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First judgments on the Dutch Work and Security Act

August 25, 2015
Martyn Top, Höcker Advocaten, The Netherlands

Hocker-logoA great deal has been said and written about the Dutch Work and Security Act (Wet Werk en Zekerheid) (“WWZ”). It was expected that the act would make it harder to dismiss employees, because employers would have to use a restrictive list of grounds for dismissal, and the court would only agree to an employee’s dismissal if a ‘fully developed’ ground was put forward.

This sets tough requirements on building up a file. If a fully developed ground is found to be present, then in principle, transitional compensation will be awarded, and only under special circumstances will it be possible to award, what is called, “fair compensation”.

The legislature also introduced new rules that make it more difficult to include a non-competition clause in a temporary employment contract. Such a clause will only be valid if an employer has stipulated a substantial business interest in the non-competition clause (in writing). Even after lectures and seminars and after doing research of their own, many employers still have questions. For example:

  • When can there be a substantial business interest that justifies the inclusion of a non-competition clause in a temporary employment contract?
  • How ‘strictly’ will the court apply the restrictive grounds for termination?
  • When will it be possible to award fair compensation rather than transitional compensation?

The first tranche of the WWZ (flexible employment legislation) came into effect in January of this year. Since the second tranche (law of dismissal and provisions on successive fixed-term employment contracts) came into effect as of 1 July and the first court judgments have been delivered, it’s time for an update.

Non-competition clause
On 23 July 2015, the Amsterdam District Court delivered a judgment in provisional relief proceedings between an employer (a secondment company) and an employee hired as a Consultant Banking & Insurance on the basis of a fixed-term employment contract. The employment contract included a non-competition clause which stated reasons for the substantial business interests. These reasons were based, on the one hand, on the employer’s investment in training the employee, and on the other hand, on the employee’s acquisition of knowledge about the network built up by the employer, the market territory, the needs and working methods of the employer.

The court ruled that the latter should have been substantiated in more detail, and moreover, that it had not been explained what specific knowledge and/or (confidential) business information this employee would acquire that would merit being protected by a non-competition clause. The court also found it relevant that the employer was a secondment company and that employees would be seconded to various clients, and would generally not work for the employer itself. The employer had insufficiently substantiated why the investment in training could not be protected by a study costs clause or a confidentiality clause. End result: the non-competition clause was declared void.

Tip: in stating reasons for a non-competition clause in a fixed-term employment contract, if you refer to terms such as market territory, competitive position, working methods, etc., be sure to explain these terms in greater detail. A business plan may provide the necessary information.

Grounds for dismissal
The first substantive and published judgment on dismissal under the WWZ involved the dismissal of a school manager. The manager had been employed since 1980 and had been the school manager since 1 August 2003. This manager’s performance had been the subject of discussion for several years: he had had coaching and supervision, and none of the manager’s colleagues had any confidence that his performance would improve. In this case, the school had definitely weighed up all the factors. At a certain point the school management had suspended the manager, and subsequently pointed out to him a number of vacancies in the foundation where he was employed. The vacancies were for teaching posts, which the manager did not consider suitable.

The court terminated the employment contract on the grounds of section 7:669(3), opening words under (d) of the Dutch Civil Code (unsatisfactory performance). The manager was eligible for an employment benefit in excess of the statutory minimum pursuant to the Dutch Unemployment Insurance Scheme for primary education personnel. This meant that he had no right to transitional compensation. There was also no scope for fair compensation – the court ruled that there was only scope for this in the event of seriously culpable acts or omissions on the part of an employer, which would be the case, for example, if the employer had grossly failed to meet its obligations arising from the employment contract and this had led to disturbed working relations, or if an employer put forward a false ground with the sole object of creating an unworkable situation. None of this had happened in this case.

The efforts an employer must make with regard to an unsatisfactorily performing employee depend on numerous factors, one of which is the duration of the employment.

Tip: A process must in principle comply with the requirements arising from chapter 25 of the Employee Insurance Agency (Policy Rules for Dismissals) Order 2012 (Beleidsregels Ontslagtaak UWV 2012) as they applied until 1 July 2015. The rules are fairly detailed. The following checklist can be used as a guideline:

  • The unsatisfactory performance is not a consequence of illness or incapacity on the part of the employee;
  • The employee was informed of his unsatisfactory performance in good time;
  • The employee was given an opportunity to improve his performance;
  • The unsatisfactory performance is not the consequence of insufficient training;
  • The unsatisfactory performance is not the consequence of insufficient attention to the working conditions;
  • It is not possible to reassign the employee to a suitable position within a reasonable period (take the notice period into consideration) (this obligation applies not only in the event of dismissal for commercial reasons);
  • Extra training will not lead to improvement;
  • The employee has been informed that if his performance continues to be unsatisfactory, his employment contract will be terminated.

In my experience, the example discussed above is not necessarily typical in practice. Under similar circumstances, different employers would perhaps have tried to dismiss the employee sooner. How much effort is ‘enough’ according to the WWZ cannot be answered by only one court judgment. So we will have to wait and see whether employers with less well substantiated cases do manage to achieve a dismissal.

Miscellaneous: obligation to give notice, trial period
The seemingly simple rules in relation to trial periods and the obligation to give notice have nonetheless led to a few published judgments. Obligation to give notice Put briefly, the obligation to give notice means that an employer must inform an employee with a fixed-term employment contract (one that ends on a certain calendar date), in writing, at least one month before it ends as to whether or not his contract will be continued, and if so, under what conditions. Various media have reported on the employer who terminated an employment contract by WhatsApp. In this case the employer had given notice by letter. The employee said that he had not received the letter. However, some time later the employee replied to a WhatsApp message in which the employer said, in so many words, that she wished to terminate the employment relationship. According to the court, she had thus complied with the obligation to give notice. Seeing as the legislation does not define how ‘written notice’ must be given, an employer has a wide range of options by which to comply with this obligation. I would not advise you to give notice by texting, but if it is not clear whether written notice in the form of a letter has reached the employee, a text message might just salvage the matter. Trial period Under the WWZ, a trial period may be agreed in fixed-term employment contracts with a  duration longer than six months. A trial period cannot lawfully be agreed in an employment Martyn Topcontract for six months, as was confirmed by the Central Netherlands District Court in a judgment of 13 May 2015. An employment contract with a duration of six months and one day does meet this condition.

In conclusion
More judgments relating to the WWZ will be published in the near future. In due course Höcker will organise a seminar about our initial experiences with the WWZ. Naturally, this will also cover the case law in this field.