case of withdrawal of the consent by the employee, might apply to this employee and will, in that case, prevent the termination from being valid.

  Whilst in general the prohibitions of the Dutch system aim to protect the employee, the ‘during’ prohibitions also do not apply if notice is given by the employer during the probationary period or for an urgent reason for dismissal. Furthermore, the ‘during’ prohibitions do not apply if the termination is due to the cessation of the company’s activities¹⁹xIn the event of redundancy for economic reasons, the applicable ‘during’ prohibitions of termination differ per situation (i.e. loss of jobs, termination of the business unit or complete cessation of business). This will not be further elaborated here. and in case of a termination due to retirement age.²⁰xThe prohibition of termination does in this situation apply if the pregnancy or maternity leave has already started.

  3.2. Assessment by the public authority or court

  As discussed in paragraph 2 above, as of 1 July 2015 employers are no longer able to choose between termination with a priori permission of the UWV or dissolution of the employment contract by the subdistrict court. The termination route has become dependent on the reason for the dismissal. In case of UWV proceedings, the UWV assesses whether there is a ‘during’ prohibition of termination. In case a ‘during’ prohibition of termination applies and the expectation is that this will still apply four weeks after the date of the decision on the dismissal application, the UWV refuses to grant a dismissal permit. The UWV does not consider the ‘because of’ prohibition of termination when assessing the application for dismissal. If a prohibition of termination applies, the employer cannot make use of the UWV’s dismissal permit. If the employer does so, the employee must then, within two months after the dismissal, request the subdistrict court to annul the termination or to rule that the employer is obliged to pay fair compensation (see more on this in para. 6). The general rule of ‘he who claims must prove’ applies to most of the prohibitions of termination. This means, for example, an employee stating to be pregnant and after that statement being dismissed, whilst still in her probationary period, may claim that the announcement and the notice of termination are interlinked. The employer then must prove that not the pregnancy, but another event led to the use of the probationary period clause. The prohibitions on discrimination, on the other hand, are subject to a reversed burden of proof.²¹xR.D. Rietveld, Prohibitions of termination, Sdu Employment law, Practice Notes. As a result, the employee must have substantive proof in order for the court to assume the employer based his decision on discriminatory grounds.

  If the route of dissolution is to be followed by the subdistrict court, the court must also assess whether there is a prohibition of termination. Despite the existence of an absolute prohibition of termination, the ‘during’ prohibition of termination, the subdistrict court may dissolve the employment contract if the request does not relate to circumstances to which the prohibition of termination relates or if the employment contract should end in the interests of the employee. In that case, therefore, the distinction between the ‘during’ prohibition of termination and ‘because of’ prohibition of termination is lapsed. The reasons underlying the request for dissolution are therefore decisive.²²xR.D. Rietveld, Prohibitions of termination, Sdu Employment law, Practice Notes.
  Are the multiple distinctions as set out in this paragraph also made within other systems? If so, does it effectuate protection of employees in vulnerable positions? How does this relate to a repressive dismissal control system?

• 4. Procedural aspects and terms

  As of 1 July 2015, due to the implementation of the Work and Security Act (Wet werk en zekerheid), short expiration periods have been introduced within which an application relating to the end of the employment contract by the employee must have been submitted to the courts. Pursuant to Article 7:686a subsection 4 of the Dutch Civil Code, an employees’ request regarding the termination of the employment contract must, in principle, be submitted to the court within two months after the day of termination of the employment contract. In case of a dispute about the payment of the transitional fee, a different period of three months applies. The previous dismissal law, usually contained a period of six months for employees to submit the dismissal claim. The rationale behind the introduction of these short expiration periods is to keep the period of uncertainty, about whether or not the employment contract has lawfully ended or about the amount of compensation, as short as possible.²³xParliamentary Papers II 2013/14, 33 818, No. 3, p. 37. However, these short expiration periods raise questions. For example, should they not be considered too short for employees? Moreover, the foregoing rationale only applies to the initiation process of proceedings. If an employee starts legal proceedings within the expiration period, there is uncertainty for a considerable period of time as to whether or not the employment contract is lawfully terminated and whether the employee has to be reinstated. After the employer has terminated the employment contract by giving notice (with prior permission of the UWV), the employee can file a case and claim – up to three instances – annulment of the termination or reinstatement.²⁴xArts. 7:681 and 7:682 Dutch Civil Code. Similarly, the dissolution route, can also involve up to three instances, in which the employer runs the risk of having to re-employ the employee at each instance. These procedures indicate that finding a balance between adequate legal protection on the one hand and implementation of rapid proceedings for both employees and employers to foster certainty on the other hand, are major challenges. In order to advance understandings of these challenges, it is interesting and important to see how foreign dismissal systems manage this balance. In other words, do foreign legal systems also have short deadlines for filing a dismissal claim? If not, are there other ways in which the importance of short expiration periods is fostered for both parties?

