If an expatriate is working in the Netherlands, the question may arise as to which provisions of Dutch law apply to the employment relationship. Easily asked, not easily answered, since the law chosen by the parties is not decisive in all cases.
Circumstances where employees may have Dutch employment rights
An increasing number of international businesses are establishing an entity in the Netherlands and employing or seconding expats from outside the Netherlands to the Dutch entity. International employers should be aware that in some circumstances, some provisions of Dutch law may apply to the employment relationship even where the employment contract of the expat is governed by foreign law.
In order to determine whether an employee can benefit from Dutch employment rights, the following should be considered:
- It is important to distinguish key employment provisions and mandatory provisions. The key employment provisions apply to all expatriates who carry out work in the Netherlands, regardless of the duration of the activities. Also, these provisions apply to non EU-citizens performing temporary work in the Netherlands. Mandatory provisions are provisions which cannot be derogated from by agreement. Most provisions in employment law are mandatory as they aim to protect the employee (as the weaker party).
- Additionally, a distinction must be made between expats working in the Netherlands for (i) less than 2 years and (ii) more than 2 years.
Employees in the Netherlands for less than two years
Generally speaking, if an expat is working in the Netherlands for less than 2 years on an employment contract governed by foreign law, he/she can only invoke the key employment provisions of Dutch law (as set out below in more detail). This is because the expatriate is considered to habitually carry out his work in performance of the contract in the foreign country, even if he/she is temporarily employed in the Netherlands. These key employment provisions include: minimum wage, holiday allowance, equal treatment between men and women and provisions in mandatory collective agreements.
Employees in the Netherlands for two years plus
If an expat is working in the Netherlands for more than 2 years on an employment contract governed by foreign law, the expatriate can, as well as the key employment provisions, also invoke the mandatory provisions of Dutch law. This is because the expat is considered to habitually carry out his/her work in the Netherlands (as a period of more than 2 years is no longer considered temporary). The statutory safeguard against dismissal is a key example of a mandatory provision applying to the employment relationship after two years employment in the Netherlands. The system of prior consent will apply to the termination of the employment contract. This means that, in order to terminate the employment relationship, the employer must first obtain consent from the employee, the UWV (a governmental agency) or a court. The court and UWV will only provide consent for termination if there is a reasonable ground for termination.
The two year threshold discussed above provides an important guideline as to whether an expatriate will be able to invoke the various employment protections under Dutch law. However, there is an exception to this rule of thumb. If it appears from the circumstances that the employment contract is more closely connected to another country, the employment contract will be deemed to be governed by the law of that country. This has to be determined on a case by case basis and for this reason, we would always recommend specific legal advice is sought on whether Dutch employment laws will apply.
In summary, employers should be alive to the fact that employees who are (temporarily) posted in the Netherlands, are very likely to be entitled to certain employment benefits and protections arising from Dutch statutory employment rights in addition to the rights and protections arising as a result of any foreign law applying to the employment relationship. This is particularly significant as employment law in the Netherlands provides a high level of protection to employees when compared to other jurisdictions.