The COVID-specific Measures in the Netherlands – Do They Fit into the General Picture?

The COVID-specific Measures in the Netherlands – Do They Fit into the General Picture? Summary This﻿ article﻿ discusses﻿ the﻿ nature﻿ of﻿ the﻿Dutch﻿COVID﻿ relief﻿measures﻿ for﻿ employers﻿ concerning﻿wage﻿costs.﻿The﻿question﻿is﻿raised﻿whether﻿the﻿ad-hoc﻿decrees﻿fit﻿into﻿the﻿ general﻿picture﻿of﻿Dutch﻿labour﻿law﻿and﻿respects﻿the﻿two﻿key﻿principles﻿(1)﻿safeguarding﻿employees’﻿income﻿and﻿(2)﻿requesting﻿employee﻿flexibility﻿with﻿regard﻿to﻿the﻿work﻿ in﻿case﻿the﻿exact﻿job﻿does﻿not﻿exist﻿any﻿more﻿or﻿is﻿under﻿serious﻿threat.﻿The﻿contribution﻿finds﻿that﻿the﻿emergency﻿legislation﻿does﻿respect﻿these﻿two﻿main﻿principles,﻿while﻿ judges﻿refuse﻿substantial﻿modifications﻿of﻿wages﻿and/or﻿working﻿hours﻿on﻿the﻿basis﻿of﻿ reasonableness,﻿also﻿upholding﻿the﻿key﻿principles﻿of﻿employee﻿protection.


Introduction
COVID-19 confronts us with a situation that First World countries have not encountered since the Spanish Flu pandemic 100 years ago. There is a worldwide health crisis which leads to mandatory closure of businesses, affecting a whole range of sectors. What does this do to paid employment which is already under pressure from various directions? 1 This article discusses the changes that the Dutch governmentintroducedintherulesgoverningfinancialaidtoemployeesand employers due to the COVID pandemic, where safeguarding (some) income for employees is as crucial as the survival of businesses. 2 The core question will be to what extent the COVID-specific measures fit into the more general framework of Dutch labour law. This will be measuredalongtwoaxes:(1)protectionofwages/income,and(2)employee flexibility concerning job content, which are two cornerstones ofDutchemploymentlaw.Theincomepositionwillbeguaranteedas muchaspossible,ifnecessarybyadaptingthecontentoftheemploymentcontracttotheextentthattheemployeehastoacceptasuitable newposition. 3 In order to be able to assess the extent to which the emergency measures fit into Dutch labour law in general, the article starts with the general rules concerning payment of wages. This summary will offergeneralinsightsintohowtheproblemofanemployeewhoisnot working but still wants pay is dealt with in general. The article will thenbrieflydiscussthepre-Covidregulations,inordertohighlightwhy these rules needed to be replaced. The third section will deal with the new,COVID-specificmeasuresindetail.Attentionwillbepaidtotheir nearconstantfine-tuning,particularlywhenitcomestoincomeprotection and employee flexibility. In the fourth section, an alternative way to reduce costs will be discussed. This is the unilateral modification of theemploymentcontractbasedonthedoctrineofreasonableness.Adiscussion of this -seemingly distant -topic is necessary, as this is usually the main way of adapting the content of an employment contract to a change in circumstances. The arguments accepted and rejected in courtaswellasthejudges'reasoningswillbecrucialforassessingthe leeway employers have when asking for wages to be reduced, which will also influence the extent to which the temporary decrees will be usedorleftaside.Finally,sectionfivewillcontainconcludingremarks ontherighttoreceivepayduringapandemic.
The contribution is not intended to be a comparative piece. The discussion focusses on Dutch law and regulations regarding regular employment and will therefore not touch upon the specific measures The COVID-specific Measures in the Netherlands… s.3z16 for flexible work (TOFA 4 ), for self-employed (TOZA 5 ) and compensationforhard-hitsectors(TOGS 6 ). 7

A right to wages in case of no work?
