Under Dutch law the legal relationship between employers and employees is not exclusively determined by the relevant statutory provisions (found amongst others in the Dutch Civil Code) and the individual employment contract. If a Collective Labor Agreement ('CLA') is applicable, parties’ freedom of contract will be limited.
CLA’s are written agreements concluded between associations of employers and trade unions. CLA’s are binding on the parties and the members they represent. CLA’s govern basic employment conditions such as: payment of wages, holiday rights, overtime, termination of contracts etcetera. CLA’s are either of a minimum or a standard nature. If it concerns a minimum CLA employers may deviate from the provisions if this is advantageous to the employees. Deviations from a standard CLA are not allowed. Many sector organizations offer the CLA relevant to their sector on their website.
The provisions of a CLA are mandatory and apply automatically to the individual employment contracts between employers and employees who are both bound by that CLA. Parties are bound by that CLA in case they are member of a employers’ organization and a union. Employers and employees can also be bound to apply a CLA by way of an explicit stipulation in the individual employment agreements.
The group of employers (and employees) to which a CLA applies may be substantially enlarged by means of an administrative order issued by the Minister of Social Affairs and Employment, declaring the provisions of a CLA 'generally binding'. The effect of such a declaration is to make these provisions binding on all employers and employees who, by reason of their field of work/sector, fall within the scope of the CLA, even if they are neither a party to nor represented by a party to the CLA. In this way employees in that sector are granted a certain minimum level of wages and other employment benefits, and competition on conditions of employment between companies can be avoided.
CLA’s can only be declared binding for a certain period of time by the Minister of Social Affairs and Employment. This binding period cannot exceed the expiry date of the CLA. However, it is common that after expiry of the CLA a consecutive (the same) CLA arises shortly followed by a new duration period in which it is declared binding.
In order to find out whether or not a CLA applies to an employer and an employee by way of the generally binding declaration, the actual business activities of the company/legal entity are of great importance. If the business activities of the company are similar to the scope rules of the CLA then the company is most likely obliged to apply the CLA and its regulations to the employees working with the company/legal entity.
Noncompliance with applicable CLA-provisions may lead to employees’ action to recover back wages and/or other employment benefits five years back. To avoid these legal actions it is recommended to conduct an inquiry into the (non)appliance of a CLA to the employment contracts of your employees. BDO Legal can of course, provide you any further information on this issue and to conduct a CLA-inquiry.