June 1, 2021: drastic consequences for the temporary employment industry
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1. Introduction
1.1 On June 1, the period of general binding declaration (avv) of the two temporary employment collective labor agreements in the Netherlands – in short: the ABU collective labor agreement and the NBBU collective labor agreement – will end, and the temporary employment sector will enter a period without any valid collective labor agreement (CLA). From a legal and practical point of view, this is an important change for the 211,000 (2020) temporary workers.
1.2 As will be known, temporary employment employers have more freedom (especially regarding dismissal law) than other employers and they can deviate, sometimes drastically, from the normally applicable statutory regulations. The most important deviations can only be realized by means of a CLA. Consider the famous phase system (which is a long-term deviation from the chain regulation of Article 7: 668a BW) and the extension of the period during which a temporary employment employer can make use of the so-called temporary employment clause (Article 7:691 paragraph 2 BW). When the collective labor agreements expire, these deviations are in fact no longer legally valid.
1.3 In this contribution I will discuss the consequences for the temporary employment sector of the expiry of the avv period of these two CLA’s. On a sidenote: both CLA’s themselves will expire at the same time: the duration of the CLA’s and their avv are therefore adjusted to one another. We will see that many of the rules that are now so characteristic of the temporary employment industry will be put into question. This has everything to do with our collective labor agreement system. Let’s take a closer look at that.
2. Binding
2.1 Binding to the collective labor agreement is possible on three grounds, each of which has its own legal framework:
Members of the ABU or NBBU and their tied employees – union members): the normative effect of art. 9 The CLA Act ensures that the provisions of the CLA have an effect on their individual employment contract, including deviations from the law (“3/4 mandatory law”).
All employers and employees in the sector: General binding declaration binds employer and employee who fall under the scope of the collective labor agreement and thus also independent employers and their employees.
Unbound employees at members of the ABU and NBBU: incorporation in the employment or temporary employment contract – applied in practice by all tied employers in all employment contracts, for both bound and unbound employees. As a result, (employers and) employees are contractually bound and the CLA is therefore factually applicable
2.2 The aforementioned grounds for binding can coexist. For example, a CLA-bound employer can be bound in three ways: by avv, because he is an ABU or NBBU member and / or because he has a contractual agreement with an unbound employee about the application of the CLA (incorporation clause). If one of these grounds of binding ceases to exist, this will not (necessarily) have legal consequences for the other ground. A company may – for example – terminate its membership of the ABU or NBBU, but still be obliged to apply the collective labor agreement for the current staff (first of all because of the specific obligation of Article 10 of the Collective Labor Agreement, but also because of incorporation and ongoing avv). Termination of membership does not detract from the fact that provisions of the CLA that form part of the employment contract by virtue of an incorporation clause remain in force (contractually) (“aftereffect”, see below). The latter may still be the case after May 31, 2021.
2.3 The system of our CLA Act means that if both employer and employee are bound by the CLA provisions (by their membership of one of the CLA parties or by an incorporation clause), the CLA that expired on 1 June remains valid in the individual employment contract. But not as a CLA: the effect of the collective labor agreement “as a collective labor agreement” does end when that collective labor agreement expires. This means that the parties are free to make new agreements (the prohibition on making (worse) deviating agreements contained in Article 12 of the Collective Labor Agreement will then lapse). If they fail to do so, the old (CLA) agreements will de facto continue to apply, in other words: the employment contract incorporating those CLA provisions will continue.
2.4 This continuation, aftereffect, always applies if the collective labor agreement provisions form part of the employment contract through membership of a collective labor union and / or an incorporation clause. However, avv alone does not have any after effect. This means that if an employer is not a member of the ABU or the NBBU himself, but is only bound by the avv, he will in principle not be confronted with aftereffects after 31 May. This creates a difference between employers who are and employers who are not members of the ABU or the NBBU.
3. Some important consequences after May 31, 2021 (date of expiry of the collective labor agreement & avv)
3.1 Below I will discuss the most important themes related to the expiry of the collective labor agreements (as well as the general binding statement).
Temporary employment clause (“Uitzendbeding”)
The temporary employmenty clause included in both CLAs’, which constitutes a CLA deviation from the law (3/4 mandatory law), will in my view no longer be valid after May 31, 2021. An employment contract existing at that time can no longer be terminated from that moment on by invoking the clause (at least: no longer after 26 weeks after commencement, see below), because the (immediate) legal effect has not yet commenced on 1 June and a reliance on the clause thus no longer has a bass in a CLA. Temporary employment contracts entered into after 31 May 2021 are, of course, also not covered by the CLA extension. They fall back on the statutory regulation of Article 7:691 paragraphs 2 and 3 of the Dutch Civil Code, which means that the agency clause can no longer be invoked after 26 weeks (assuming that it has been agreed in writing). A written deviation from the law is of course not enough to maintain the collective labor agreement scheme.
Dissolving condition in case of illness
The same applies to the scheme included in both CLA’s, meaning that in the event of incapacity for work of the temporary worker, the temporary employment contract with temporary employment clause is deemed to be “legally terminated immediately after reporting sick with immediate effect at the request of the client”. In fact, this also concerns the application of the agency clause. I refrain from explaining the legal validity of this clause here, but note that that validity is seriously under discussion. In summary: the regulation that terminates the secondment in the event of illness will expire for all employers and employees in the sector on 1 June 2021.
