LEGAL

Crisis and Contracts, Changes and Chances - Hitting the High C’s in Confidence

Expat Contracts and Dutch Labor Law

By Godelijn Boonman

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

However, with the changing times and tides, incoming expats are increasingly offered contracts previously tailored for local staff, only. The crisis has hit hard, at all levels, and even the big multinationals are aiming to cut back on their costs. The first thing to go are the perks and incentives that used to be part of the so-called 'expat contracts' and, quite often, existing contracts will be subject to change, to match the present austere circumstances. Under Dutch labor law, employers have the right to unilaterally initiate changes in an existing contract; however, quite often such changes will be dismissed in court, should an out-of-court settlement of the dispute fail.

Dutch labor law allows for changes in an existing employment contract for good reasons only. Reorganization in order to cut costs is not among them – however, reorganization of the company due to financial difficulties is a valid reason for change.

Unilateral Changes to an Existing Employment Contract
It may therefore very well be that your employer will come up with a proposal to change your existing contract in order to meet the company’s immediate needs. Should this happen, make sure you take a deep breath and take it step by step, in order to identify your best options.

Under these circumstances the four questions to ask yourself are:
 Is the proposal reasonable?
 Am I being treated equally to others in my position?
 Have I been informed in full and on time, and did my employer justify the decision credibly?
 Does the proposal cover a transition phase?

If you cannot answer one, some, or any of these questions, it may be time to consult a labor law expert. Dutch judges are known to meticulously scrutinize each case presented to them, so that having your facts and figures sorted out clearly will definitely aid your cause. In the Netherlands, judges consistently consider the interests of the employer and the employee as being of equal importance.

The 'Golden Handshake' in 2009
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. In the Netherlands, redundancy packages, the so-called 'golden handshakes', are calculated using a pre-set formula. In 2009, this formula has changed, and, we are displeased to inform you, not to the employees' advantage.

The formula, the so-called Kantonrechtersformule (sub-district court formula, marked with a K), reads as follows:

K = A (the number of weighted years of service) x B (the gross payment per month) x C (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.

Previously, Dutch labor law took into consideration only the 'guilt' factor of either the employer or the employee. The new changes introduced in 2009 also take into consideration the current labor market position of the employee, along with other specific circumstances. Should your contract be terminated suddenly, it is very possible that your labor 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 for contracts that are limited in time, Dutch labor law defines the situation as follows: in the case of a contract 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 situation will clearly work to the advantage of the employee.

In the case of a contract for a definite period of time that does not specifically exclude earlier termination, no compensation is granted, if all applicable notice periods and other compulsory procedural details have been observed during the redundancy procedure. In this case, it is best to gather information on other employers in your field of expertise and activate all professional networks available, openly asking colleagues and friends for referrals and advice on where to turn to for new employment.

In all of 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 often will shy away from lengthy court cases; on the other hand, employees made redundant need all the emotional and financial resources they have in order to tackle the new situation. A mutually agreed settlement reduces the bitterness on both sides, enhancing the employee’s feeling of self-worth. Mediation in this field is proving more and more popular, as it saves costs and energy, leaving all parties with the feeling that their points of view have been heard and taken into consideration.

Luckily, reality is often less grim than all the theoretical scenarios listed. Sound advice from a labor law expert can help reshape both the present and the future – be it in court or through mediation. The present article cannot and will not give you all the answers, however, it might point you to the right direction for sharp advice and targeted action.

GMW labor law experts are fully at home in Dutch labor law, as well as being well acquainted with other international labor law systems. Consulting them will weed out the 'ifs 'and 'shoulds', bringing clarity into the situation you are confronted with. They have formed a 'crisis task force' that helps both employers and employees with their individual questions. Feel free to contact Godelijn Boonman at g.boonman@gmw.nl for a quick scan of your particular circumstances, or call 070 - 361 50 48 to make an appointment. For more information, please visit www.gmw.nl/en.
 

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