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Harmonization accord is just the beginning of the road

Racing against the clock, the social partners finally reached an agreement on July 5, 2013 on the harmonization of blue and white collar workers with respect to notice periods and the first day of sick leave, but has the agreement raised more questions than it answers?

On July 7, 2011, the Constitutional Court of Belgium ruled that the different treatment of blue and white collar workers was discriminatory. A deadline of July 8, 2013 was set to eliminate differences in notice periods and the first day of sick leave. Two years and a marathon 27-hour long negotiation later, the social partners finally reached a compromise. Unfortunately, as the agreement will only come into effect on January 1, 2014, Belgium’s labor law has now entered a period of considerable uncertainty.

According to the agreement, notice periods for all workers (regardless of their status) will be a three phase process:

  • A progressive build-up during the first five years of employment;
  • An additional three weeks per year starting on the fifth year of seniority;
  • A slower increase past 20 years of seniority.

This represents a significant improvement for the blue collar workers, but results are mixed for the white collar workers. White collar workers earning less than €32,000 per year will find their notice periods to be similar to what they had under the old regime. Employees making over €32,000 a year, or with over 20 years of seniority, will receive shorter notice periods and will be less protected.

Divergences between the old and new legislation will be problematic in the upcoming months as the Employment Contracts Act no longer sets out any notice period for blue collar workers and the new legislation will not be applied until January 1, 2014. What will happen to notices of dismissal issued between July 9 and December 31 of this year is a question that still needs to be answered. The legal uncertainty makes it very hard for companies to determine what the total cost of harmonization will be.

Stefan Nerinckx, Partner at Field Fisher Waterhouse LLP and Vice-Chair of AmCham Belgium’s Human Resources Committee, believes that this gap in the law will mean that the courts themselves will have to find a solution. However, since they cannot legislate, it is likely that the courts will apply the rules governing notice periods for white collar workers,

Furthermore, these initial changes are only the tip of the iceberg as the Constitutional Court has stated that it would be inconsistent not to consider harmonization in other areas of labor law and social security matters. This includes salary, trial periods, annual holidays and pensions. Looking forward, the government and the social partners still have much work to do.

AmCham Belgium’s position

This legal uncertainty only adds to the fact that, ultimately, harmonization will increase costs for employers, which will further inflate the country’s significant wage handicap. As Belgium’s labor costs are already highly uncompetitive, this will harm the country’s reputation as an attractive location for foreign investors.

AmCham has long argued for a revision of the labor market and published its own proposal with regard to the termination of employment (regardless of blue/white collar status) in 2012. The Chamber proposed an alternative way to allocate notice periods, which increases more smoothly as seniority accumulates. In exchange for lowering the notice periods, AmCham Belgium proposes to introduce a requirement to motivate dismissals, as is required under the last European treaty. The proposal can be downloaded from our website here