Thegeneralruleonwagesincasetheemployeedoesnot(fully)carry outhistasksislaiddowninart.7:628BW.Thisprovisionhasrecently beenupdatedtoitscurrentformandnowprovidesthattheemployer isliabletopaywages,eveniftheemployeedoesnotfullycarryouthis tasks,unlessthereasonwhytheemployeecouldnotdotheworkmust inallreasonablenessbedeemedtocomewithintheemployee'ssphere of risk. 8 The employer is obliged to offer proof for this. Case law has spelt out the respective spheres of risk in more detail.A first rule of thumb is that foreseeable risks are for the person who can influence them best, e.g. by taking out an insurance or who profits. 9 This also means that an employer should make reasonable provision for times in which business is slack. Generally speaking, problems regarding lack of materials, insufficient contracts or clients and the like are for the employer to bear. The same goes for a temporary shutdown of the enterprise by the authorities due to insufficient health and safety measures. 10 Interestingly, the employer's decision to take disciplinary actions like suspension of the employee are also considered to come within the employer's sphere of risk, so that in principle, wages are due. 11 Ontheotherhand,theemployeehastobeartherisk,e.g.incase Nicola Gundt s.4z16 heislateduetoabrokencar,orifhehaslosthisdriver'slicencewhile thisisnecessarytoperformthework. 12 However, in case of exceptional circumstances, the general rules donotapplyanymore,becauseneitheremployernoremployeecould have foreseen these circumstances and/or taken precautionary measures.Thisisoneofthemainissuesthatisdiscussedincaselawand literature.TheOost-Brabantcountycourt,forexample,brazenlydecid-edthatCOVID-relatedrisksarefortheemployertobear,becausethe risksdonotfallwithinthesphereofriskoftheemployee. 13 However, COVIDisaworldwidehealthcrisiswhichemployerscannotsolveby themselves. Therefore, this assumption may at least debatable. Van Slooten argues that in the light of recent crises, this decision is not as straightforward as it may seem to the Oost-Brabant county court, because in 2009, social partners agreed that the consequences of the worldwide credit crisis were for employees to bear. 14 Therefore, the mereargumentthatariskisfortheemployertobearbecauseitisnot withintheemployee'ssphereofriskmaynotbevalidintheseexceptionalcircumstanceswherethegovernmentreactstoahealthcrisisby orderingthecompulsoryclosureofbusinesses. available work of at least 20% for a substantial amount of time. 17 The permission then allowed for a partial suspension of the employment contract.Theemployeewouldgetunemploymentbenefits 18 forthepart thatwassuspended,whiletheemployerwouldtopthisuptothenormalincomeandalsopaywagesfortheotherpartofthecontract.Forex-ampleanemployerwhogotpermissiontoreduceworkingtimeby60% hadtopaywagesfortwooutofthefiveworkingdays.Theemployee gotunemploymentbenefitsfortheotherthreedays,whichtheemployer toppeduptothenormalincome.Theemployerwouldthusberelievedof asubstantialamountofthewagecosts,offeringabetterchanceforsurvivalofthebusiness,whiletheemployeewouldusuallygetanincome equaltothewages. 19 However,thissystemwasnotwithoutflaws.One major problem was that there was no clear rule on how to deal with employeeswhohadnotyetqualifiedforunemploymentbenefits. 20 The authorisationfortheemployerseemedtoindicatethatthesituationwas beyond his control, and that therefore art. 7:628 BW would not apply, but it was less than clear whether this actually should mean that the risk was for the employee to bear. After all, the employee has even fewer possibilities to influence the situation. Another main issue was thatemployeeswere"eatinginto"theirunemploymentbenefitswhich in the Netherlands are limited in time. Therefore, if employees were made redundant after a (prolonged) period of short time work, this could mean that they would no longer be eligible for unemployment benefits and would have to fall back on social assistance benefits. The pre-COVIDemergencyreliefrulesthereforedidachieveacertainprotectionforemployeeincome,butintheend,itwastheemployeeswho footed the bill by eating into their unemployment benefits. Employers had to bear certain costs by themselves, but certainly the wage costs werelowered.However,asawholethesystemwassuitableforsmaller 17 ForafulloverviewseeW.A.Zondag,Werktijdverkorting,GoudaQuint2001and A.M.Helstone,VanWTVnaarNOW;vanwerktijdverkortingnaarloonkostensubsidie, AR2020/22. 18 Art.47UnemploymentBenefitsact(WW):75%ofthe(maximalised)dailywages forthefirsttwomonths,then70%.

