Questions and challenges during COVID-19: Dutch employment law, tenancy law and contract law

Publication date: 13 September 2021
In this article, we will discuss several questions and challenges in the field of Dutch employment law, tenancy law and contract law during COVID-19.

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A. Employment law

Dismissal law

Questions and challenges during COVID-19: Dutch employment law, tenancy law and contract law | Russell Advocaten AmsterdamDutch labor law remains the same during COVID-19. This means, as a starting point, there is a distinction between temporary and permanent contracts. An employment contract for a fixed term automatically ends on the final date as mentioned in the contract. The only obligation for the employer is that upon the expiry of a fixed-term employment contract lasting six months or longer, the employer must notify the employee at least one month before the employment contract expires about (1) whether or not the employment contract will be renewed and (2) the conditions under which the employment contract might be continued.

In principle, it is not possible to terminate a temporary employment contract prior to the agreed end date, unless this is explicitly agreed upon in the contract (unilateral amendment clause) or the contract is terminated with mutual consent. Then, the same rules for termination apply as in the event of a termination of an employment contract for an indefinite period of time:

1) Mutual consent

An employment contract for a(n) (in)definite period of time may be terminated with mutual consent. The arrangements concerning the termination must be laid down in writing in a settlement agreement. Please note that when an employee agrees to the termination of the employment contract by signing a termination agreement or by giving his consent in writing, he will be granted a 14-day reflection period. Within this period, the employee is entitled to withdraw, in writing, his consent to the dismissal without giving any reasons.

2) UWV proceedings or legal proceedings

What if the employee does not agree to terminate the employment contract with mutual consent? The employer then requires one of the nine statutory reasonable grounds for dismissal. This means, an employer can only dismiss an employee via:

  • Submitting an application to the UWV (Employee Insurance Agency) to obtain a dismissal permit, in case of financial/economic reasons or long-term illness or
  • Legal proceedings before the court to set aside the employment contract, for example, in case of an employee that is underperforming or acting culpably. 
Transfer to suitable position

The employer will first have to investigate whether the employee can be transferred to a suitable position, before he initiates UWV proceedings or legal proceedings before the court in order to terminate the employee’s employment contract.

Notice period

When terminating an employment contract, a notice period has to be taken into account to determine the termination date. The required notice period for an employee is one month.

The statutory notice period for the employer is based on the length of the employment:

  • Less than 5 years = one month’s notice
  • 5 years or more, but less than 10 years = two months’ notice
  • 10 years or more, but less than 15 years = three months’ notice
  • 15 years or more = four months’ notice.
Transition compensation

Each employee whose employment is being terminated on the initiative of the employer is entitled to so-called transition compensation. The amount of the transition compensation depends on the length of the employment and is for every employee 1/3 of the monthly salary per year of service. The accrual of the transition compensation starts immediately from the first day.

Fair compensation

In case of serious culpable acts or negligence of the employer, the court might award a ‘fair’ compensation on top of the transition compensation. The court is free to determine the level of fair compensation that has to be paid. 

3) Termination for urgent reasons

Under Dutch law, either party may terminate the employment contract with immediate effect in case of an urgent reason, such as theft, fraud, or crimes involving a breach of trust.

Unilaterally changing employment conditions

There are three options to change an employee’s employment conditions:

1) Agreement with the employee

First of all, a change of the conditions of employment is possible with the consent of the employee. Hence, the employer can request the employee to agree with a (temporary) change of his conditions of employment. It may well be that the employee is prepared to agree to the (adverse) adjustment if, for instance, he has the choice between a wage sacrifice and bankruptcy or a forced redundancy. If the employee agrees to a change of his conditions of employment, it is important to record properly in writing which conditions will be changed, how, for how long, and why. To avoid discussion afterwards, it is advisable that the employer and the employee sign this record.

2) Unilateral change of the conditions of employment

If a unilateral amendment clause has been agreed upon with the employees, the employer may be able to unilaterally change the conditions of employment on grounds of the coronavirus. A unilateral changes clause has to be agreed in writing (for example, in the employment contract, collective labor agreement or personnel handbook). Please note: The employer can only make use of this clause if he has such a substantial interest in the change that the interest of the employee has to yield to it. Whether the employer can use a unilateral changes clause due to COVID-19 will depend on the consequences of the outbreak of the coronavirus for the company. Has it caused business or organizational circumstances which compel the employer to change the conditions of employment and to which the interest of the employee has to yield (temporarily)? In this case reliance on a unilateral amendment clause could be successful. Unilateral changing of employment conditions is in particular used for collective changes.

3) No unilateral changes clause – reasonable proposal to the employee

The conditions of employment can also be changed without a unilateral changes clause. If the following three conditions are met, the employee must – on grounds of being a good employee – agree to the employer’s proposal for change:

  1. As a consequence of COVID-19, there are changed circumstances at work that give rise to changes of the conditions of employment,
  2. The employer has made a reasonable proposal to the employee to change the conditions of employment, and
  3. The acceptance of this proposal can reasonably be required from the employee.

Making a reasonable proposal is in particular used for individual changes.

