In this episode, we take a look at the current state of employment and labor law in the Netherlands. Amsterdam Employment and Labor partner Johanne Boelhouwer discusses the latest developments with Employment and Labor Junior Associate, Tjerk Bijlsma.

View the video or read the summary text below.

Some of the most recent and relevant developments in the Dutch employment and labor law landscape are:

1. Market developments

• Working from home remains a relevant topic.

In 2023, the Dutch House of Representatives adopted a bill that allows employees to more easily claim their right to work from home. Surprisingly, the Dutch Senate rejected the bill. But its initial adoption and the subsequent discussions that arose indicate that working from home will remain a relevant topic and will be something employers are going to have to deal with for years to come.

• Over the last year we have seen continued high inflation and high energy costs.

Partly as a result of this, many employers decided to reevaluate their organization and reorganize their business. Due to the high inflation and energy costs, many employees were expecting salary increases in order to keep up with inflation. In many situations this proved difficult as employers’ businesses were also suffering from the high inflation and uncertain market conditions. Over the past year, discussions frequently arose with employees on their entitlement to merit (or salary) increases in accordance with their employment contracts or the company’s employment conditions.

2. Independent contractors and the requalification of employment agreements

In the Netherlands, the employment market has been dealing with self-contractors requalifying as employees. Contractors are hired to do the same work as employees but without the legal protection employees receive. The Dutch Supreme Court made a ruling on this issue, after a case was brought before it by an employee union.

For both tax and civil law purposes, the requirements for paid employment are currently as follows:

1. The labor is performed personally.
2. There is a relationship of authority (hierarchy), where the employer determines how the work must be performed, and the employee has to comply with the employer’s instructions.
3. The employee receives remuneration for the work in excess of an expense allowance.

All of these requirements must be met (with limited exceptions, see below) to establish an employer-employee relationship and wage tax/insurance obligations for the employer. In 2020, the Dutch Supreme Court already ruled that key is the material work relationship between parties and that the intention of the parties prior to the performance of labor is of no importance.

The Dutch Supreme Court recently emphasized that all the circumstances of the case must be considered for the assessment of a paid employment relationship.

Regarding the requirement to perform the work personally (set out under 1. above) the Dutch Supreme Court has ruled that the fact that employees were allowed to get someone to replace them — which points towards independent contracting — does not stand in the way of requalifying the relationship with the contractor as an employment agreement. Especially if all other circumstances point towards an employment contract, the practical importance of the replacement option is considered minor. The same applies to the freedom to work or not to work.

Regarding the second requirement of authority (as set out under 2. above) the Dutch Supreme Court clarifies that a court may also look at whether the work being performed is organizationally embedded, i.e. whether the work forms part of the company’s core activities and is therefore part of the normal business of the employer’s company. This must be determined based on how the work is actually performed, in line with case law of the Court of Justice of the European Union and future legislation from the European Union for codification thereof. Consequently, further guidance of the Dutch Supreme Court in relation to the hierarchy requirement is not considered decisive, but just one of the factors that should be taken into account when qualifying whether there is a paid employment relationship.

Action point for employers — stay cautious when hiring independent contractors, as they might claim there is an employment agreement in place. Also, assess whether your model agreements are in line with practice in respect of dismissal protection as well as protection during illness, and, if an employment relationship is determined, the backlog of tax payments and social security contributions is dealt with.

3. Obligatory clawback provisions for financial institutions

A recent ruling by the Dutch Supreme Court on 17 November 2023 addressed a case involving a prominent bank in the Netherlands that was attempting to reclaim a bonus from an employee implicated in fraudulent activities. Notably, the bank had neglected to include a clawback clause in the applicable bonus guidelines, nor was such clause included in the employment terms with the concerned employee, contravening the legal mandate to clawback. Despite the absence of a specific clawback provision in the employment conditions, the Dutch Supreme Court stated that the bank could invoke the legal obligation to include such clawback provisions in the employment relationship as a valid ground for executing a clawback in this case.

Hence, to the extent Dutch remuneration rules are applicable, the obligation to claw back when an employee fails to meet the required standards and/or behavior (mainly in actions that led to a deterioration of the financial institution’s financial situation) in accordance with article 1:127 of Section 3 of the Financial Supervision Act (in Dutch: Wet op het financieel toezicht — Wft), also applies if a financial institution does not have (detailed) clawback procedures and detailed clawback criteria in the institution’s remuneration policy. Please note that the regulator is able to give directions and/or a penalty to the organization if this clawback provision is not complied with.

Action point for financial employers — consider assessing the remuneration policy on clawback issues and determine if a bonus clawback is required on a case-by-case basis — especially in the event of an employee not meeting the required standards and/or behavior.

4. Pensions

A new Pension Act came into effect on 1 July 2023. This change impacts every employer that has a pension scheme in place. In practice, almost all pension arrangements with employees and contracts with pension providers will need to be renewed. Although the deadline for transitioning to the new system is 2027, most contracts with insurance parties terminate at the end of the 2024, and those pension providers are no longer offering defined benefit schemes. Pension funds are also already preparing for the new system.

The main element of the act is that parties can no longer agree a defined-benefit pension scheme. This means that the new pension system will be contribution-based, contributions which can no longer be age-independent.

We have been advising employers on the renewal of their pension schemes; this includes guiding them on how to appropriately involve works councils and obtain individual consents of employees in order to successfully implement the renewal within the organization.

Action point for employers— contact your pension broker and/or legal counsel if amendment/renewal of the applicable pension scheme within the company is required and what the deadline is to do so.

5. Whistleblowing

The Dutch Whistleblower Protection Act (Wet Bescherming Klokkenluiders) was recently amended in order to implement the EU Whistleblowing Directive into Dutch law. The legislative proposal was passed by the Dutch Senate on 24 January 2023 and entered into force on 18 February 2023 for organizations , with more than 249 employees and on 17 December 2023 for organizations with 50 to 249 employees.

The new act includes the following key changes:

• Reporters now have the opportunity to report directly externally (outside their own organization).
• The act shifts the burden of proof: The employer will have to prove that the disadvantage suffered by the person reporting is unrelated to the report.
• The investigation department of the Dutch House for Whistleblowers (Huis voor Klokkenluiders) has been given sanctioning powers, including imposing fines (amount not yet known), namely in the event of retaliation, for failure to follow its instructions or if the organization in question lacks an internal reporting procedure.
• The act’s protection will be extended to the broader circle of natural persons and legal entities referred to in the Directive, instead of only former employees/public servants (e.g. self-employed persons, shareholders, board members, facilitators, interns, or even third parties closely associated with a reporter, such as colleagues or family members).

Action point for employers— assess whether a whistleblowing policy is mandatory/desirable for your company.