Pre-COVID regulations on relief in exceptional circumstances
19 Unlesssomeoneearnedmorethanthismaxed-outdailywage. 20 InDutchlaw,inordertobeabletoclaimunemploymentbenefits,theemployee in question must show that during the last 36 weeks he worked at least 26 weeks (art.17(1)WW). or isolated issues, but did not offer sufficient flexibility to deal with anationwidecrisis.

Noodfonds Overbrugging Werkgelegenheid 21
When COVID became an issue in the Netherlands, it quickly became clearthatthiswouldbeamuchbiggercrisisthantheissuesthathad triggeredtheWTVbefore.Afterall,anintelligentlockdown,compulsoryclosureofnon-essentialbusinesses,travelrestrictionsandthelike affect all sectors and employers can only do so much to prevent the spreadingofthedisease. 22 a)NOW-1 The first Noodfonds, NOW-1, came into force on 17 March 2020. 23 Its aim was to keep as many people as possible in (their) employment. Therefore, the regulation followed a two-pronged approach: on the onehand,theemployer'sfinancialburdenhadtobelightened,onthe other hand, the employees' income had to be protected. The system workedasfollows:theemployerpays100%ofthewages,butiseligi-bleforacompensationforthesecostsofupto90%,dependingonthe reductionofrevenue,whichmustbe20%atleastforthebusinesstobe eligible for compensation. The wage costs are also taken into account inthiscalculation.Thismeansthatanemployerwhohasdiscontinued fixed-term contracts or who proceeds to terminate contracts gets less compensation.Thecalculationforthecompensationwasasfollows: AxBx3x1,3x0,9 A=Percentageexpectedrevenueloss B=wagesum 3=amountofmonthsforwhichthesubsidyiscalculated 1,3 is a factor that allows for employer costs like pension premiums, insurance,etc. Thecompensationfortheemployeractuallywasanadvancepayment of 80% of the estimated compensation, and the correct amount was to be calculated at the end of the period for which the compensation has been requested. This means that the employer could become liabletopaybackpartofthecompensation.Theemployerwasobliged to refrain from redundancies on economic grounds while getting the compensation. If the employer asked permission for issuing dismissalsoneconomicgroundsnonetheless,hewas"fined".Thismeansthe subsidieswereloweredbyanamountequalto150%ofthedismissed employee's wages (until April) or by 1,5 times the employee wage costs, multiplied with a specific factor (from 5April 2020 onwards). 25 Dismissals also influenced the calculation set out above, as the wage sumwillbelower.
It soon became clear that NOW-1 contained some serious shortcomings. One rule which seriously limited employers' preparedness to actually request compensation was the prohibition on dismissal of employeesoneconomicgrounds.Employerswantedtokeeptheirflexibility and therefore did not request compensation. This in turn led to a greater risk of bankruptcy and irrevocable loss of employment, somethingwhichNOW-1triedtoprevent.Anotherissuewasthefact that only dismissals on economic grounds were prohibited, while an agreement to terminate the contract for the same reason remained perfectly possible and did not trigger the fine.As this kind of termination is the most common one in the Netherlands, this loophole in the decree was serious. However, the employer would have incurred financial consequences as rescission of contracts would also have led toalowerwagesumwhichinfluencedthecalculationofthecompensation.A final point, which was also a sensitive issue politically, was that bonusses or dividends for executive managers could be financed through the compensation offered by the Government and thus paid for by taxpayers' money. In short, employees' wages were relatively safe, but for employers, the system was inflexible, which led to employersevadingit.

