Is dismissal law in the Netherlands too stringent? Have older workers been caught in a ‘gilded cage’ of overprotection, which makes them afraid to change jobs and employers afraid to hire them? Will the plans of Minister Kamp of Social Affairs and Employment lead to employment at will? Is the current system fair? Will the reforms result in more economic growth?
Those are but a few of the questions raised during a consultation session of the Second Chamber of Parliament on dismissal law reforms. On June 28 a parliamentary committee speed dated with an impressive number of experts - economists, legal scholars and practitioners - and wanted to know their take on the necessity and impact of the reforms envisaged by the Minister. The experts couldn’t have disagreed more. They had different answers to the questions mentioned above. It is interesting to note that it wasn’t the traditional case of economists vs. lawyers, where the economists stress the need for more flexibility and the lawyers for fairness and legal certainty. The experts were divided among themselves. This means that the legislator, having heard several possibilities, has to make up its own mind.
Or, rather, the voter will have to. The plans on dismissal law, drawn up by the Minister as part of the reform package agreed on by the so-called Kunduz Coalition, are still somewhat sketchy. The results of the upcoming elections will be decisive for the fate of the proposals. It’s up to the new government – whenever it takes office – to decide whether or not to proceed with the plans, and if so, in what way exactly. In order to help you, the voter, to make up your mind, let me set out the gist of the proposed dismissal law reforms. (The plans are supported by the Kunduz Coalition Parties, and opposed by SP, PvdA and PVV, by the way.)
Currently, an employer who seeks to terminate an employment contract needs to get permission (a dismissal permit) from a public authority (the Uwv). Another possibility is to seek dissolution of the contract via the ‘kantonrechter’ (employment tribunal). The employer needs to show reasonable grounds for termination, e.g. financial problems, in order to get a permit or achieve dissolution. The employer is free to choose whether to terminate via the Uwv or to opt for dissolution. Employees are, usually, awarded severance payments by the kantonrechter in the case of dissolution, the amount being dependent on the age of the employee and years of service. If an employee has been dismissed via the Uwv, he can try to obtain damages on the grounds that his dismissal was manifestly unreasonable. ‘Try’ should be stressed here: it’s not easy to prove manifest unreasonableness. Furthermore, even if an employee succeeds in doing so, the amount awarded is usually way, way lower than in dissolution cases. Finally, employees of fixed term contracts should be mentioned. Their contracts terminate ex lege after the fixed term expires: a dismissal permit or dissolution are not required. There’s no right to severance payments. It’s estimated that 20 to 25 % of the workforce in the Netherlands is working on the basis of a fixed term or similar flexible contract.
At the heart of the reform plans is the abolition of the preventive check of dismissals by the Uwv or the kantonrechter. A repressive system will be put in place. After an internal hearing, in which an employee can discuss the necessity, date and conditions of his dismissal, an employer could proceed to dismiss the employee. The repressive check is performed by the kantonrechter: the employee can contest the fairness of the dismissal. The severance payments to be awarded by the court will be limited to a half year’s salary, maximum (the maximum may be doubled by the court when the dismissal is extremely unfair, e.g. discriminatory dismissal or termination as a result of bullying by colleagues.) Apart from limiting the height of those payments, under the reform plans the possible uses of the payments will be limited as well. Severance payments will serve as ‘transition budgets’ instead of golden handshakes: they will have to be spent on training, schooling and other activities aimed at re-employment. Employees on fixed term contracts may qualify for severance payments as well.
How to assess the plans? I will try not to add to the confusion, the dust raised in the battle between experts. A few observations, though, in favour of the plans. The current system is unfair, because of the dual system of termination. Even though the grounds for dismissal are more or less the same in the Uwv proceedings as in dissolution proceedings, substantial amounts are awarded in the case of dissolution only. Also questions can be raised regarding the effectiveness of the preventive check by the Uwv: in the vast majority of cases the permit is awarded. It seems that the Uwv deals mainly with open and shut cases, and that more contentious cases are brought before the court with a dissolution request. The latter cases are likely to lead to proceedings anyway. Furthermore, the proceedings leading to a dismissal permit might not meet the standards for a fair trial set out in article 6 ECHR. This might be a problem, since the award or refusal of a dismissal permit cannot be challenged directly in a court of law. Finally: the internal hearing, the requirement of reasonable grounds for dismissal and the repressive check by the court will prevent employment at will. In my estimation, the reforms will not result in ‘Blitz terminations’ (flitsontslagen).
Of course, there are disadvantages and flaws to the reform plans. But that’s no reason to keep the current system in place. Looking at that system – illogical, unfair, costly – I have the feeling that things can only get better.