• 5. Payment during sickness

  5.1. Short term sickness

  An employee who reports sick is, in principle, entitled to continued payment of his salary. Depending on the contract, the employer must pay a certain percentage during a certain period of time (see the next paragraph). If, for example, the employee only works when he is called upon by the employer, he will not be paid during his sickness, unless he can claim his rights based on the substantial duration of the contract up to that moment. The right to receive income paid by the employer during sickness, does not apply to temporary agency workers, since their contract will be terminated from the first day of sickness and from that moment on, they fall under the scope of the Sickness Benefits Act. Again, the UWV is the public authority responsible for executing this Act.

  5.2. Long term sickness

  Until 1994, the Netherlands had a system in which the employer was forced to pay salaries during a short period of sickness of the employee and, thereafter, the employee could rely on sickness benefits. In case of lasting disability, social security pensions were offered as a benefit, the height depending on the level of disability of the employee. The former labour code obliged the employer to pay the full wage to the sick employee during ‘a short period of time’.²⁵xArt. 1638c Dutch Civil Code (old). After that, the authorities took over this responsibility, but only for 80% of the initial wage.
  Since 1994 the system has been reformed drastically. As of 1994 the employer was obliged to pay 70% of the initial wage of the employee during the first 6 weeks of sickness.²⁶xDutch Official Gazette 1993, 757. This percentage of 70% could be supplemented to 100% by collective labour agreement. After six weeks, the sick employee was entitled to a sickness benefit of 70%. In two tranches in 1996 and 2004 the period of six weeks during which the employer was obliged to pay at least 70% of the wage or at least the minimum wage, has been prolonged to 52 weeks (in 1996) and to 104 weeks (in 2004).²⁷xDutch Official Gazette 1996, 141 and Dutch Official Gazette 2003, 555. It was still possible to remedy the loss of wages and/or benefit by the employee by collective labour agreements. Whether that happened depended on whether employers and trade unions succeeded to conclude agreements in that regard. The amount to be paid according to the current law is 70% of the wage during the first 52 weeks or, if the remaining wage is below that minimum, the applicable minimum wage.²⁸xArt. 7:629 Dutch Civil Code. After 52 weeks the allowance can be lower than the regulatory minimum. Throughout the period the employer covers the lack of income of the employee due to sickness, this employee is not entitled to sickness benefits, as it is excluded by the Sickness Benefits Act.²⁹xArt. 19d Sickness Benefits Act.

  In addition, women who are sick because of their pregnancy also fall under the scope of the Sickness Benefits Act, so that the employer is exempt from paying the salary for that period of time. During pregnancy, the rules are slightly different, as the UWV once again pays a compensation to the employer, but only up to the annually determined maximum. The remaining amount must be supplemented by the employer, which only applies to employees with a wage far above the average.

  With full awareness of the extensive duration of sick pay compared to other countries, it will be interesting to understand how the continued payment of sick employees is regulated. Will a shorter period lead to problems for sick employees or will the government provide an adequate safety net?³⁰xIn 2015, at the request of the Minister of Social Affairs and Employment, the Netherlands Bureau for Economic Policy Analysis conducted a study into the effects of a shorter period of sick pay. This study showed that this would increase costs for employers (in the long run) and government, because the influx into the Capacity for Work Act would then increase. Netherlands Bureau for Economic Policy Analysis, Memorandum on the reduction of salary payments during sickness, 26 April 2015. The issue of the 104 weeks pay by the employer is still under discussion due to a possible heavy burden imposed on the small and medium sized enterprises.

