What impact has the WAB had on the business community? The Balanced Labour Market Act (Wet arbeidsmarkt in balans, WAB) aims to reduce the differences between permanent and flexible work. Permanent work covers employees with an employment contract for an indefinite period, while flexible work covers on-call workers and employees with a temporary (fixed-term) contract. The WAB came into force on 1 January 2020. This law has now been in effect for more than six months, and it is time to take a first stock of the situation.

For SMEs in the cleaning industry, the blog below is somewhat different. If you are a cleaning-industry entrepreneur, please read our article at trade partner Clean Totaal.

What did the WAB actually bring?
The main changes under the WAB concerned:

• Widening of the chain rule
• Statutory scheme and higher unemployment insurance (WW) premium for on-call workers
• More protection for payroll employees
• Easing (or not?) of dismissal law
• Adjustment of the transition payment

Widening of the chain rule.
First, the chain rule. Employers may enter into 3 fixed-term employment contracts with an employee within a 3-year period. Previously, this was 2 years. The next contract (the 4th) then automatically becomes an employment contract for an indefinite period. A temporary contract also converts into a contract for an indefinite period if the chain of temporary contracts, added together, has lasted more than 36 months. From the day on which that period has elapsed, the last contract counts as having been entered into for an indefinite period. In principle, the chain starts counting again from the beginning if there is a break of at least 6 months between the contracts.

Some employers look for ways to escape these additional obligations. The Supreme Court was recently confronted with an employer who tried to circumvent the chain rule by hiring the employee, after 2 years, via a secondment agreement with a payroll company. The Supreme Court ruled that this simply also results in an employment contract for an indefinite period arising. In doing so, the judge looks primarily at the actual circumstances in the workplace.

Statutory scheme and higher unemployment insurance premium for on-call workers.
To make permanent employment contracts relatively more attractive, alternatives such as on-call contracts are made more expensive by the WAB. On-call workers are employees who do not work a fixed number of hours at fixed times. Think here of zero-hour contracts and min-max contracts. The unemployment insurance premium for on-call and temporary workers has been 7.94% since this year. For employees employed for an indefinite period, an unemployment insurance premium of 2.94% is paid as of this year.

As an employer, one must, via a signed addendum before 1 July 2020, have “active consent” from all employees who were already employed for an indefinite period before 1 January 2020, in order to be eligible for the low unemployment insurance premium. If these conditions are met, the employer can, with retroactive effect, apply the low unemployment insurance premium for the employee concerned from 1 January 2020. If the conditions for the low unemployment insurance premium are only met after 1 July 2020, then the low unemployment insurance premium applies to that employee only from that moment onward.

It is sufficient to confirm to an employee by email that he or she is employed for an indefinite period. The employee can then respond with a single reply by email. You then save this email in the payroll records. A tacit renewal is not accepted by the Tax and Customs Administration, even if an employee has already been employed for an indefinite period for years.

Experiences in practice.
This adjustment has led many entrepreneurs to update existing employment relationships that were already, legally, for an indefinite period (because of the chain rule). In doing so, employees who had already been employed for a fixed term for a longer period were, in many cases, primarily given an accelerated offer to move to an indefinite-period contract. Not a strange consequence, given the more favourable tax circumstances.

Offer of a fixed scope.
Furthermore, employers must make a written offer of a fixed number of hours to an on-call worker who has had an on-call contract for longer than 12 months. That offer must be based on at least the average number of hours that on-call worker worked over the past year. In addition, since the introduction of the WAB, the employer must inform an on-call worker in writing or electronically, at least four days in advance, when he or she has to come to work. An employee with an on-call contract will, in principle, soon be entitled to observe a notice period of four days (unless a shorter period has been agreed in the collective labour agreement or preliminary agreement).

Practical experience with the mandatory offer.
In our practice, we notice that employers are still not well informed about the mandatory offer of a fixed number of hours for on-call workers. As a result, a (written) offer is often not made. Employers are thereby running a significant risk. It often happens that on-call workers are alerted by acquaintances to the fact that they are actually entitled to fixed hours. Usually you can resolve this in good consultation with the employee and still make the offer. But especially in the event of a conflict or dismissal, and with the assistance of a lawyer, the employee will start claiming lost income if no offer has been made. That can add up considerably: the employee can, in fact, claim the lost salary based on the fixed number of hours up to as much as 5 years later, with statutory interest and a 50% statutory increase. We therefore advise employers to set up a notification each year for the moment an on-call worker has been employed for 12 months. As long as the employee still qualifies as an on-call worker, a new offer must, after all, be made every 12 months. The fact that the offer is possibly declined because the employee also wants to remain working flexibly does not change this.

More protection for payroll employees?
Payrolling concerns the hiring of employees who are on the payroll of payroll companies rather than the hiring company. The difference with secondment (uitzending) is that payroll companies do not mediate between supply and demand in the labour market. The payroll worker is recruited by the “hiring company” (the company where the work is carried out) and not by the payroll company. This person is then put on the payroll of the payroll company, and the hiring company pays a fee to the payroll company.

