Labor Market Balance Act: a brief update

Back in April 2018, I briefed you on the fact that labor law is (once again) undergoing a shake-up. I promised to keep you informed of developments. Meanwhile, the Internet consultation has taken place and the Council of State, the government's advisory body, has advised on Minister Koolmees' bill. Last week (November 7, 2018), the bill including the accompanying Explanatory Memorandum was submitted to the House of Representatives.

Background Proposal

In a nutshell, the new law seeks to narrow the gap between permanent contracts and flexible labor, among other things by making dismissal easier, making flexible work less attractive, and offering more protection to payrollers and on-call workers. According to the minister, the Work and Security Act (from 2015) did not sufficiently succeed in making permanent contracts attractive again. The WAB can therefore in a sense be seen as repair legislation to the WWZ.

Key changes

Some salient changes:

• The introduction of a "cumulation ground," which allows combining grounds for dismissal;
• Accrual of transition compensation will take place from the first day of work;
• The probationary period is extended;
• The chain rule will be extended again to three contracts in three years;
• Payroll employees are treated the same as "regular" employees;
• On-call workers who do not work a fixed number of hours must receive a firm offer after 12 months for a scope of work equal to the average number of hours worked in the previous 12 months. Thus, a zero-hours or min-max contract cannot last longer than one year.

Council of State

Both the Internet consultation and the advice of the Council of State are critical. According to the Council of State, the new law in general will not prove sufficiently capable of bringing about a better balance in the labor market. To achieve that, a "broader and more fundamental" approach is needed, according to the Council. Incidentally, in the Explanatory Memorandum to the WAB, Minister Koolmees also announces that there will be a broader package of measures, namely rules around the position of the self-employed and the (long) obligation of the employer to continue paying wages during illness.

The payrolling and probation proposals should not be introduced in their current form, the Council argues. However, other proposed measures may reduce certain bottlenecks. For example, it believes the introduction of the cumulative ground for dismissal and the adjustment of the transitional compensation scheme offer opportunities.

The submitted bill

Minister Koolmees has largely ignored the criticisms of the Section, which means that the submitted bill is largely similar to the draft version from April. The Lower House is going to consider the bill before it in the coming period. It is expected that there will be some changes. If the Lower House agrees with the proposal, the law will not yet be definitively effective, as this still requires approval by the Senate. My expectation is that both the Lower and Upper Houses, after the necessary debates and amendments, will agree to the bill. It is expected that the new law will actually come into effect from January 2020.

The Balanced Labor Market Act will of course be a regular topic of our blogs and current affairs meetings in 2019. If you have any questions before or in the meantime, please feel free to contact one of our attorneys.