  5.3. After two years

  Since the employer is responsible for payment of wages during sick leave, this obligation only exists as long as there is a valid employment contract. If the contract is in any way terminated before the 104 weeks expire, the Sickness Benefits Act shall apply. This Act is also applicable to former employees who have been sick for 104 weeks and whose contract is terminated by the employer. The Act contains sickness benefits regulations for another two years, depending on the progression of the sickness. After this period of another 104 weeks, the disabled employee falls under the disability act (the Capacity for Work Act), provided he meets the requirements for being eligible.

  5.4. Rehabilitation

  The employer must try to reintegrate the employee as soon as possible, not only because of the strict regulations that apply, but also to prevent a penalty of an additional year of wage payment to the employee.³¹xArt. 7:629 para. 11 Dutch Civil Code. This idea of ‘rehabilitating’ the employee as soon as possible was the reason for the radical change to 104 weeks of sick pay. An obligation³²xArts. 7:658a and 7:660a Dutch Civil Code. was imposed on employers and employees to jointly return the employee to the job or to other suitable jobs within the enterprise of the employer or, if the employer does not have this reintegration possibility, at the enterprise of a third party.³³xDutch Official Gazette 2001, 628. This is done with the support and guidance of a company doctor. The sanction on infringement of their obligations differs. If the employer does not make sufficient effort to reintegrate the employee, the obligation to continue the employee’s salary during sickness can be extended by another 52 weeks. The employer, on the other hand, can force the employee to stick to his rehabilitation obligations by stopping the payment of salary. This is possible in various situations.³⁴xArt. 7:629 para. 3 Dutch Civil Code. Three of them are quite evident: 1. sickness is deliberately caused by the employee, 2. the employee has provided false information during the recruitment procedure; 3. the employee impedes or delays recovery. All grounds must be proved by the employer, which is not common in case law. The most important and most applied ground is when the employee refuses or cannot provide a sound reason for refusing a suitable job offered by the employer, or when he refuses to cooperate with reasonable measures to that end. In case law, courts have aimed to clarify what falls under the scope of a ‘sound ground’ or a ‘suitable job’. However, it leaves room for interpretation.

  Throughout the whole period the employee receives salary whilst being unable to work due to sickness; he is protected against unfair dismissal.³⁵xArt. 7:670 para. 1 Dutch Civil Code. In the event of a reorganization of the employer’s enterprise, the sick employee cannot be dismissed.³⁶xArt. 7:670a Dutch Civil Code. This was a deliberate choice by the legislator to make it clear that the employer is responsible for the reintegration of a long-term sick employee even in times of reorganization. In that case, the employer will therefore have to dismiss another non-sick employee. Parliamentary Papers II 2013/14, 33 818, nr. C, p. 50 and Parliamentary Papers II 2014/15, 34 273, nr. 3, p. 20. It is only possible to terminate the contract of a sick employee during the first 104 weeks of sickness, for reasons unrelated to the sickness, such as a disruption of the working relationship or when the court, given the circumstances considers it in the interest of the employee to terminate the employment contract.³⁷xArt. 7:671b paragraph 6 Dutch Civil Code.

  All these rules and regulations lead to a high number of court cases in which the employer and employee disagree on reintegration, payment of wages and, as a result of ongoing discussions, disruption of the working relationship. In several cases the relation is so severely damaged, that it causes termination of the contract. However, in the light of the prohibitions of termination as discussed in paragraph 3, this is often disputable. Considered in combination with each other, one might argue that a shorter period of sick pay could lead to fewer conflicts, but perhaps other jurisdictions will shed another light on this assumption.

• 6. Severance allowances

  In case of dismissal, the employee could be entitled to four statutory severance allowances: the transition allowance, reasonable allowance, cumulation allowance and fixed damages.

  6.1. Transition allowance

  The transition allowance is due in case an employee is dismissed by the employer, regardless of the duration of the employment contract. Also, the employee with a fixed term contract whose contract is not followed up by a new contract, is eligible for transition payment. However, the employee loses this right in case of a serious culpable act or an omission made by himself and severe enough for the employer to terminate the contract immediately or through court under the ruling of the judge.

