David Gibson, partner at DWF LLP, tells us about new trends in Labour Law and the example of Netherlands.

Changes in Dutch Labour law could signpost the way forward in the EU.

Engagement, Flexibility and Responsibility – The new mantra for Europe?

As part of meeting the challenges of coming out of global recession, European Union governments and employers are faced with addressing three mutually inter-dependent pillars of the new emerging form of the capital – regulatory - labour paradigm namely engagement (either collectively or individually); flexibility – (in relation to the way in which work is performed and under what type of relationship) and responsibility (namely issues of discrimination, liability, safe systems of work, remuneration).

The concept of flexibility is one which has recently come to the forefront. Flexibility can cover a multitude of relationship frameworks including fixed term contracts, part time contract workers, agency and casual workers. EU governments have increasingly considered such models to be useful in providing capital and employers room plan and adapt to emerging economic developments. A number of questions are now coming into sharper focus to ensure that such flexibility is not abused and has the unintended ramification of creating social dislocation, hence drawing on the pillar of responsibility to balance excessive flexibility.

A good example of this are the changes that are taking place in the Netherlands, where the government recently approved the Works and Security Act which is due to come into effect from 1 January 2015.

This legislation covers three areas – namely issues relating to dismissal, unemployment benefits and issues regarding flexible working. This article focuses on the latter.

The changes have the objective of getting the correct balance to enable flexible working whilst providing adequate protection for workers and “responsibility” from employers. The Netherlands employment paradigm has always been heavily infused with the principle of equality and protective measures. The new legislation seeks to ensure that any “rights gap” between workers on flexible contracts and permanent employees is minimised to prevent the entrenchment of a tiered workforce and to uphold the principle of “effective rights protection”.

The areas covered show an attempt to give flexible workers an element of certainty and clarity in relation to future intentions of the relationship; prevent the exploitation of the employee during the probationary period and allowing the flexible worker to enjoy the decision to be flexible by not being restrained from working (potentially) with other competitors. It therefore places a heavy emphasis on the concept of responsibility in the capital – regulatory – labour relationship. Concurrently the principle of engagement is also adhered to by providing a greater level of communication with the fixed term worker.

The mechanics of the system to be introduced on 1 January 2015 are as follows:

  • For contracts concluded on or after 1 January 2015, a probationary period within a fixed term contract of six months or less is void.
  • Fixed term employment contracts entered into on or after 1 January 2015 will also not be allowed to include a non-compete clause unless there is some firm business justification as to why one should be operative. Should an employer deem that a non-compete clause is important they must state in writing why this is so.
  • Finally, there is greater protection in relation to certainty for the fixed term worker as to the duration of the agreement. If the fixed term contract has a term of six months or more then the employer will be obliged to inform the employee (in writing) at least one month before the contract ends as to whether it will be continued and under what conditions. To enable effective rights enforcement, penalties for non-compliance have been introduced (which if there has been a total failure to inform the employee then a payment of one month’s gross salary will be paid). If the employee is tawdry in informing the employee, for example less than a month before the contract ends, then there will be a penalty of one day’s gross salary for every day that the employer has failed to inform the employee. Furthermore, if the contract is continued and the employer has not fully complied with the duty the contract will continue under the same terms and conditions as the previous one (for a maximum period of one year save where the contract was already transferred into an indefinite one by operation of Dutch law).

This is undoubtedly a ground breaking development in the Netherlands and it will be interesting to see whether this system is replicated elsewhere in the EU.

No doubt as the dialectic between the pillars of engagement, flexibility and responsibility continue, questions about the capital – regulatory – labour paradigm will come into sharp focus. Potentially, greater efforts could be made by governments and employers to seek effective engagement of fixed term flexible workers to undoubtedly maximise their skills matrix.

The views expressed are those of the author and do not represent those of the Law Society.