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s.8z16 b)NOW-2 As it became clear that COVID was not a one-season issue, the government issued a second decree on 22 June 2020, ingeniously named NOW-2. 26 It addresses some of the shortcomings of NOW-1, but also showsashiftinpolicypriorities.NOW-2focusseslessonkeepingpeople in their original jobs and more on allowing businesses to adapt. Themaximumsubsidyforemployersisstill90%incaseof100%loss of revenue, but the fine in case of dismissals on economic grounds is discontinued. There is still a financial consequence, however.As was already the case under NOW-1, if the employer dismisses employees or discontinues temporary employment contracts, the wage sum will be lower, which will influence the calculation of the compensation to be received. Furthermore, if the employer proceeds to carry through a collective redundancy and has not succeeded in getting the Trade Unions' agreement for this plan, the compensation he gets will be loweredby5%ofthetotalamountduetohim.Fromtheexplanatory memorandum, it becomes clear that this means that all parties to the contractneedtoagreeonthecollectiveredundancy. 27 Thejustification forthesechangesisthatbusinessesneedtobeabletorestructureinordertoavoidbankruptcy,nowthattheeconomicoutlookhaschanged. Furthermore, the Government wishes to encourage enterprises to applyforthesubsidyandavoidbankruptcy,andprefersthattotheirnot making use of the measures because dismissals might still be necessary. 28 Consequently, dismissals are "decriminalised" as the governmentacceptsthattheymightbenecessary. AxBx4x1,4x0,9 30 Theotheraspectthatdemonstratesthepolicyshifttowardsaccepting a rise in unemployment and survival of most businesses by creating a well-trained, flexible workforce is the introduction of an obligation for best efforts to train and retrain employees. 31 This fits nicely with the more general rule in Dutch dismissal law, that dismissal is only acceptableiftheemployeecannotbeofferedasuitabledifferentjob. 32 Employees may not always have a right to keep their exact job, but the employment relation will be retained as much as possible. This necessitates a certain flexibility in contract law, which is offered by thegeneralclauseofart.7:611BW(seebelow,sec4).Inordertomake this well-trained, flexible workforce happen on a substantial scale, the Dutch government made available € 50 Million for 2020 to set up afundsfortrainingactivities,personaladviceandthelike. 33 Thiscame ontopofalltrainingresponsibilitiesemployershaveanyway.Finally, in order to discourage fraud, which was an issue with the rather un-bureaucraticNOW-1,businesseswhichreceivemorethan€100.000in subsidiesmusthand inan audit.Thesebusinessesarealsoforbidden topaytheboardofdirectorsorpolicy-makingmanagementdividends orbonussesover2020.Itisthereforenolongerpossibletofinancebonussesanddividendsfromtaxpayers'money. c)NOW-3 FromOctober2020onwards,NOW-2hasbeenfollowedbyNOW-3. 34 This most recent decree, which aims to regulate the situation until July 2021, shows the continuation of the policy changes that NOW-2 started. However, NOW-3 also bears witness to the realisation thatwhile the overall situation in the Netherlands relating to government debtandunemploymentfiguresisstillprettyrosywhencomparedto other countries -funds are not unlimited and need to be distributed more carefully. In the first place, to remain eligible for subsidies and compensation, a business must show a loss of 20% of revenues now, butfromJanuary2021onwards,thiswillneedtobeatleast30%loss of revenue. Also, the compensation offered to the employer is lower and will be lower still in 2021. Instead of a maximum of 90% compensation in case of total loss of revenue, the maximum percentages are 80% (October-December), 70% (January-March 20201) and 60% (April-June 2021). This shows the realisation that not all businesses will be able to survive and not all can be saved. Fines in case of economic dismissal are not reintroduced and the fines surrounding col-lectiveredundanciesfromNOW-2arealsoskipped.However,thegeneralrulesconcerningcollectiveredundanciesstillapply. 35 While dismissals seem to be accepted as part of current economic necessities, the ideas on lifelong learning and retraining are retained. Theemployerisstillobligedtooffertraining,employeescangetpersonalised career advice and the like. The available funds have been raisedto€67million.Rightnowthesituationthereforeisthatemployerswhodealwithasubstantialdeclineinrevenuearestilleligiblefor compensation,butnotasgenerouslyastheywereuptoOctober2020. Ontheotherhand,dismissalsarepossibletoagreaterdegree.