  The objective of the transition allowance is twofold. First, it aims to provide a form of financial compensation for dismissed employees. Therefore, the calculation method of the transition allowance is claimed to reflect the financial consequences of the dismissal.³⁸xParliamentary Papers II 2013/14, 33 818, No. 3, p. 34 and No. 4, p. 61. Secondly, the idea behind the allowance for the government was for it to be used by the employee to increase the chance of a new job, for example by using the allowance for training and education. However, employees are not obliged to use it for a smoother transition to a new position in any way.³⁹xParliamentary Papers II 2013/14, 33 818, No, 4, p. 11 and 88.

  In most cases, the end of the employment contract means payment of the transition allowance is due. If the employer falls short, the employee must file for payment within three months . After this period, the entitlement is lost. Placing such a responsibility on the employee is, while understandable for procedural and practical reasons, disputable. In addition, it is debated whether this financial obligation should exist at all in cases when the employment contract was terminated on a legitimate ground and in accordance with all the procedural rules, such as notice period. Do other countries have different arrangements that would be suitable for the Dutch system?

  6.2. Reasonable compensation

  The reasonable compensation can be granted by the court in various situations, as established in the law in different articles.⁴⁰xParliamentary Papers II 2013/14, 33 818, No. 3, p. 61. First, it can be granted in case of a serious culpable act or an omission by the employer.⁴¹xArt. 7:671b-8 sub c Dutch Civil Code, Art. 7:671b-9 sub b Dutch Civil Code, Art. 7:671c-2 sub c Dutch Civil Code and Art. 7:671c-3 sub b Dutch Civil Code. Furthermore, such a payment is in place in case the employee himself resigns due to voidability of previous termination by the employer.⁴²xArt. 7:681 Dutch Civil Code. In that case, the employee chooses for the employment contract not to be restored after a void dismissal⁴³xArt. 7:682 Dutch Civil Code. or the higher court chooses to do so if in their opinion restoration is not in reason.⁴⁴xArt. 7:683-3 Dutch Civil Code. The reasonable compensation is explicitly not meant as compensation for an incomplete dismissal case.⁴⁵xParliamentary Papers II 2013/14, 33 818, C, p. 86-87. Therefore, the employer cannot buy off an insufficient ground for dismissal as discussed in paragraph 2.

  There is no statutory calculation method for the reasonable allowance. The supreme court gave guidelines for circumstances to take into account, but it is up to parties to substantiate or refute any damage in order for the court to accumulate a fair amount. The amount depends (partly) on the specific circumstances of the individual case and on the resulting legal basis of the allowance.⁴⁶xSee for example N. Jansen & R.D. Rietveld, ‘De begroting van de billijke vergoeding in het arbeidsrecht’, TvO 2017/4. The nature of the allowance is not explicitly punitive.⁴⁷xSupreme Court 30 June 2017, ECLI:NL:HR:2017:1187 (New Hairstyle), under 3.4.5. The objective is not to create a deterrent effect or to penalize, but to compensate the employee for the damage suffered due to the fact the employment contract was terminated earlier than it should have when done correctly, whhich could even come to a few years’ salary.

  6.3. Cumulation allowance

  The cumulation allowance was introduced as per 1 January 2020 as a result of the entry into force of the Balanced Labour Market Act (‘Wet arbeidsmarkt in balans’ or ‘WAB’). In case the court terminates an employment contract on the cumulation ground (see para. 2, the ground is also referred to as i-ground), it can grant the cumulation allowance to the employee.⁴⁸xArt. 7:669 lid 3 sub i Dutch Civil Code jo. Art. 7:671b lid 8 Dutch Civil Code. The objective of the allowance is to compensate the employee for the fact that the termination is based on the cumulation ground and the fact that the dismissal case does not meet all requirements of one of the grounds for dismissal. The legislator has left it to the courts to fill in the benchmarks for the determination of the amount of the allowance, although there is a statutory maximum of 50% of the applicable transition allowance. One of the relevant aspects for determining the amount can be the question to what extent the requirements for the respective dismissal grounds are fulfilled.⁴⁹xParliamentary Papers II 2018/19, 35 074, No. 9, p. 57. This specific pay is most likely not found in other labour law systems. However, it fits the questions posed in paragraph 2 on how employers can reach a fair ground for dismissal and its criticism.

