Coronavirus – information for companies in The Netherlands

Written on 17 Mar 2020

Understanding what coronavirus means for your business – talk to our experts.

Background

As of today, 17 March 2020, new and stricter rules have been imposed by the Dutch government in order to prevent the further spread of COVID-19 virus (the coronavirus). The government’s measures will apply until 6 April 2020.

This update includes a brief overview of measures that employers may take as a result of this new situation. This includes both measures to prevent the further spread of the coronavirus and measures to reduce wage costs.

If the situation were to deteriorate materially, for example if the government were to decide on a full lock down, further advice may be needed. Of course, we will give an update if there is another reason. The government has repeatedly indicated that it will not let down the entrepreneurs. It is not yet known exactly what this means, but the intention is there. That does not imply that employers can now sit back and relax, at least not if and to the extent that turnover and profit are (or will be) under pressure as a result of a reduction in work.

Measures

Mandatory working from home

As a result of the most recent measures taken by the government, there is no longer any doubt that employers, with the exception of the so-called ‘vital professions’ (link), may send their employees home unilaterally (i.e. without consent). This also applies to employees who do not show any symptoms of illness. Employers are not obliged to do so, but – if the office or workplace remains open – will have to comply with the regulations advised by the government on the RIVM’s advice (link), such as social distancing. Under Dutch law, the employer is and remains responsible for safety in the workplace.

The question that arises is whether or not the employer, which has sent its employees home, is obliged to continue paying wages.

The general rule is that the employer must continue to pay the wages of its employees if they work from home. This also applies if there is less or no work. This is at the employer’s risk.

An exception to this general rule exists if and insofar as the employer has contractually excluded this obligation. This can be excluded for a maximum period of six months after the employment commencement date. The foregoing occurs with on-call contracts and also – to a much lesser extent – with ‘general’ employees.

The employer that is faced with the threat of a reduction in its work must therefore take action itself. Fortunately, Dutch law provides for a number of measures that the employer can take. The government is currently working, in consultation with the social partners on additional measures, in particular to manage the large number of applications for short-time working (werktijdverkorting). (Tax) aid measures have also been announced (link).

Short-time working

The most important temporary wage saving measure that the employer can take unilaterally is to apply for short-time working (STW).

Reducing working hours is currently the most obvious measure an employer can take to save wage costs. As of today, there have already been more than 20,000 requests. In essence, short-time working temporarily reduces the wage costs in order to avoid forced redundancies, at least in the short term, in the hope that the coronavirus is under control within the foreseeable future, as a result of which the government measures can be made more flexible or withdrawn.

For some companies, such as KLM, a reduction in working hours is not sufficient to handle the serious reduction in work. In that case, a company may structurally eliminate jobs. This is subject to the regular Dutch dismissal law as is currently the case for reorganisations due to a reduction in working hours.

The reduction of working hours in connection with the coronavirus is based on article 8 paragraph 3 Extraordinary Labour Relations Decree (BBA) (exemption from the ban on reduction of working hours under article 8 paragraph 1 BBA).

The employer’s obligation to continue payment of wages in the event that the agreed work is not performed, is not applicable on the basis of Article 7:628 paragraph 9 of the Dutch Civil Code in conjunction with Article 5 of the Unworkable Weather Regulation (Regeling onwerkbaar weer) (link) if the non-performance is the result of exceptional circumstances (other than exceptional natural circumstances) and insofar as an exemption as referred to in Article 8 paragraph 3 of the BBA has been granted.

In the case of the current coronavirus situation, therefore, the following applies:

  • during the period for which the employer has obtained a STW permit, the employer shall be exempted from the obligation to continue to pay wages for the hours that the employee does not work within the framework of the STW ;
  • the employer may still have an obligation to continue to pay wages for the hours that the employee does not work within the scope of the STW, if this has been agreed by the applicable collective labour agreement (CLA) or employment conditions scheme;
  • the exemption from the obligation to continue to pay wages referred to above shall also apply if the affected employees have not accrued any unemployment benefit or have accrued insufficient unemployment benefit. Nor is there an obligation to compensate employees with high salaries for the difference with the – usually much lower for them – unemployment benefit.

Employers’ associations VNO-NCW, MKB-Nederland and AWVN recommend that employers – provided the financial position of the company allows to do so – supplement the full wage for the hours not worked, even if employees have insufficient unemployment entitlements.

By further regulation, the Ministry can include an obligation for employers – in case of obtaining a STW permit – to supplement the wage difference between the unemployment benefit and the agreed wage. At this moment it is not yet known whether such a regulation will be promulgated.

We explain below how an employer can apply for STW.

Other (wage-saving) measures

An employer can ask its employees to take an early vacation. This can only be done in consultation with the employees, unless other agreements have been made in the employment contract or an applicable CLA. This measure does not lead to direct savings on wage costs and it is plausible that many employees are unwilling to agree to such a request, given the travel restrictions that apply. The employer may also ask its employees to take other forms of (unpaid) leave. Employees are not expected to be enthusiastic about this either.

Another measure is that employees may be asked to make a so-called pay cut (loonoffer). This means that employees voluntarily agree to a (temporary) salary reduction, with the aim of avoiding forced redundancies. A pay cut is not popular in the Netherlands and is very rarely applied in practice. A well-known example is the ‘fall’ of the V&D concern. This ultimately went bankrupt since the unions refused to agree to a pay cut.

Application for STW

A STW permit must be applied for digitally from the Ministry of Social Affairs and Employment (link). Currently, more than 20,000 applications have been made and the site is occasionally down. According to the government, they are working on this, but at the moment this is a problem.

To qualify for a STW permit, the following conditions apply:

  • the company is affected by a special situation that does not fall under the normal business risk;
  • the company expects at least 20% less work for a period of a minimum of 2 to a maximum of 24 calendar weeks.

In principle, a permit is granted from the date on which the application for the STW is received by the Ministry. The permit is valid for a maximum of 6 weeks and can be extended by a maximum of 6 weeks at a time, up to a total period of 24 weeks.

In any case, a permit will not be issued:

  • over the periods prior to the date on which the application for exemption was received by the Ministry. If an employer wants to make use of the STW it is therefore important to request the STW permit this as soon as possible;
  • insofar as the number of employees is not in line with the reasonably expected need for the company;
  • if the reduction in activities is related to a strike.

Furthermore, no STW permit is provided for on-call and temporary workers, since the STW only concerns employees for whom the employer has an obligation to continue to pay wages. Self-employed persons cannot also rely on the STW (but they can rely on the Social Assistance (Self-Employed Persons) Decree).

Other comments

Partial unemployment benefit (deeltijd-ww)

Currently, partial unemployment benefit in connection with the coronavirus is not under discussion.

Collective Redundancy (Notification) Act

The applicability of the Collective Redundancy (Notification) Act (on the basis of which a duty of consultation of employee representation would exist) does not seem to be at issue. This act refers to the intention to ”terminate” the employment contracts of a minimum of 20 employees. It is therefore important to determine how many employment contracts will be terminated. The STW seems not to be a factor, since the STW measure clearly concerns (reduction of) the working time factor and not the termination of the employment contract.

Next Steps

Let us know if you have any questions as a result of this update. Furthermore, we are happy to assist you with filing an application for STW.