Bywayofconclusion,wecanstatethattheCOVID-specificmeasures fit into the general system of Dutch labour law. Safeguarding employees'wageswithoutjeopardisingemploymentisapriorityissue. However, employees are also expected to show flexibility concerning their exact job. They have a right to retraining in case their exactjobisthreatenedoflost.Thisrightgoeshandinhandwiththe obligation to accept a change of job where the new place offered is asuitableplacementandthealternativewouldhavebeenaterminationofcontract. 36 35 They derive from the implementation of Directive 1998/59/EC, and therefore, obviously,mustremaininplace.TheapplicableDutchlawistheWetMeldingCollec-tiefOntslag(WMCO). 36 Technically,thereisthepossibilitytorefuse,asotherwisethiscouldbelabelled forcedlabour.However,refusaltoacceptasuitablejoboffertriggerssevereconsequencessuchaslossofunemploymentbenefits(art.24WW)andthereforerarelyoccurs.
The COVID-specific Measures in the Netherlands… s.11z16

Unilateral modification of contracts instead of using NOW
Ashasbeenexplainedabove,thecurrentmeasurestokeeptheeconomy going focus on keeping businesses afloat while also guaranteeing a near normal income to employees. However, these measures come withstringsattached,evenifthisisjustshowinghowmanyemploymentcontractsstillexistandwhatlossesofrevenueareencountered. Therefore,afairnumberofemployerswhodidnotwanttoapplyfor NOW or who did not qualify for the measures try a different way to alleviatewagecosts. This other way for employers to minimise wage costs is to (unilaterally) modify wages and/or working hours. The unilateral modification of contracts is fully accepted in Dutch labour law and offers a great amount of flexibility to keep the employment relation intact,evenifthecontractassuchismodifiedtosuchanextentthat itwouldotherwisequalifyassomethingcompletelynew.Dutchlaw offers two possible legal bases for this modification, art. 7:613 BW and art. 7:611 BW respectively. The first one regulates the unilateral modification clause and is only applicable if a written modification clause exists. In that case, the employer must show overriding business interests which must reasonably prevail over the employees' interestinretainingtheunchangedemploymentcontract.Thesecond one is a codification of reasonableness, in labour law described as good employership and good employeeship. Case law by the Dutch SupremeCourtshowsthatagoodemployeemustreactinapositive way to employer's requests for reasonable adaptations of the contractincaseofachangeincircumstances. 37 Therefore,threestepswill besubjecttojudicialreview:(1)thechangeofcircumstances,(2)the reasonablenessoftheoffermadebytheemployer,and(3)thequestionwhethertheemployeecouldreasonablyhaverefusedthereasonable offer. The main question in all these cases was whether a wage sacrifice (or a reduction of working hours) can be deemed a reasonable offer and if so, under which circumstances. Case law from the credit crisis is pretty unanimous on this issue. While showing the changeofcircumstancesthatnecessitatesareactionisrarelyanissue incaseofeconomicdifficulties,thereasonablenessoftheemployer's requestisusuallythestickypoint.Althoughthejudiciaryshowssympathy towards the employers' plight, generally speaking, a request forwagesacrificesisnotareasonablerequestasthisconcernsaprimary employment condition. 38 The final step would be a discussion abouttheemployee'sdutytoreactinapositivewaytoareasonable offer. However, once the offer is judged not to be reasonable, there is no duty for the employee to act reasonably him-or herself. Flat refusalbytheemployeeispossibleandisupheldincourt.Recentcase lawseemstobeinlinewiththislineofreasoning. 39 TheAmsterdam county court decided that a unilateral reduction of wages by 50% iswaytoomuch,consideringthattheemployeehasnoothermeans to make ends meet. Therefore, however much the employer needs a reduction in cost, a unilateral reduction of wages by half is not a legal option. 