  6.4. Fixed damages

  In case the employer has unduly failed to take the applicable notice period into account, the employee is entitled to fixed damages regarding the notice period. Furthermore, the fixed damages are due in case of an unlawful immediate dismissal or in case the employer gives reason for immediate resignation by the employee. The amount corresponds to the gross salary over the applicable notice period, that, depending on the duration of the employment contract or a specific situation an employee finds himself, adds up to four months.

  A characteristic of the statutory severance payments under Dutch employment law is that the allowances are compensatory in nature. There is no explicit punitive or deterrent component. This is very relevant for the argumentation and determination of the reasonable allowance and the cumulation allowance. It may also be a relevant factor when negotiating a contractual severance payment in the context of a termination agreement, in which case the statutory severances generally form the starting point for the negotiations. It is interesting to see what the objective is of the statutory severances in the other jurisdictions, and to see to what extent this objective affects the calculation method or benchmarks for determining the amount of the allowance(s).

• 7. Social security in case of unemployment

  7.1. Introduction

  The income consequences of dismissal are partly cushioned by the transition allowance discussed earlier in paragraph 6.1, the aim of which is to mitigate the consequences of dismissal and to facilitate a transition to other paid employment. In addition, the termination of the employment relationship may give rise to entitlement to social security and, more specifically, unemployment benefits. The conditions for entitlement to unemployment benefits, its amount and duration, and how it is executed and financed are regulated by the Dutch Unemployment Insurance Act. A jumping point in the regulation of labour in the Netherlands is the question of how to guarantee fundamental protection against social risks for workers in view of the increase in new forms of work and an increase in flexible employment relationships and self-employed workers. And this, in essence, affects the scope of the Unemployment Act that provides protection against unemployment. Under the current system, not all workers are entitled to benefits under the Unemployment Act, but the scope of application is broader than that of workers with an employment contract. This section starts with a discussion of how the personal scope of the Unemployment Insurance Act (Werkloosheidswet, hereafter referred to as ‘WW’) is shaped.

  7.2. Personal scope: circle of insured persons

  The Unemployment Insurance Act is a compulsory ‘insurance’, meaning all insured persons are obliged to participate and financing is done through a premium system. Which groups of workers fall under the scope of the Unemployment Insurance Act, is determined by the law. Regarding insured persons, an employee must fall under the scope of the national definition of ‘employee’, which effectuates compulsory insurance of an employee under employment law under the Unemployment Insurance Act. In Dutch law a discussion is ongoing about the design and interpretation of the concept of ‘employee’. As with the European concept of employee, an employment contract (and therefore employee status) must be based on wages, labour and authority. Recently, the Dutch Supreme Court ruled that the intention of the party is irrelevant to the qualification of the employment contract.⁵⁰xHR 6 November 2020, ECLI:NL:HR:2020:1746. The interpretation of the concept of authority in Dutch law (i.e. case law, literature and policy) is subject to change. The change means that the interpretation is increasingly tending towards a formal or organizational approach in which embedding in the organization seems to become more important.⁵¹xFor an overview of the state of affairs in literature and jurisprudence see: concl. A-G De Bock 17 July 2020, ECLI:NL:PHR:2020:698. Incidentally, it should be noted that on-call workers, part-time workers and temporary workers are in principle regarded as employees, and, as a result of this qualification, they also fall within the scope of the Unemployment Insurance Act.

  The Unemployment Insurance Act is therefore primarily in line with the private law concept of employees as far as the circle of insured persons is concerned. However, not every worker falls within the personal scope of the Unemployment Law, because the Unemployment Law explicitly excludes a number of employment relationships, thus limiting the scope of the Unemployment Law. Examples are the director-major shareholder and domestic workers working less than four days a week.⁵²xArt. 6 WW.
  In addition, a number of workers who cannot be regarded as employees have been equated as such.⁵³xArt. 4 and 5 WW. This applies, for example, to homeworkers, athletes and artists who do not work on the basis of an employment contract.

