Act on Combating Sham Arrangements

The Netherlands Act on Combating Sham Arrangements (Dutch acronym: “WAS”) had been in force since the first of July 2015.

Object

The Act on Combating Sham Arrangements has been implemented with the aim of cracking down on unfair competition between businesses and enhancing the legal status of members of the workforce. The recruitment by businesses of foreign workers who are willing to settle for less than the Dutch minimum wage is an example of unfair competition, and is bad news for employees and employers alike. Sham arrangements are being created all the time with the aim of side-stepping Dutch legislation and regulations, to the detriment of the national coffers owing to loss of social security contributions and taxes.

Remedies

The Act on Combating Sham Arrangements offers an array of remedies, as follows:

• more stringent pay slip requirements – it is now compulsory for employers to provide a break-down of what the employee’s wage is actually made up of where it concerns expense allowances and amounts docked from the wage. The breakdown of the expense allowance must feature the precise level and type of expenses in connection with which the employee has been reimbursed as well as show how this relates to the employee’s service contract. Employers who are found wrongly to have accounted for expenses as part of their employees’ minimum wage risk a penalty for underpayment;
• the Act offers a more outspoken outline of the entitlement to the statutory minimum wage and the payment thereof;
• the Act has made it compulsory for employers to pay out the net statutory minimum wage by bank transfer, which has made it easier to monitor employers’ compliance with the statutory minimum wage requirements. Cash payment of wages is susceptible to fraud. Employers who continue paying their workers in cash rather than by bank transfer risk a penalty;
• the Act has banned amounts being set off against or docked from the minimum wage, the reason being that the set-off of amounts against the minimum wage is at odds with the Minimum Wage Act of the Netherlands. It is still permissible, however, to practise set-off and deductions involving the statutory minimum holiday pay where the employee in question authorises his or her employer in writing to see to the relevant payments being made in his or her name and from his or her wages. The set-off of advance wage payments against the employee’s wages has not been banned;
• the Social Affairs and Employment Inspectorate now has the option of publicising the outcome – in terms of penalties imposed, confirmation of spotless compliance and/or orders issued for preventive business suspension – of the reviews it carries out on disclosure of the particulars of the businesses in question, in an effort to stimulate compliance with prevailing legislation and regulations;
• implementation of vicarious liability in civil-law terms in respect of the wages due and payable to the employee, to make it possible for principals on whose behalf work is being performed as part of a chain to ensure that the appropriate wages are being paid within the chain, as a way of preventing unfair competition on terms of employment;
• enhancement of compliance with and enforcement of Collective Labour Agreements, by having the CLA’s “generally binding declaration” renewed upon request for a maximum of 12 months and by having the Social Affairs and Employment Inspectorate make use of available inspection details in the reviews it carries out;
• enhancement of the public-private information exchange by passing on any suspicions of non-CLA compliance the Social Affairs and Employment Inspectorate may have to CLA parties and/or the latter’s enforcement agencies;
• enhancement of the enforceability of the Foreign National Employment Act of the Netherlands by bolting on an explicit clause to said Act to the effect that the employer must cooperate in enabling the employee’s identity to be ascertained.

Partial phase-in

Some exceptions were made when the Act on Combating Sham Arrangements took effect on the first of July 2015. The duty to make minimum wage payments (if nothing else) by bank transfer and for the obligation to include an expense allowance breakdown in the pay slip came into force six months later, on the first of January 2016, whereas the ban on amounts being set off against or docked from the minimum wage has been scheduled to take effect on the first of July 2016.

Dutch version: Wet aanpak schijnconstructies