Privacy of employees

Vaccination

An obligation to be vaccinated is a violation of the employee’s fundamental rights, such as the right to physical integrity. Therefore, a balancing of interests will always have to be made between the employee’s fundamental rights and the interests of the employer. If the employer’s interests are considered to be more important, the refusal to be vaccinated could have employment consequences for the employee, such as adjustment of the work, an obligation to work from home or even – in extreme cases – dismissal.

Temperature checks of employees

Starting point is that employers are not allowed to take the temperature of their employees. Employers may not collect medical data of employees. It is only the company doctor who is allowed to do this and who can take temperature of employees, provided that this does not qualify as ‘processing of personal data’ and the General Data Protection Regulation Act (GDPR) does not apply. The company doctor must meet the following three conditions:

  • The temperature taken is not included in a data base, such as an Excel list with names and temperatures;
  • The temperature check does not take place automatically, for instance with a thermal camera;
  • The processing may not have an automated consequence. For example, gates that open automatically or a light that automatically turns green if the employee’s temperature is considered okay: This constitutes a violation of psychical integrity because based on this other employees are able to draw a conclusion about the health of the employee.

Even if the employee has given permission to a temperature check, the company doctor is still not allowed to scan the employee’s temperature. After all, the GDPR considers the employee’s consent not as freely given permission, since the employment relationship does not qualify as an equal relationship.

Of course it is possible to give employees, visitors or customers the opportunity to have their temperature taken in a screened-off room, where they can choose what to do with the result.

B. Lease law

Unforeseen circumstances: rent reduction?

Most judges consider the COVID-19 crisis and the measures taken by the government to be unforeseen circumstances. This means that there may be a ground for adjusting the rent, even if changing the rent has been explicitly excluded in the rental agreement. The pandemic and the measures are unforeseen, therefore, these could not have been included in the rental agreement and the general terms and conditions.

Must the rent be adjusted?

The judge is not obliged to adjust the rent in case of unforeseen circumstances. The judge will consider whether retaining the current rent is still acceptable according to the standard of reasonableness and fairness. To prove that the rent has to be reduced, the tenant will have to demonstrate with financial data how much the revenues and turnover have been reduced and that there are no other means available to pay the rent. If the landlord does not want a rent reduction, he will have to prove that the loss of income is not acceptable to him. 

To what amount will the rent be reduced?

The judge will usually assume there is reason to adjust the rent if there is a substantial reduction of turnover and revenue. In that situation, professional parties will in principle have to share the pain. If there are no revenues left, this will in practice lead to a rent reduction of 50%. Depending on the circumstances, another amount of rent may be set by the judge. 

Turnover rent

Especially in situations like these, turnover rent can be an option. In that case, parties will share the loss of turnover. Jurisprudence shows that the judge will take account of turnover rent when calculating the amount of rent to be paid. However, using turnover rent as part of the rent will not preclude an adjustment of the fixed rent by the judge.

C. Commercial contracts

During COVID-19, some contracts are put to the test: a supplier is unable to fulfil its obligations as a result of governmental measures, goods or services supplied are of no use to the buyer anymore or a debtor encounters payment problems. May force majeure or unforeseen circumstances be invoked due to the coronavirus?

Force majeure

Some events, causing a contracting party to fail to perform, qualify as a force majeure event. Typical force majeure events are (amongst others) natural disasters, earthquakes and war. Force majeure under Dutch law requires that the non-performance is not attributable to the debtor pursuant to the law, a legal act or the relevant standards. Parties can, however, put aside or deviate from the statutory provisions by including a force majeure clause in their contracts.

In case of a successful appeal on force majeure, a claim by the non-breaching party for specific performances or damages will be rejected. The non-breaching party may still dissolve or set aside the contract and/or suspend its obligations.

The threshold for successfully invoking force majeure is high. Whether COVID-19 and its effects qualify as force majeure will always depend on a case-by-case analysis of the facts and the contractual relationship between the parties. However, COVID-19 does present a unique set of circumstances which could justify a force majeure defense due to its unusual nature, the global scale and the unpredictability of the outbreak.

Unforeseen circumstances

Under Dutch law, the execution of contracts is at all times governed by principles of reasonableness and fairness. According to these principles, it may be unreasonable to expect full performance under the contract in case of unforeseen circumstances. Unforeseen circumstances are circumstances that parties did not take into account in their contract. Even though this is also a very high threshold, COVID-19 may qualify as such a circumstance.

In case of an appeal on unforeseen circumstances the Dutch court is involved. The court may (retroactively) partly or wholly terminate the contract, modify the effects of a contract, or set these aside, provided that these unforeseen circumstances are of such a nature that the other party, according to standards of reasonableness and fairness, may not expect the contract to be maintained in unmodified form.

The question whether the COVID-19 outbreak qualifies as unforeseen circumstance depends, inter alia, on the interpretation of the contract and when the contract was concluded. Key is whether the parties have taken the risk of a pandemic and the effects into account in their contract.

D. Conclusion

As can be concluded from the aforementioned, the outbreak of the coronavirus might provide reason to alter employment contracts, rental agreement and commercial contracts. These possibilities are all based on legal provisions and case law that had already been established before the pandemic, but could now enable entrepreneurs to cope with the coronavirus and its serious commercial consequences.

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