  7.3. Conditions

  Once a worker falls under the scope of the Act, the second condition is actual unemployment. This is the case if there is a loss of a minimum number of working hours, whilst the insured person is available to accept work.⁵⁴xArt. 16 WW. The minimum number of hours needed is five. Furthermore, there must be absence of a ground for exclusion based on Article 19 WW.⁵⁵xA ground for exclusion may also terminate a right to unemployment benefit (Arts. 20 and 21 WW). The most common ground for exclusion, or, in most cases, delay of the benefits is the notice period. The right to unemployment benefits cannot arise as long as the legally applicable notice period has not expired.⁵⁶xArt. 19, paragraph 3 WW. This also applies in the event of termination by mutual consent, and therefore the employee has to make sure the applicable notice period has been taken into account when determining an end date to be agreed upon. In the event of early termination, an employee will have to file a claim with his former employer. Furthermore, the right to unemployment benefits is subject to the condition that the insured person has had at least one hour of work per calendar week in at least 26 weeks in the 36 weeks immediately preceding the first day of unemployment.⁵⁷xArt. 17 WW.

  Finally, unemployment must not be imputable to the worker. In the case of culpable unemployment, the Unemployment Insurance Act distinguishes between becoming unemployed and staying unemployed. The latter includes the obligation for the unemployed person to be registered as a job-seeker, to actively apply for work and the obligation to accept suitable work. If these obligations are not met, the UWV – as the enforcer of the Unemployment Act – must impose a measure. Its severity is related to the seriousness of the offence and the extent to which it can be imputed.
  If the employment contract has ended for instance with immediate effect⁵⁸xArt. 24 par. 2 under a WW in conjunction with Art. 7:678 Dutch Civil Code. or on the employee’s initiative,⁵⁹xArt. 24 para. 2 under b WW. unemployment is regarded culpable. In the event of an instant dismissal that cannot be imputed, a right to unemployment benefit can nevertheless be claimed. On the other hand, the UWV has its own discretion, which means that if an employer chooses not to dismiss an employee with immediate effect (or to delay the dismissal) and terminates the employment contract otherwise, whilst an urgent reason was present, this still can lead to culpable unemployment.⁶⁰xCRvB 7 November 2018, ECLI:NL:CRVB:2018:3469. Zie ook: G.C. Boot, ‘WWZ en (verwijtbare) werkloosheid’, ArbeidsRecht 2018/8. In the event of its own termination, the UWV must investigate whether there were any objections to the continuation of the employment contract to such an extent that the employee could not reasonably be required to continue it, before the UWV can establish culpable unemployment. An employee is not obliged to oppose termination of the employment contract on the initiative of the employer, not even if the employee had a real possibility to prevent the dismissal. In the Unemployment Act, agreeing to a termination or not putting forward a defence is not (any longer) regarded as an act of culpable unemployment.⁶¹xArt. 24 para. 6 WW.

  7.4. Height and duration

  Once qualified, the minimum of unemployment benefit is three months. Depending on the duration of employment history, this period may be extended up to 24 months. In that case an extra requirement is that the worker worked four out of five calendar years immediately preceding the year in which he became unemployed, and for at least 208 hours each of these years.
  In case of a collective labour agreement, the duration can be extended by an extra 12 months.

  The height of unemployment benefit depends on the initial income. The first two months unemployment benefit amounts to 75% of the monthly salary and from the third month 70% of the monthly salary. Any income will be deducted from the unemployment benefits. The result of the settlement is that the benefit will be lower, but in addition, an unemployed may keep his or her earned income, so that working always pays off and unemployed are stimulated to go to work. The monthly salary over which the benefits are calculated is capped, in the same way as described in paragraph 5 for the pregnant employee.

