Newsletter current affairs in employment law – Mr J. Sterk and Mr I. van Efferen

NEWSLETTER  “ACTUALITY LABOR LAW”

Modernization of the Sickness Benefits Act as of 1 January 2014;

1. The most important measure;
2. Consequences for employers;
3. self-insurer;
4. Conclusion;

Work and security bill submitted to the House of Representatives;

1. Protection flex workers (as of July 1, 2014);
2. Severance pay (as of July 1, 2015);
3. Dismissal route (as of July 1, 2015);
4. Unemployment Insurance Act (from 1 July 2015)
5. Conclusion

Modernization of the Sickness Benefits Act as of 1 January 2014

From 1 January 2014, an employer can remain financially responsible for twelve years for a temporary employee who has reported sick after his first working day. Pursuant to the Restriction on Sickness Absence and Disability Safety Nets Act (BeZaVa), which was introduced on 1 January 2013, a number of important changes are being implemented, including the financing of the Sickness Benefits Act.

The aim of the modernization of the Sickness Benefits Act is to limit absenteeism and the influx of employees with temporary employment under the WIA Act (Work and Income according to Labor Capacity Act). The cabinet believes that employers should make even more efforts to reintegrate sick employees with a temporary contract. This concerns employees with a fixed-term contract (flex workers) whose contract is not extended in the event of illness, who will receive a sickness benefit and/or subsequently, after 104 weeks, enter the WGA.

In this context, flex workers are understood to mean:

• employees with a fictitious employment relationship, such as home workers, trainees, commission workers or temporary workers, who fall ill;
• employees who leave employment sick;
• employees who fall ill within 4 weeks after the end of their employment.

The most important measure is that employers will bear a greater financial risk. Under the current regulations, a temporary employee who leaves employment sick can claim a benefit under the Sickness Benefits Act. This Sickness Benefit is funded from a sector fund for which employers pay a fixed premium. After two years of illness, a temporary worker can then enter the WIA Act.

As of 1 January 2014, a differentiated WGA and Sickness Benefits Act premium will be introduced for flex workers at medium-sized and large companies. The scheme will take effect retroactively, which means that an employer will pay for flex workers who left their employment on or after January 1, 2012 and for flex workers who were sick on or after January 1, 2010 and who were in employment on or after January 1, 2012. WGA (Work Resumption of Partially Disabled Persons Act). Allocation takes place on the basis of the ^1st day of illness. If this is within the employment contract or within four weeks after termination of employment, the payment burden is attributable to the (former) employer.

Consequences for employers

Due to the modernization of the Sickness Benefits Act, companies that work with many temporary workers run the risk of receiving higher costs from 2014. From 2014 onwards, all employees who leave employment sick after 1 January 2012 will be reflected in the differentiated sickness insurance premium. From 2016, the WGA costs will be added.

The amount of the premium depends on the category to which an employer falls:

1. For small employers – less than 10 times the average wage bill (€  302,000.= in 2013) – the premiums are determined entirely on a sectoral basis;
2. For medium-sized employers – between 10 and 100 times the average wage bill – the premiums are partly determined on a sectoral basis and partly individually (partial charging);
3. For large employers – wage bill more than 100 times the average wage bill per employee (€ 3,020,000.= in 2013) – the premiums are determined on an individual level (full charge; the higher the absenteeism of employees, including those with a temporary contract, the higher the premium)

The amount of the individual premium will be determined for each employer. This depends on the occupational disability risk at the specific employer. In other words, the higher the inflow of employees into disability schemes, the higher the premium. Medium-sized and large employers therefore have a direct financial interest in the reintegration of employees in order to keep premiums low.

The above classification also applies to the premium levy for the WGA. From 2014, an employer is also responsible (for a maximum of 10 years) for the costs of sick employees with a temporary employment contract if they receive a WGA benefit after 104 weeks of illness. For the 2014 premium bill, flex workers who have entered the WGA will be included in the premium differentiation for the first time. This only applies to (medium) large employers, this is not passed on to small employers. The inflow into the WGA of 2012 is therefore decisive for the 2014 WGA premium.

In order to further contain costs, the criterion for eligibility for Sickness Benefit during the second year of illness has also been changed. Until 2012, resuming ‘own work’ was the criterion for full reintegration. The former employee remained ill as long as he was unable to perform his own work. From 2013, the criterion for recovery has been broadened to ‘normal work’. The criterion will be whether the sick employee is able to earn a maximum of 65% of his old salary with “normal work”. The aim of this measure is to reduce the number of long-term sick people.

