Planning to sign a contract of employment under Dutch law? What should you look out for?
Expatriate staff living and working in the Netherlands are generally presented with a contract of employment under Dutch law. But what exactly does this entail? What sort of pitfalls should you beware of? Is it a contract that could come to a sudden end, for example? How about aspects like probationary periods, non-compete clauses and the continued payment of your salary during a period of illness?
Temporary or permanent?
As in many other countries, a contract of employment may be concluded under Dutch law either for a specified or for an unspecified period of time. In other words, it may be either temporary of permanent. In the former case, the contract terminates on the expiry date specified in the contract.
However, if the period of employment specified in a temporary contract is six months or more, your employer is obliged to inform you, by no later than one month before the expiry of the contract, whether they wish to extend the contract and, if so, on which terms and conditions. If your employer does not notify you in this way, they incur a penalty of one month’s salary. If your employer does notify you but does so later than one month before the end of your contact, they are liable to a proportionate penalty.
As the name suggests, a contract of employment for an unspecified period does not expire on a set date. Instead, it may be terminated only if formally set aside by a court or if the Employee Insurance Agency (UWV) gives its consent to termination. In other words, under Dutch law an employment contract of unspecified duration affords employees a relatively high level of protection against dismissal.
Many contracts of employment stipulate a probationary period. Under the law, however, probationary periods are restricted to contracts of unlimited duration and fixed-term contracts of more than six months duration. In other words, if your contract is for six months or less and nonetheless specifies a probationary period, this period is not valid: there is no probationary period.
If you do agree on a probationary period, be aware that both parties, i.e. both the employer and the employee, are entitled to terminate the contract with immediate effect (i.e. without giving notice) at any time during this period. The permission of a court or the Employee Insurance Agency (UWV) is not required in order to terminate a contract during the probationary period. Nor does the terminating party need to cite any reasonable grounds for termination.
Working hours, salary, overtime and collective agreement
Staff employed full-time in the Netherlands generally work a 40-hour working week. How much you are paid is a matter of negotiation, taking account of the statutory minimum wage. In certain cases, you may be covered by a collective agreement (CAO). If so, your collective agreement will probably contain certain arrangements about the duration of a full-time working week, pay and overtime. If you are not covered by a collective agreement, your contract may stipulate that any overtime is unpaid.
Under Dutch law, your annual holiday entitlement (expressed in hours) is equal to at least four times the length of your contractually agreed working week. In other words, if you work a 40-hour working week, you are entitled to at least 160 hours’ holiday a year. Here too, a collective agreement will generally define your holiday entitlement.
Payment of salary during illness
Under Dutch law, you are entitled to receive 70% of your salary during the first two years of an absence from work due to sickness. This is generally also regulated in your contract of employment, which may also state that the level of entitlement during the first year of absence is higher than the statutory minimum, i.e. 80%, 90% or perhaps even 100% of your salary
Non-compete and non-solicitation clauses
Many contracts of employment contain a non-compete clause and in some cases also a non-solicitation clause. These restrict your ability to work either for competitors (in the case of a non-compete clause) or for former customers of your present employer (in the case of a non-solicitation clause) after your contract has come to an end.
This is something you need to think about very carefully. The fact is that you have probably come to work in the Netherlands because you have certain very specific expertise to offer. A ban preventing you from continuing to practise your chosen profession after your contract has terminated could have a dramatic impact.
A fixed-term contract of employment may contain a non-compete or a non-solicitation clause only if your employer has legitimate commercial reasons for doing so. They are required to set these out in writing in the contract. If a fixed-term contract of employment does not explain why a non-compete or non-solicitation clause is needed, the clause is automatically deemed to be void (i.e. invalid). And it is ‘voidable’ if an explanation is given, but if there are no legitimate commercial grounds for including such a clause. This means that a judge can declare the clause null and void if he is of the opinion that there are no legitimate commercial grounds for including such a clause.
If you are planning to enter into a contract of employment as a company director, you should bear in mind that you have fewer safeguards against dismissal than other employees. That’s why it’s particularly important to ensure that your contract contains suitable arrangements for protecting your rights.
Check and double-check
I would be more than willing to examine your contract of employment and discuss it with you. An extra check can help to avoid any unpleasant surprises further down the road.