• 8. Conclusion

  The nature of Dutch dismissal law is highly protective. Employers need a reasonable ground for dismissal and cannot unilaterally terminate the employment agreement without the prior consent of the UWV or the court. Reasonable grounds are not easily accepted. Although this high level of protection seems beneficial for employees, the reality is that for this reason employers are often reluctant to agree on an indefinite employment agreement. Courts often struggle with the strict system of dismissal law. The ball is in the legislator’s court, but we hope to be inspired by the other jurisdictions for a system that is more in line with nowadays reality.

Noten

• 1 Act of 14 June 2014, Dutch Official Gazette, 2014, 216.

• 2 Parliamentary Papers II 2013/14, 33 818, No. 3, 5, 24.

• 3 Parliamentary Papers II 2013/14, 33 818, No. 4, p. 13-14.

• 4 See for example: ‘In wat voor land willen wij werken? Naar een nieuw ontwerp voor de regulering van werk’, Eindrapport van de Commissie Regulering van Werk, 23 January 2020, pp. 66-67.

• 5 These are: (a) economic reasons, (b) long-term (104 weeks) disability, (c) frequent and disruptive absence due to sickness, (d) dysfunction, (e) misconduct, (f) refusal to perform contractual obligations due to reasons of conscience, (g) disturbed working relationship, (h) other reasons indicating a continued labour relationship cannot be expected. See Art. 7:669 para. 3 Dutch Civil Code. Reasonable grounds (a)-(b) are assessed by the UWV, whilst grounds (c)-(h) are assessed by the subdistrict court.

• 6 Art. 7:671a Dutch Civil Code.

• 7 Art. 7:671b Dutch Civil Code.

• 8 Parliamentary Papers II 2013/14, 33 818, No. 3, 43.

• 9 Parliamentary Papers II 2018/19, 35 074, No. 3, p. 54.

• 10 See J.H. Bennaars e.a., Evaluatie ontslaggronden WWZ, HSI 2016; AR. Houweling, M.J.M.T. Keulaerds & P. Kruit, VAAN-VvA Evaluatieonderzoek WWZ, 2016, A.R. Houweling, P. Kruit & I.H. Kersten, ‘Evaluatieonderzoek ontbindingspraktijk 2015-2018’, TAP 2018/266; P. Kruit & I.H. Kersten, ‘Statistiek Ontbindingsprocedure 2018-2019: de Wwz werkt toch! Of toch niet…’, ArbeidsRecht 2020/16.

• 11 Act of 29 May 2019, Dutch Official Gazette 2019, 219.

• 12 The grounds for dismissal a, b and f are excluded from cumulation.

• 13 Art. 7:669 para. 3 under i Dutch Civil Code.

• 14 This means that the prohibitions of termination do not apply if the employee enters into a settlement agreement with the employer.

• 15 G.R. Oldenhuis, Employment contract, Article 7:670 of the Dutch Civil Code, note A.

• 16 The ‘during’ prohibitions of termination: sickness, pregnancy or maternity leave/sickness due to pregnancy, military service, membership of the works council and employee representation, membership of the works council preparatory committee, period that employee has been on the list of candidates or has been a member of a works council or employee representation body or occupational health and safety officer for less than two years, period that employee is a data protection officer and the period during which the employee is a member of the board of a pension fund (Art. 108 of the Pension Act).

• 17 The ‘because’ prohibitions of termination: because of trade union membership and activities, political leave, care leave, parental leave, adoption leave and leave to take up an adopted child, transfer of undertaking, refusal to perform Sunday work, the various discrimination prohibitions (Arts. 7:646, 7:648 and 7:649 of the Dutch Civil Code), request for adjustment of working time (Art. 3 of the Flexible Working Act).

• 18 Parliamentary Papers II 2013/14, 33 818, No. 3, p. 101.

• 19 In the event of redundancy for economic reasons, the applicable ‘during’ prohibitions of termination differ per situation (i.e. loss of jobs, termination of the business unit or complete cessation of business). This will not be further elaborated here.

• 20 The prohibition of termination does in this situation apply if the pregnancy or maternity leave has already started.

• 21 R.D. Rietveld, Prohibitions of termination, Sdu Employment law, Practice Notes.

• 22 R.D. Rietveld, Prohibitions of termination, Sdu Employment law, Practice Notes.

• 23 Parliamentary Papers II 2013/14, 33 818, No. 3, p. 37.

