News

The transition compensation keeps the legislator and the judiciary occupied. Below a survey of recent developments and rulings, after a brief explanation of the general rules in connection with the transition compensation.

What does the law say?

The employer owes the employee a transition compensation when the employment contract has lasted for at least 24 months and:

1. The employment contract (i) has been cancelled by the employer, (ii) has been terminated at the request of the employer; or (iii) after an ending ipso jure has not been subsequently continued at the initiative of the employer

or

1. as a result of serious imputable acts or omissions of the employer, the employment contract: (i) has been cancelled by the employee, (ii) has been terminated at the request of the employee; or (iii) after an ending ipso jure has not been subsequently continued at the initiative of the employee.

Jurisprudence

There have been two recent rulings in which the judge has rendered a judgment about the payment of the transition compensation:

• According to the District judge (Kantonrechter) in Roermond (Limburg), no transition compensation is owed when the employment contract has not been continued at the initiative of the employer, but at the initiative of the (female) employee herself. In this case, the employee had not availed herself of the employer’s offer to do harvesting work after she had first done crop handling. Since the stated illness of the employee could not be verified and there was no proof of serious culpability on the part of the employer, the employee received no transition compensation.

The Limburg (Roermond) judge has confirmed the generally accepted view that when the employment contract has lasted exactly and so at least for 24 months, the employer is not required to pay the transition compensation to the employee.

Draft bill transition compensation on dismissal

On 23 March recently, the Council of State rendered advice on the “Draft bill with measures relating to the transition compensation on dismissal owing to commercial circumstances or long-term disability”.

The background to this draft bill is the financial pressure felt by employers now that, since the arrival of the Act employment and social security (Wwz), an employer also has to pay a transition compensation to employees whose contract is being terminated after two years of employment.

Besides, the bill proposes that the employer will not have to pay a transition compensation when an employee is being dismissed for commercial reasons and the collective agreement (CAO) does not contain a provision limiting unemployment or provides for a reasonable compensation. This compensation no longer has to be equivalent to the transition compensation.

The bill provides for a financial compensation of the employer for the payment of the transition compensation. The Employee Insurance Administration (UWV) will provide the compensation, but against a premium increase for the employer. The measure will also apply in situations in which the employment contract on or after the date of the entry into force of the Wwz (I July 2015) had been terminated or had not been continued, in order to prevent differences between employers who proceed to dismissal before or after the named entry date.

The Council of State wonders why the old system is not being revived, in which no compensation was owed after an illness lasting for two years. After all, with the compensation procedure the cause of the problem is not removed. In addition, the compensation regulation is expected to become relatively costly to implement and it will require a lot from the UWV. The Council of State therefore advises parties to reconsider the compensation procedure.

In addition, the Council of State advises on the transition compensation in cases of dismissal for commercial reasons. The legislator has proposed to make it possible to include in the collective agreement (CAO) a regulation deviating from the transition compensation. The Council of State advises to remove possible ambiguity by legally regulating that collective agreements (CAO’s) have to explicitly stipulate that a certain measure concerns a substitute compensation for the transition compensation. They also advise to include a provision for staff members who are not tied to the collective labour agreement (by universally binding declaration or membership of a trade union)

We will keep you informed of the developments of the draft bill.