Self-insurer

The new regulation as of 1 January 2014 can therefore have considerable financial consequences for employers. In that context, it can be attractive for employers to become a self-insurer, since this way an employer retains control over the reintegration of the sick ex-employee. In the future, an own-risk bearer will not pay a differentiated Sickness Benefits Act and WGA premium, but will pay the Sickness Benefits Act and WGA benefit itself. A self-insurer is therefore personally responsible for the supervision and reintegration of a sick former employee. Whether self-insurer status is interesting for you as an employer depends, among other things, on the inflow of employees into disability schemes in the past and the employer category. For the WGA you can now only become a self-insurer for an indefinite period of time. With regard to flex workers, it is only possible to choose self-insurer status for the WGA as of 1 January 2016. And this can only be opted for if the employer is/becomes a WGA self-insurer for permanent staff as well. You can also reduce the risk of paying the WGA benefit to your occupationally disabled (ex-)employee for 10 years.  reinsure. Various private insurers offer options for this.

Conclusion

The amendment to the law can have a major financial impact for large and medium-sized employers. That is why it is advisable to keep a close eye on a number of things. It is important that as few employees as possible leave employment sick. In certain cases, it may even be more beneficial to retain sick employees instead of terminating the contract if they can resume work in the short term. If there is little or no prospect of recovery, the situation is different, in which case the higher wage costs and pension obligations do not always outweigh a longer duration of the benefit.

It is also important to keep good records of employees who leave employment sick and to properly check the decisions of the UWV (in which a benefit is allocated to the employer). It is becoming even more important to limit absenteeism as much as possible by means of a prevention policy, absenteeism guidance and active reintegration.

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Bill Work and Security submitted to the House of Representatives

On Friday 29 November 2013, Minister Asscher of Social Affairs and Employment sent the Work and Security Bill to the House of Representatives. The bill is an elaboration of the agreements made in April of this year in the social agreement and the budget agreement.

The proposal contains measures in three areas:

• Improving the legal position of flex workers;
• Streamlining the rules for dismissal and compensation changes;
• Adjustment of unemployment schemes.

The most important measures of the bill will be listed below.

Protection flex workers (as of July 1, 2014)

• Fixed-term contracts for a maximum of 2 years instead of the current 3 years. The interval within which contracts are considered consecutive is extended to 6 months. At present, employees are only entitled to permanent employment after three temporary contracts within three years. This new chain provision applies to (successive) contracts concluded on or after 1 July 2014, for contracts concluded before 1 July 2014 the ‘old’ period of three years continues to apply. The maximum number of contracts and the duration of the chain provision can be extended by collective agreement. Legal conditions are attached to this;
• A probationary period may no longer be agreed with a contract that lasts a maximum of six months;
• The employer is obliged to inform the employee whether the contract will be extended no later than one month before the contract expires;
• The chain provision and the transition payment do not apply to employees under the age of 18 who work a maximum of 12 hours. The current contract that an employee already has on his ^18th birthday does count in the chain provision;
• Tightening of the requirements for a non-competition clause in a temporary contract;

Severance pay (as of July 1, 2015)

• As of July 1, 2015, Asscher wants to replace the current severance payment with a transition payment. Every employee (temporary or permanent) who is dismissed after at least 2 years of employment is entitled to a transition payment, which must be used to get back to work as soon as possible. The compensation amounts to a third monthly salary per year of service and half a month’s salary for each year of service that the employee has been employed for more than 10 years. The reimbursement is capped at € 75,000 gross, or an annual salary if that is higher;
• For employees over the age of 50 who have been employed for at least 10 years, a transitional arrangement applies until 1 January 2020. For them, the amount of the transition allowance is one month’s salary per year worked over the years that they have been employed by the employer after their 50th birthday. Small employers (with 25 employees or less) are excluded from this transitional arrangement.

Dismissal route (as of July 1, 2015)

• Employers can no longer choose the route through which they fire an employee . Dismissal for business economic reasons and due to long-term incapacity for work usually goes through the UWV, dismissal for personal reasons through the subdistrict court;
• In the event of negligence on the part of the employer, the subdistrict court can still award compensation. The protection against arbitrary dismissal also remains;
• In the event of disagreement about the dismissal, it will be possible to appeal and cassation;

Unemployment Insurance Act (from 1 July 2015)

• The unemployed are more likely to have to work in work that differs from the work they did before they became unemployed. As of 1 July 2015, after 6 months of unemployment benefit (currently after 12 months), all work will be regarded as suitable.
• The duration of the new Unemployment Benefit will be gradually reduced from three years and two months to a maximum of 24 months between 2016 and 2019. At collective labor agreement level, employers and employees can make agreements about further additions.

Conclusion

However, the question is whether the intended changes to dismissal law will actually lead to a relaxation. An employer will still have to substantiate the dismissal of an employee very well. File structure is and will remain important. Employees can also appeal against a dismissal, which is currently not possible. The employee therefore has several options to oppose the dismissal. The question is how subdistrict court judges deal with assessing whether dismissal is seriously culpable or not. In addition, culpable dismissal due to employer’s actions can mean a higher severance payment. The employer can follow the official dismissal route, but can also propose dismissal by mutual consent. The employee can then negotiate a higher severance payment, for example based on the (current) subdistrict court formula. It is clear that a lot will change in the field of employment law.

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