• 24 Arts. 7:681 and 7:682 Dutch Civil Code.

• 25 Art. 1638c Dutch Civil Code (old).

• 26 Dutch Official Gazette 1993, 757.

• 27 Dutch Official Gazette 1996, 141 and Dutch Official Gazette 2003, 555.

• 28 Art. 7:629 Dutch Civil Code.

• 29 Art. 19d Sickness Benefits Act.

• 30 In 2015, at the request of the Minister of Social Affairs and Employment, the Netherlands Bureau for Economic Policy Analysis conducted a study into the effects of a shorter period of sick pay. This study showed that this would increase costs for employers (in the long run) and government, because the influx into the Capacity for Work Act would then increase. Netherlands Bureau for Economic Policy Analysis, Memorandum on the reduction of salary payments during sickness, 26 April 2015. The issue of the 104 weeks pay by the employer is still under discussion due to a possible heavy burden imposed on the small and medium sized enterprises.

• 31 Art. 7:629 para. 11 Dutch Civil Code.

• 32 Arts. 7:658a and 7:660a Dutch Civil Code.

• 33 Dutch Official Gazette 2001, 628.

• 34 Art. 7:629 para. 3 Dutch Civil Code.

• 35 Art. 7:670 para. 1 Dutch Civil Code.

• 36 Art. 7:670a Dutch Civil Code. This was a deliberate choice by the legislator to make it clear that the employer is responsible for the reintegration of a long-term sick employee even in times of reorganization. In that case, the employer will therefore have to dismiss another non-sick employee. Parliamentary Papers II 2013/14, 33 818, nr. C, p. 50 and Parliamentary Papers II 2014/15, 34 273, nr. 3, p. 20.

• 37 Art. 7:671b paragraph 6 Dutch Civil Code.

• 38 Parliamentary Papers II 2013/14, 33 818, No. 3, p. 34 and No. 4, p. 61.

• 39 Parliamentary Papers II 2013/14, 33 818, No, 4, p. 11 and 88.

• 40 Parliamentary Papers II 2013/14, 33 818, No. 3, p. 61.

• 41 Art. 7:671b-8 sub c Dutch Civil Code, Art. 7:671b-9 sub b Dutch Civil Code, Art. 7:671c-2 sub c Dutch Civil Code and Art. 7:671c-3 sub b Dutch Civil Code.

• 42 Art. 7:681 Dutch Civil Code.

• 43 Art. 7:682 Dutch Civil Code.

• 44 Art. 7:683-3 Dutch Civil Code.

• 45 Parliamentary Papers II 2013/14, 33 818, C, p. 86-87.

• 46 See for example N. Jansen & R.D. Rietveld, ‘De begroting van de billijke vergoeding in het arbeidsrecht’, TvO 2017/4.

• 47 Supreme Court 30 June 2017, ECLI:NL:HR:2017:1187 (New Hairstyle), under 3.4.5.

• 48 Art. 7:669 lid 3 sub i Dutch Civil Code jo. Art. 7:671b lid 8 Dutch Civil Code.

• 49 Parliamentary Papers II 2018/19, 35 074, No. 9, p. 57.

• 50 HR 6 November 2020, ECLI:NL:HR:2020:1746.

• 51 For an overview of the state of affairs in literature and jurisprudence see: concl. A-G De Bock 17 July 2020, ECLI:NL:PHR:2020:698.

• 52 Art. 6 WW.

• 53 Art. 4 and 5 WW.

• 54 Art. 16 WW.

• 55 A ground for exclusion may also terminate a right to unemployment benefit (Arts. 20 and 21 WW).

• 56 Art. 19, paragraph 3 WW.

• 57 Art. 17 WW.

• 58 Art. 24 par. 2 under a WW in conjunction with Art. 7:678 Dutch Civil Code.

• 59 Art. 24 para. 2 under b WW.

• 60 CRvB 7 November 2018, ECLI:NL:CRVB:2018:3469. Zie ook: G.C. Boot, ‘WWZ en (verwijtbare) werkloosheid’, ArbeidsRecht 2018/8.

• 61 Art. 24 para. 6 WW.