Phase system
The phase system is also only possible in its current form because it is included in the CLA. The statutory regulation is that the regulation of Article 7:668a BW regarding the maximum amount of fixed-term employment contracts does not take effect until after 26 weeks, but this does mean that (after 26 weeks) a maximum of three fixed-term employment contracts can be concluded within three years thereafter. The current phase system is a deviation by collective labor agreement, permitted by Article 7:691 paragraph 8 of the Civil Code, but if there is no longer a collective labor agreement, the deviation in the phase system is also not possible. This is especially important for:
the aforementioned temporary agency clause: it expires after May 31, 2021. In effect, this means that employment contracts or agency work employment contracts arise without this clause (and then for an indefinite or fixed period, depending on the legal status of the contract at that time).
the deviation from the provisions on succession of fixed-term employment contracts:: there is no longer a 78-week phase A, because the deviation from article 7:668a Paragraph 1 jo. Paragraph 8 of the Dutch Civil Code (extension of the 26-week period to a maximum of 78 weeks) is no longer based on a CLA and is therefore immediately invalid after 31 May. The risk here is that if the employee, calculated back from 26 weeks after commencement of employment, has already had more than three fixed-term employment contracts, he will, by legal conversion, immediately have an employment contract for an indefinite period. However, it seems to me that we should not assume that too quickly. Parties did not have to take this into account. The mere expiry of a collective labor agreement in which a deviation from the law was permitted may not imply that the legal position of the parties will be radically changed retroactively. In short: one may “serve out” the last contract for a definite period, but a new contract outside the framework of the law is no longer possible.
Wages in the event of incapacity for work
The collective labor agreements have a scheme that is more favorable for the employee than prescribed by law (in short, the law reads: 70% continued payment of wages of maximum daily wages for 104 weeks). The collective labor agreements prescribe a continued payment of, in short, 90% in the first year and 80% in the second year. The question is whether this level of continued payment of wages, which deviates from the law, also applies after 31 May 2021. This appears to be the case due to the aftereffects of the CLA (see above). ABU and NBBU members and their employees will therefore continue to fall under the scheme of their expired CLA until new agreements are made. This also applies to new cases of illness. There is something special going on here for non-ABU and non-NBBU members. They were only bound by the avv. There is no aftereffect for them, so the starting point is always that they revert to the legal system immediately after the end of the avv (unless they have agreed otherwise). However, based on the case law of the Supreme Court (Hoge Raad), we may assume that there is a certain form of “aftereffect” with regard to employees who are already incapacitated for work at the time of expiry of the CLA. In practical terms, this means that an employee of a non-ABU or non-NBBU member who is ill on 1 June 2021, calculated from his first day of illness, retains the right to the CLA scheme for a maximum of 104 weeks thereafter. New sickness after 31 May 2021 no longer needs to be dealt with by non-ABU and non-NBBU members in accordance with the previous CLA.
Hirer’s remuneration
The same applies to this as what is stated about wages in the event of incapacity for work: the scheme in the CLA’s, which are now more favorable for employees than the law (Waadi) prescribes, have an effect for members and their employees, but for non-members the more limited regulations of Article 8 Waadi apply. This can therefore have an anti-competitive effect. This principle of aftereffect for members and no aftereffect for non-members applies to most of the two CLA’s (holidays, leave, working hours, exchange, facilities, etc.).
4. New collective labor agreement, other parties?
4.1 It is no secret that the delay in the new temporary employment CLA’s is due to disagreements between social partners. The ABU and the NBBU are free to attempt to conclude a new CLA with other parties after 31 May 2021. After all, there is no obligation to conclude a CLA with the same parties, certainly not if earlier consultations have not led to results. A legal action by large unions such as FNV and / or CNV to be admitted to the negotiating table again / yet will not be very successful. A Union will then have to demonstrate why a favorable result (read: a CLA) is likely.
4.2 There is a risk of social unrest. FNV and / or CNV could decide to take collective action to enforce a better CLA result. A strike will not be easily forbidden, certainly not if it concerns employment conditions and the person against whom the strike is directed is the direct opposite party to collective bargaining.
4.3 There is a legal objection that members of the FNV and / or the CNV do not consider themselves bound by the new collective labor agreements, because “their” union was not involved. In the past, courts have ruled that an incorporation clause did not relate to a subsequent collective labor agreement entered into by other parties. This is all the more important if the non-participating unions are large unions that previously did participate. I see a clear risk here for the ABU and the NBBU. After all, the new collective labor agreements will then not apply to a substantial part of the employees, and therefore not qualify for avv, so that non-members will not have to accept the new collective labor agreement.
4.4 In addition, the current CLA’s will in that case have an aftereffect, and that effect cannot simply be ruled out in the new CLA’s (after all, it concerns other parties). Then the undesirable situation will arise that some of the employees will fall under the new CLA’s, while a substantial other group will continue to be able to rely on the continuation of the CLA’s that ended after 31 May.
Summary
In summary, there are the following three risks for the ABU and the NBBU after 31 May if there is no new collective labor agreement:
Deviations from 3/4 mandatory law do not have any aftereffect (although one may ‘sit out’ the contract that deviates from statutory law), so the desired flexibility, now regulated in both CLA’s (in particular the phase system), disappears.
Employment conditions that do not contravene the law, have a continued effect on members amd employees who are bund by an incorporation clause, such as higher wages in the event of illness, but not for non-members who are only bound by avv. The latter fall directly back on contractual agreements (which may have been modified by the collective labor agreements, but that is not certain). This leads to competition on terms of employment.
A new CLA can be concluded with other parties, but this has consequences for the value of the incorporation clauses of current staff. There is a reasonable chance that it will be judged in court that an incorporation clause that pertains to CLA’s concluded with large unions does not relate to CLA’s concluded with other (smaller) parties. Furthermore, the number of bound employees will decrease if the large unions are not involved.