The future of collective labor agreements for The Netherlands

12th of December | Door:  Barry Scheer

In the last couple of years we have seen a decreasing of the number of collective labor agreements in The Netherlands

Not only this, but also the fact that some new legislation can be prescribed in cao’s – that means that this will be a deviation from the basics of labor law – the need to know all about the cao’s is bigger than ever.

In Dutch law there is great part of freedom of agreements. Therefore, parties are able to arrange a lot of things themselves. Of course, in specific matters one of the parties must be protected, mostly the employee. In that matter Dutch law has prescribed a couple of laws to follow, that cannot be exceeded. Some other matters are important, but not in a way that the law has to prescribe this completely. To be most effective, it suits the best to regulate this kind of matter per sector. This is when that Dutch law only gives the possibility to exceed the basic legislation at this point (in disadvantage of employees) when it is regulated in a cao. So, you need a cao to exceed some basic legislations in labor law.

Also, the cao’s in The Netherlands are regulated by legislation themselves. By the way: When a foreign employer puts people to work in The Netherlands without settling its company in The Netherlands (Non-Resident-Employer: NRE), nearly all cao’s are not applicable in this situation. Most regulation at this point states that the employer has to be settled in The Netherlands.

(Note: Employees who are hired by a Dutch company, should follow the same rules as any other employee in that company. Whether foreign or not.)

If an employer is settled here, then several possibilities exist: If a cao is just agreed between parties – unified employers and unified employees – this cao is only first applicable between these parties. An employer that is a member of a union of employers is also held to this agreement of cao at that moment. An employer in the same branch that is not a member of such a union has no obligations to follow the cao at first. If this employer wants to participate, he is able to declare that cao applicable. In that case, mostly these employers will mention this cao applicable in the individual labor agreements to their personnel. In most situations the cao is submitted to the Minister of Social affairs and Employment to declare this cao binding by law for the total branch in The Netherlands. When this happens, all employers – unified or not – are obligated to follow the legislation by cao. The reason for this submission is that competition in the market won’t effect the terms of employment.

The need for cao’s in The Netherlands was decreasing. In the last couple of years several cao’s were not extended. All registered conditions concerning the employees during cao are still applicable after a cao has been dissolved. New employees can have other conditions in basic. However, we should be careful with that, because of the fact that no discrimination to employees must occur.

Another problem to be aware of is that suddenly employers conditions on labor agreements can change radically once a new cao is launched. For example: A cook in a restaurant. There is no cao submitted at one moment. The employer decides to raise the cooks wage. Then a new cao for the catering industry is launched with the agreement of raising all wages for 3 percent. The wage was already raised, but based on the new cao the cook gets a second raise.

From upcoming legislation we have concluded that more possibilities in cao’s can be arranged in favour of employers. One of these possibilities is the regulation on fixed-term contracts. The law states that the next contract which follows within six months of the other, should be counted in the chain of contracts. Once this chain of contracts leads to a total term of two years, also the intervals included, the employee should get an open-ended contract. Employers with seasonal work patterns are very unhappy with this situation. Now that our government informs that in cao’s more individual agreement is allowed to decrease the length of the interval to a minimum of three months based on seasonal work patterns, we predict that more employers are motivated to launch a cao. Also, this fact can be added in existing cao’s as well. Another big issue in The Netherlands is the retirement age of a lot of employers, not able to sell their company/business. So, they have to terminate their business, leaving them to pay the employees a transition fee. The transition fee is a kind of obligated dismissal fee. These retiring employers do not have the money for this. At least, they were not prepared for it, because this new regulation was launched in July 2015. The government will launch the possibility in cao’s to cancel the transition fee by dismissal on the grounds of business economic reasons. Another big reason to predict that employers are very interested to launch a cao which includes this. The government has also explicitly requested that more must be arranged at branch levels such as modernizing their employment situations in cao’s.

Therefore, we advise to follow all news regarding the cao’s developments in the future with great interest. We predict a lot of new regulations in existing cao’s and also the launch of several new cao’s. As we have explained in this column, the consequences of these developments can have serious effects on your employment agreements.