40 The Court of Appeals for Arnhem-Leeuwarden decidedsimilarlyinacasewhereanemployerrestructuredtheenterpriseandemployeeswereplacedinsuitablealternativejobs.Thenew jobs did not provide compensation for the loss of the flexible paymentintheearlierjobs,becausecommissionswerenotpaidanymore. Thisledtoawagereductionof13-23%,dependingontheemployee inquestion.TheCourtstatedthatinextremeeconomiccircumstances, a wage sacrifice -concerning flexible parts of the payment, not the basic salary -may be justified, but that in this case the circumstances cited by the board of directors fell short of this kind of economic emergency. While the court does not rule out the possibility of wage sacrifices in extreme cases, in this case the need to act is not acceptedto the degree necessaryto demanda significant reduction of salary. 41  accept the employer's argument that he is no longer liable to pay wages. 42 Sofar,therefore,caselawshowsacleartendencytowardsupholdingtheemployee'srightstowagesanddoesnoteasilyacceptemployers' wishes to (unilaterally) lower wages. When it comes to reducing working time, art. 8 BBA is still the major obstacle. This provision explicitly prohibits the reduction of working time if this leads to a reduction in wages as well. Furthermore, a unilateral employer's right to reduce working hours is deemed incompatible with the employee'srighttodemandachangeofworkinghours,asthiscouldunderminetheemployee'sright. 43 Therearepossibilitiesforexemptions from the prohibition, but as they have to be granted by the Secretary ofStateforEmployment,theemployerdependsonthirdpartiestobe abletodothis.
Taken together, this means that the employer's legal possibilities tounilaterallymodifywagesorworkinghoursinordertosavemoney on wage costs are few. The employer needs to show a truly exceptionalcase,andeventhenprobablycannottouchthebasicsalary. Althoughnoneofthecasesconsideredmadeanexplicitcommenton the availability of NOW measures as potential alternatives, it might be that the fact that a possible alternative exists which strengthens thelineofreasoningfoundinthecourts.Afterall,demandingwage cuts and arguing that they are a reasonable offer while also having theoptiontoapplyforemergencyreliefmaysoundunreasonableto ajudge'sear.

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s.14z16 the employees. Therefore, they apply the general principle of wage protectionandfitintoDutchnon-emergencylaw.
The decrees try to strike a balance between employers' needs and employees' needs. However, the (substantial) adaptations that those measures have undergone reflect new realities. Neither all dismissals norallbankruptcieswillbepreventable.Inordertosoftentheimpact foremployees,theyaregivenarighttotakeretraining,whichmeans thatoncejoboffersbecomeavailableagain,theymightbeabletofind anewjobquickly.Themeasuresthereforefitintothebiggerpictureof creatingaworkforcethatisflexibleinthesensethatworkersareable to adapt quickly to new sets of requirements in new jobs. Therefore, the measures that were introduced in March 2020 fit into the more general system of Dutch labour law, more specifically, the obligation to pay wages on the employer's side and the obligation to look for reasonable solutions like placement in other suitable jobs, if the current job ceases to exist, on the employee's side. This general idea of a certain flexibility of the employment contract also explains the idea ofbeingabletochangetheemploymentcontractingoodfaithonthe basis of reasonableness. As this is a very open norm, the application to the facts by the judiciary is crucial for the stability of the employmentcontract.Ashasbeenshownintheparagraphdealingwithcase law,sofarjudgeshavebeenunwillingtofindunilateralwagecutsof upto50%reasonable.Thismeansthattheresponsetothecrisisisnot a weakening of the position of the weaker of two parties in the contract,butratheracontinuedprotection.Consideringthat(particularly when it comes to unilateral modification) everything depends on the notionof"reasonableness"-anopennormliabletobeinterpretedby asinglejudge-theDutchsystemsofarshowssurprisingstaminain itseffortstoprotecttheemployees'income.This,however,iscounterbalanced by a demand for flexibility concerning the exact content of the work to be done. Training efforts should prepare employees for new jobs which in turn may be offered.Acceptation of these offers is expectedandrefusalis-generallyspeaking-sanctionedbyalossof rightstounemploymentbenefits.