On 1 June 2021 the period of general binding declaration (avv) of the Netherlands' two temporary employment collective labour agreements (CLAs) – namely, the ABU CLA and the NBBU CLA – ended, leaving the temporary employment sector with no valid CLA. From a legal and practical perspective, this is an important change for the country's 211,000 temporary workers.(1)
Temporary employment employers have more freedom (especially regarding dismissal law) than other employers and can deviate, sometimes drastically, from the normally applicable statutory regulations. The most important deviations can be realised only by means of a CLA. For example, on the expiry of the above CLAs, the following deviations ceased to be legally valid:
- the famous phase system (which is a long-term deviation from the chain regulation of Article 7:668a of the Civil Code); 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(2) of the Civil Code).
This article discusses the consequences of the expiry of the avv period of these two CLAs for the temporary employment sector. In sum, many of the rules that have become characteristic of the temporary employment industry have been called into question.
Binding to a CLA is possible on three grounds, each of which has its own legal framework:
- members of the ABU or the NBBU and their tied employees (union members) – the normative effect of Article 9 of the CLA Act ensures that the provisions of the relevant CLA affect individual employment contracts, including deviations from the law (the '3/4 mandatory law');
- all employers and employees in the sector – a general binding declaration binds employers and employees which fall under the scope of the relevant CLA and thus also independent employers and their employees; and
- unbound employees who are members of the ABU or the NBBU – these employees are bound by way of an incorporation clause in the employment or temporary employment contract, which is 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 relevant CLA is factually applicable.
The aforementioned grounds for binding can coexist. For example, a CLA-bound employer can be bound in three ways:
- by the avv;
- because it is an ABU or NBBU member; and
- because it has a contractual agreement with an unbound employee regarding the CLA's application (incorporation clause).
If one of these grounds for binding ceases to exist, this will not necessarily have legal consequences for another ground. A company may – for example – terminate its ABU or NBBU membership but remain obliged to apply the CLA for its current employees (because of the specific obligation of Article 10 of the CLA, but also because of incorporation and the 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) (the so-called 'after effect' (see below)). The latter may still be the case after 31 May 2021.
The system under the CLA Act means that if an employer and employee were bound by a CLA that expired on 1 June 2021 (by their membership of one of the CLA parties or by an incorporation clause), the CLA remains valid in the individual employment contract. However, it does not remain valid as a CLA: the effect of the CLA "as a collective labor agreement" ended when that CLA expired. This means that the parties are free to make new agreements (the prohibition on making (worse) deviating agreements contained in Article 12 of the CLA has lapsed). If they fail to do so, the old CLAs de facto continue to apply; in other words, the employment contract incorporating those CLA provisions continues.
This continuation 'after effect' always applies if the CLA provisions form part of an employment contract through membership of a collective labour union or an incorporation clause. However, the avv alone has no after effect. This means that if an employer is not a member of the ABU or the NBBU, and is bound only by the avv, it will, in principle, not be confronted with after effects after 31 May 2021. This creates a difference between employers which are members of the ABU or the NBBU and employers which are not.
The main consequences of the expiry of the CLAs (as well as the general binding statement) are as follows.
Temporary employment clause
The temporary employment clause included in both CLAs, which constitutes a CLA deviation from the law (3/4 mandatory law), is arguably no longer valid as of 31 May 2021. An employment contract which existed at that time can no longer be terminated from that moment by invoking the clause (at least no longer after 26 weeks from commencement (see below)). This is because the immediate legal effect had not yet commenced on 1 June 2021 and a reliance on the clause thus no longer has a base in a CLA. Temporary employment contracts entered into after 31 May 2021 will also not be covered by the CLA extension. They fall back on the statutory regulation of Articles 7:691(2) and (3) of the 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 insufficient to maintain the CLA scheme.
Dissolving condition in case of illness
The same applies to the incapacity scheme provided for in both CLAs, meaning that, in the event of a temporary worker's incapacity, the temporary employment contract with the temporary employment clause will be deemed to be "legally terminated immediately after reporting sick with immediate effect at the request of the client". The same applies for the application of the agency clause, whose validity is also under discussion. In summary, the regulation that terminates a secondment in the event of illness expired for all employers and employees in the sector on 1 June 2021.
