News Update Employment

4 August 2021

What constitutes an employment condition?

In 2018, the Supreme Court gave a much-discussed ruling on the question of when an employment condition exists. The ruling was given in the FNV v Pontmeyer case.

Pontmeyer, a trading company in building materials, applies the Collective Labour Agreement (CLA) for the Timber Trade. The employees who had been placed in a pay scale exceeding this CLA, and for that reason were not subject to the CLA, still received the usual CLA increases or indexations. Pontmeyer wanted to abolish this and introduce a salary increase that depended on individual assessments. The central works council agreed, after which Pontmeyer unilaterally introduced the changes. The Dutch Trade Union Confederation FNV argued that an employment condition was at issue, and therefore, Pontmeyer was not allowed to unilaterally change it. FNV initiated proceedings.

The parties litigated all the way up to the Supreme Court. In cassation, the Supreme Court ruled on whether a course of action can give rise to an employment condition applicable between employee and employer. The Supreme Court gave six viewpoints that are important when answering this question and referred the case to The Hague Court of Appeal for further consideration of the decision. The Hague Court of Appeal delivered its judgment, partly based on the viewpoints of the Supreme Court, on 25 May 2021. It concluded that it constituted an employment condition that Pontmeyer was not allowed to change unilaterally.

The judgments and their importance for employment law practice are discussed in more detail in this article. 

Are changes to the non-competition clause imminent?

Signs of improper use
Minister Koolmees has commissioned research into the operation of the non-competition clause in employment law. This was prompted by a motion adopted by the House of Representatives in response to signals that employers were increasingly using non-competition clauses to bind employees in a tight labour market rather than to combat unfair competition.

For this reason, the government has been asked to examine how the use of the non-competition clause can be limited to what is strictly necessary.

The motion asked that research (i) consider a ban on non-competition clauses in fixed-term contracts. Since 2015, the legislation for non-competition clauses in fixed-term contracts has already been tightened. In principle, a non-competition clause may not be included in a fixed-term employment contract unless there are compelling business or service interests. Employers must then clearly motivate this interest in the employment contract.

The ban on non-competition clauses in fixed-term contracts is in line with the Borstlap Committee's proposal. The latter goes one step further and proposes to include a duty to state reasons for a non-competition clause for open-ended contracts (as is already the case for temporary employment contracts).

The motion also calls for (ii) consideration to be given to the possibility of limiting the maximum duration and geographical scope of the non-competition clause in open-ended contracts and (iii) for an employer to be obliged to pay compensation if it compels an employee to adhere to the non-competition clause.

Investigation report
The investigation report shows that many employers include a non-competition clause as a standard clause in the employment contract, even for employees who do not have access to knowledge and business contacts that could harm the employer's competitive position. Often a duration of more than one year and multiple fines are included.

Furthermore, it appears that the purpose for which an employer includes a non-competition clause is not always clear to the employee. Although it is an improper use of the non-competition clause, one in three employers use it to bind hard-to-replace employees.

The survey shows that employers are satisfied with the non-competition clause and that there is little support for a mandatory maximum duration or compensation scheme. Employers who support reform are particularly in favour of a justification requirement for non-competition clauses in open-ended contracts.

Recommendations
The researchers recommend giving the non-competition clause a clearer profile by, for example, imposing stricter requirements on the reasons for the decision or by stipulating a fee. A non-competition clause with a clearer profile would, among other things, also make legal proceedings on this less unpredictable.

Minister Koolmees concludes that the investigation report in combination with the recommendations of the Borstlap Committee give cause to take a closer look at the non-competition clause. In the coming period, the aforementioned research questions and the proposals of the Borstlap Committee will be further elaborated. By the end of 2021, the Minister will inform the House of Representatives about the possible policy options.

We will keep you informed of developments.

Application for NOW 4.0 has opened

Turnover loss threshold
After some delay, the application for NOW 4.0 (Temporary Emergency Bridging Measure for Sustained Employment) opened on 26 July.

Since measures have been relaxed and companies have been allowed to open again, a complete loss of turnover as a result of the Coronavirus crisis is no longer to be expected. Therefore, the government has decided to maximise the turnover loss to be declared in NOW 4.0 to 80%. This means that even if a company expects to lose more than 80% of its turnover, a company can include a maximum of 80% loss of turnover in its application for NOW 4.0. The amendment does not affect companies with a turnover loss percentage between 20% and 80%.

Both the advance payment and the final determination of the subsidy are based on a maximum of 80% loss of turnover. The compensation percentage remains the same as in the second quarter (85% x loss of turnover), as does the minimum loss of turnover of 20%.

Additional conditions for payment of bonuses and dividends
As a result of a motion passed, an additional condition was included in NOW 4.0  to prevent companies from using the financial scope created by receiving NOW to pay bonuses to management board and board of directors, distribute profits or buy back their own shares. In NOW 4.0, companies are required to enter into an agreement with employee representation on how bonuses and dividends are handled when applying for NOW. This condition is in addition to, and not in place of, the obligations that already apply in relation to not being allowed to pay bonuses or dividends to the management board and the board of directors and not being allowed to purchase own shares.

Floods in Limburg
Companies affected by the floods in Limburg, and who consequently miss out on turnover, can also apply for compensation for wage costs under NOW 4.0. The same conditions apply to these companies as to companies applying for compensation of wage costs due to the coronavirus crisis.

The application period for NOW 4.0 runs retroactively from 1 July to 30 September 2021.