Expat contracts & Dutch labour law

22 October 2012, by
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There were years when a permanent employment contract with a multinational company brought a plethora of benefits with it. From school fees and health plans for the entire family, from sabbaticals and fat end-of-year bonuses, it was all there, along with expat and housing allowances, great on-site sporting and leisure facilities, fancy company outings and lavish Christmas parties.

However, with the changing times and tides, incoming expats are increasingly offered contracts previously only tailored for local staff. The crisis has hit hard since 2008, at all levels, and even the big multinationals have had to cut back on their costs.

The first things to go were the perks and incentives that used to be part of the so-called "expat contracts" and nowadays, existing contracts will be subject to change, to match the current austere circumstances. Quite often such changes will be dismissed in court.

Unilateral changes to an existing employment contract
Under Dutch employment law, employers have the right to initiate unilateral changes in an existing contract. However, this is only allowed when an important reason is at stake. Reorganisation in order to cut costs is not considered to be important enough, while reorganisation due to financial difficulties is a valid reason for unilateral change.

So, what to do if your employer comes up with a proposal to change your existing contract according to the immediate needs of the company? Make sure you hold your breath and take it step by step, in order to identify your best options. If you feel that the proposed change affects your interest to an unreasonable extent, make sure to consult a lawyer.

Dutch judges are known to meticulously scrutinise each case presented to them, and having your facts and figures in order will definitely help your cause.

In the Netherlands, judges consistently consider the interests of the employer and the employee as being of equal importance. This fact often surprises people, because not many legal systems provide the same level of protection to employees.

The "golden handshake"
Assuming the Dutch Labour Relation Decree (LRD, in Dutch: BBA) applies in your case, the worst case scenario to hit you under the present global crisis would be a termination of your contract without the prospect of its renewal or alteration.

The LRD offers employees protection from unfair dismissal because the employer needs to obtain permission from the Dutch Dismissal Authority (UWV WERKbedrijf) in order to terminate an employment contract. If the LRD is not applicable, the employee has a weaker legal position. An employer may end the contract by giving notice.

In the Netherlands, redundancy packages (the so-called "golden handshakes") are calculated using a pre-set formula. The formula, the so-called Kantonrechtersformule (sub-district court formula, marked with a K), reads as follows:

K = A x B x C
K is the sub-district court formula
A is the number of weighted years of service
B is the gross payment per month
C is the correction / adjustment factor

Therefore, a change in the weighting of the years of service will have a negative effect on the amount of the redundancy package. However, it may very well be that C (the correction / adjustment factor) will become the loophole for internationals who plan to stay and work in the Netherlands.

contract signing
Photo by Flickr user nerdcoregirl 

Previously, Dutch labour law only took into consideration the "guilt" factor of either the employer or the employee. Since 2009 judges take into consideration the current labour market position of the employee, along with other specific circumstances.

Should your contract be suddenly terminated, it is very possible that your labour market position will be evaluated as being weak and vulnerable - not being a native Dutch speaker, for example, really limits your chances on the employment market. Other costs pursuant to the termination of the contract, such as repatriation costs, will also be taken into consideration.

Therefore, your compensation package would have to be adjusted to the case-specific circumstances, meaning that what would normally be seen as a handicap might actually turn to your enviable advantage.

Contracts for a definite period of time
As to contracts that are limited in time, Dutch labour law defines the situation as follows: in the case of contracts for a definite period of time without the possibility of early termination, the employer must pay the agreed salary for the remainder of the contract.

The company still might come up with a proposal for a golden handshake; however, should this not be satisfactory, the case is clearly working to the advantage of the employee.

In the case of a contract for a definite period of time that specifically includes earlier termination, a compensation is usually granted according to the sub-district court formula.

Conclusion
In all the cases described above, if the proposal of the employer concerning a unilateral change in the contract raises a dispute, it may be wise to consider an out-of-court settlement.

On the one hand, companies will often shy away from lengthy court cases; on the other hand, employees made redundant need all their emotional and financial resources they have in order to tackle the new situation. A mutually agreed-upon settlement reduces the bitterness on both sides, enhancing the employee's feeling of self-worth.

Luckily, reality is often less grim than all the theoretical scenarios listed above. Sound advice from a labour law expert can help reshape both the present and the future - be it in court or through an out-of-court-settlement.

The present article can not give you all the answers but I hope it might point you in the right direction!


Godelijn Boonman is Attorney-at-Law at GMW Advocaten / Legal Expat Desk. For more information, please comment below or contact her directly.



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Godelijn Boonman

Godelijn is partner of GMW Advocaten and is the head of the section employment law and the Legal Exp...

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