Phase system
The phase system existed only because it was included in the CLAs. The statutory regulation is that the provision of Article 7:668a of the Civil Code regarding the maximum number of fixed-term employment contracts does not take effect until after 26 weeks. However, this means that after 26 weeks, a maximum of three fixed-term employment contracts can be concluded within three years. The phase system was a CLA deviation permitted by Article 7:691(8) of the Civil Code. As there is no longer a CLA, the deviation regarding the phase system is no longer possible. This is especially important for:
- the abovementioned temporary agency clause, which expired on 31 May 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); and
- the deviation from the provisions on the succession of fixed-term employment contracts. In this respect, there is no longer a 78-week Phase A because the deviation from Articles 7:668a(1) to (8) of the Civil Code (extension of the 26-week period to a maximum of 78 weeks) is no longer based on a CLA and is therefore invalid as of 31 May 2021. The risk here is that if an employee has already had more than three fixed-term employment contracts within 26 weeks of commencing employment, they will, by legal conversion, immediately have an employment contract for an indefinite period. However, this should not be assumed, as parties did not have to take this into account. The mere expiry of a CLA in which a deviation from the law was permitted may not imply that the parties' legal position will be radically changed retroactively. In short, one may 'serve out' the last contract for a definite period, but a new contract outside the legal framework is no longer possible.
Wages in event of incapacity
The CLAs provided for a scheme that was more favourable for employees than prescribed by law (the law provides for 70% continued payment of maximum daily wages for 104 weeks, whereas the CLAs provided for 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, applies after 31 May 2021. This appears to be the case due to the after effects of the CLA (as discussed 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 in new cases of illness. For non-ABU and non-NBBU members, which were bound only by the avv, there is no after effect, 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 Supreme Court case law (Hoge Raad), it can be assumed that there is a certain form of after effect with regard to employees who were already incapacitated when the CLAs expired. In practical terms, this means that an employee of a non-ABU or non-NBBU member who was ill on 1 June 2021 retains the right to the CLA scheme for a maximum of 104 weeks from their first day of illness. New cases of sickness which arise after 31 May 2021 no longer need to be dealt with by non-ABU and non-NBBU members in accordance with the expired CLAs.
Hirers' remuneration
With respect to hirers' remuneration, the same applies as for wages in the event of incapacity: the scheme provided for in the CLAs, which was more favourable for employees than the law, has an effect on members and their employees, but for non-members, the more limited regulations of Article 8 apply. This can therefore have an anti-competitive effect. This principle of an after effect for members but not non-members applies to most provisions of the CLAs (eg, holiday, leave, working hours, exchange and facilities).
It is no secret that the delay in the new temporary employment CLAs is due to disagreements between social partners. The ABU and the NBBU are free to attempt to conclude a new CLA with other parties as of 31 May 2021. There is no obligation to conclude a CLA with the same parties, especially not if earlier consultations have failed to yield results. A legal action by large unions (eg, the FNV or the CNV) to be readmitted to the negotiating table will not succeed. A union will then have to demonstrate why a favourable result (ie, CLA) is likely.
There is a risk of social unrest. The FNV or the CNV could take collective action to enforce a better CLA result. It will not be easy to prohibit a strike, particularly not if it concerns employment conditions and the person against which the strike is directed is the opposite party in collective bargaining.
There is a legal objection that FNV and CNV members will not consider themselves bound by the new CLAs because they were not involved. In the past, courts have ruled that an incorporation clause did not relate to a subsequent CLA entered into by other parties. This is all the more important if the non-participating unions are large unions that previously did participate. There is a real risk that this will happen with the ABU and the NBBU. After all, the new CLAs will not apply to a substantial number of employees and therefore not qualify for the avv, so non-members will not have to accept them.
In addition, in such case, the previous CLAs will have an after effect, which cannot simply be ruled out in the new CLAs (as it concerns other parties). This would give rise to an undesirable situation where some employees fall under the new CLAs, while a substantial number of other employees will continue to be able to rely on the continuation of the CLAs that expired on 31 May 2021.
There are three risks for the ABU and the NBBU after 31 May 2021 if no new CLAs are agreed:
- Deviations from the 3/4 mandatory law have no after effect (although one may 'sit out' the contract that deviates from statutory law), so the desired flexibility, previously regulated in both CLAs (in particular, the phase system), has disappeared.
- Employment conditions that do not contravene the law have a continued effect for members and employees who are bound by an incorporation clause (eg, higher wages in the event of illness), but not for non-members who are bound only by the avv. The latter fall directly back on contractual agreements (which may have been modified by the CLAs, but this is uncertain). This will lead to competition with respect to terms of employment.
- A new CLA can be concluded with other parties, but this will have consequences for the value of the incorporation clauses of current employees. There is a reasonable chance that the courts will find that incorporation clauses that pertain to CLAs concluded with large unions do not relate to CLAs concluded with other (smaller) parties. Further, the number of bound employees will decrease if the large unions are not involved.
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