Since the introduction of the WAB on 1 January 2020, payroll companies can no longer make use of the favourable rules that apply to secondment agencies, such as the wider chain rule and the secondment clause (if the hiring company stops using the seconded worker, the seconded worker no longer needs to be paid). Payroll employees are also entitled to the same terms of employment as the permanent employees who are employed by the employer in an equal or comparable position. In addition, payroll companies must offer payroll employees an adequate pension scheme.

Practical experience with the new payroll rules.
The business model of payroll companies has been thrown considerably off balance by the new rules. Employing payroll workers was set to become much more expensive. In practice, we see that payroll companies nevertheless stick to their old business model. They try, through a sham construction, to still be regarded as a secondment agency. In doing so, they unlawfully make use of the secondment clause and immediately push the payroll worker aside as soon as there is no more work. This happened a great deal during the coronavirus crisis. However, the explanatory notes to the law are clear, and the courts will therefore certainly put a stop to this kind of abusive construction. The only question is when this will happen. Employees in sectors where a lot of payrolling takes place, such as cleaning or hospitality, often do not have the knowledge or the financial means to pursue this and start proceedings. Perhaps the trade unions are already playing a bigger role here.

Adjustment of dismissal law.
Furthermore, dismissal law was supposed to be eased with the introduction of the WAB. Employers can dismiss employees when there is a “reasonable ground” for doing so. These reasonable grounds are described in the law and can broadly be divided into 3 categories: economic dismissal, long-term illness, and personal grounds. The procedure for dismissal on personal grounds, such as underperformance or a disturbed working relationship, goes via the subdistrict court. There, a request for dissolution must first be filed. The judge is very strict in assessing this. To be successful, the employer had to fully substantiate one reasonable ground and have a well-documented file ready. This high threshold for dismissing employees with an indefinite-period contract has meant that many entrepreneurs, where possible, preferred a fixed-term contract.

Introduction of the i-ground, is dismissal easier?
Because politicians considered this undesirable, a new ground for dismissal was added on 1 January 2020. This is the so-called i-ground, also known as the cumulation ground. The point is that there is a combination of several grounds for dismissal that are not, individually, fully satisfied, but that, in combination, are such that dissolution is still the only solution. When the judge grants an i-ground request for dissolution, the judge can award a higher severance payment of up to a maximum of 150% of the statutory transition payment. This can be seen as a sanction for the employer if the judge considers it the employer’s fault that no “full” ground for dismissal can be substantiated.

With the introduction of the i-ground, it was expected that dismissal would become a lot easier in 2020. There was particular interest in whether one could now put forward two “partial” grounds for dismissal before the judge and whether dissolution would then always follow. That, however, turns out not to be the case: the first seven i-ground cases were, in fact, all rejected by the subdistrict courts. So what is going wrong? It turns out that the employer must, in any case, explain very clearly why the situation is such that the parties can no longer work together and dismissal is the only option. Furthermore, a good file must still be in place to substantiate the presence of the not-fully-satisfied grounds. If the file is too sparse, this will not be repaired by invoking the i-ground. The first cases show that the employer must always demonstrate that there is at least one almost fully satisfied ground for dismissal. The employer must also demonstrate that it has done its best to improve the situation. If the file is insufficient for dismissal due to underperformance, the employer cannot then go on to disturb the working relationship itself, so that dissolution can subsequently be successfully requested.

Adjustment of the transition payment.
For temporary employees too, it is now the case that entitlement to a transition payment exists from the first working day. Previously, an employee was only entitled to a transition payment after 24 months of employment. The employee is entitled to this transition payment if the dismissal, or the non-continuation (fixed term), comes from the employer. Previously, the employee built up a higher transition payment the longer he was employed. After ten years, the employee was even entitled to half a month’s salary per year worked. With the introduction of the WAB, the amount of the transition payment is now 1/3 of a month’s salary per year of service for every employee, regardless of the length of employment and age. This change means transition payments will turn out relatively lower in the case of long periods of employment.

Conclusion.
Does the WAB now mean that employers are offering more permanent contracts to employees? It is actually still too early to pass judgment on the WAB. Earlier this year, the unprecedented tightness of the labour market clouded the picture. Now, the measures against the further spread of the coronavirus are causing an unprecedented slowdown in business activity.

What is clear, however, is that there is a need for change. Flexible workers still find themselves in the corner taking the hardest blows. Despite the fact that the NOW scheme for continued wage payment encourages employers to also retain their temporary workers, those workers were nevertheless let go more quickly.

Experts say the WAB is only a first step towards more certainty for the more than 2 million people currently working under a temporary or on-call contract. Without accompanying legislation, employers will shift to cheap (sham) self-employed contractors. Legislation for this latter group of workers is currently being developed. In the longer term, it is expected that the entire system will be overhauled. Currently, everything revolves around the permanent contract, while 35% of all working people are now flexible workers.

Advice/questions?
The corporate legal advisers at The Legal Company specialise in employment law for SMEs. If, in light of the above, you have any questions or would like legal advice or support, please contact us by filling in this contact form or calling us on: 020-3450152.

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Nothing changes as often as laws and regulations. We would like to point out that our blogs may no longer be in line with current laws and regulations and may therefore be outdated. If you have questions or a problem relating to this blog, or if you require legal assistance, please contact us.