on the application of the European Code of Social Security and its Protocol by the Netherlands
(Period from 1 July 2007 to 30 June 2008)
(Adopted by the Committee of Ministers on 10 June 2009
at the 1060th meeting of the Ministers' Deputies)
The Committee of Ministers,
In the exercise of the functions conferred upon it by Article 75 of the European Code of Social Security (hereinafter referred to as the “Code”), as modified by the provisions of its Protocol (hereinafter referred to as the “Protocol”), and with a view to supervising the application of these two instruments by the Contracting Parties;
Whereas the Code and the Protocol, opened for signature on 16 April 1964, entered into force on 17 March 1968 and since that date have been binding on the Netherlands, which ratified them on 16 March 1967;
Whereas, when ratifying the Code and the Protocol, the Government of the Netherlands stated that it accepted, in addition to the parts which must be applied by every Contracting Party (Parts I, XI, XII, XIII and XIV), the following parts of the Code, as modified by the Protocol:
– Part II on “medical care”,
– Part III on “sickness benefit”,
– Part IV on “unemployment benefit”,
– Part V on “old-age benefit”,
– Part VI on “employment injury benefit”,
– Part VII on “family benefit”,
– Part VIII on “maternity benefit”,
– Part IX on “invalidity benefit”,
– Part X on “survivors’ benefit”;
Whereas, in pursuance of paragraph 1 of Article 74 of the Code, as modified by the Protocol, the Government of the Netherlands submitted its 41st annual report on the application of the Code, as modified by the Protocol, for the period from 1 July 2007 to 30 June 2008;
Whereas, in accordance with paragraph 4 of Article 74, that report was examined by the ILO Committee of Experts on the Application of Conventions and Recommendations, at its 79th meeting in November and December 2008,
I. concerning Part IV (Unemployment benefit) of the Code, as amended by the Protocol, in conjunction with Article 68.f: under Article 68.f of the Code, sanctions in respect of claimants of unemployment benefit who are deemed to be “culpably unemployed” may apply only in cases where unemployment has been caused by the wilful misconduct of the person concerned. According to Article 24.2 of the Unemployment Insurance Act, an employee is considered to be culpably unemployed when the unemployment occurred due to compelling reasons mentioned in Article 678 of Book 7 of the Civil Code and the employee is to blame for becoming unemployed. Among such compelling reasons, Article 678.k and l mention cases where the employee “neglects his duties in a flagrant way” or “is not able to perform his duties due to his own recklessness”. Taking into account that neglect and recklessness on the part of the employee leading to dismissal may not necessarily constitute “wilful misconduct” which may be sanctioned under Article 68.f of the Code, the government was invited to explain how these provisions are applied in practice. In reply, the government states, with reference to publicised jurisprudence, that the implementing body only imposes sanctions due to culpable unemployment in situations where the employee’s misconduct was deliberate and intentional and, consequently, the employer could not be expected to maintain the employment relationship. The government considers therefore that the provisions of the Unemployment Insurance Act are fully in conformity with the standards set out in the Code.
The Committee of Ministers has examined the important jurisprudence of the Dutch courts summarised in the government’s report, which includes a case of refusal to grant unemployment benefit on the ground that the person concerned neglected her duty and was thus culpably unemployed (RSV 2007, Magazine Rechtspraak Sociale Verzekeringen, issue 6, No. 155 WW). The Committee of Ministers understands that in this case the decision of the Institute for Employee Benefit Schemes (UWV) to refuse unemployment benefit was overturned by the Central Court of Appeal, which recognised that while the person concerned indeed neglected her duty, this neglect resulted not from wilful misconduct, but rather from the lack of leadership qualities necessary for the job for which she could not be blamed. This decision shows that the regime of sanctions for “culpable unemployment” under the Unemployment Insurance Act needs to be brought in line with the limitations set up by the Code, the purpose of which consists precisely in preventing the persons concerned from having to appeal to courts against improper sanctions imposed by the administration;
II. concerning Part IX (Invalidity benefit):
a. the provisions of Part IX of the Code and the Protocol stipulate that the rate of the invalidity benefit payable throughout the contingency to a fully incapacitated person (standard beneficiary), having completed a qualifying period of 15 years of employment, shall amount to at least 50% of the reference wage determined under Article 65 of the Code, if the benefit is wage related, or under Article 66, if it is a flat-rate benefit. A person shall be recognised as fully incapacitated if he is unable to engage in any gainful occupation to an extent of 66.6%, the remaining earning capacity being disregarded. A person considered to be unable to engage in any gainful occupation by definition cannot be required to work. Where classes of employees are protected, as in the Netherlands, the invalidity benefit shall be guaranteed without taking into account other income of the beneficiary or his family.
The Work and Income (Employment Capacity) Act of 10 November 2005 (WIA) defines a fully and permanently incapacitated person as a person able to earn, through work, no more than 20% of the hourly reference income (section 1.2.1, subsection 1), which means that he or she has lost 80-100% of their earning capacity. Persons who have lost between 35% and 80% of their earning capacity are considered to be partially capable of work (section 1.2.2) and split into the following disability categories: 35-45%; 45-55%; 55-65% and 65-80%. The Committee of Ministers observes that the threshold of 80% incapacity established by the WIA is set much higher than the level of 66.6% (two thirds) fixed by the Protocol for defining a fully incapacitated person. This means that for the purposes of the application of the Code, as amended by the Protocol, persons partially capable of work with a disability of 65-80% should be treated as fully incapacitated and their remaining earning capacity should be disregarded. The WIA, thus, would have been more consistent with the Code and the Protocol, if the category of permanently incapacitated persons with 65-80% disability were included under the definition of fully and permanently incapacitated.
Highlighting the distinction between the disability categories of 80-100% and 65-80%, the government explains that fully and permanently disabled persons are eligible for benefit on the basis of the Income Provision Scheme for Fully Occupationally Disabled Persons (IVA), while persons partially capable of work are entitled to a benefit on the basis of the Return to Work Scheme for the Partially Disabled (WGA). The Committee of Ministers has thus to examine whether the IVA benefit to persons with 80-100% disability and the WGA benefits paid throughout the contingency to those with 65-80% disability comply with the requirements of the Code, as amended by the Protocol;
b. IVA benefit: under the terms of the WIA, an employee (section 1.3.1) who is fully and permanently incapable of work (section 6.1.1, subsection 1.b) shall be entitled to an incapacity benefit of 70% (75% according to the report) of the monthly wage (section 6.2.1, subsection 1), provided that the benefit shall be reduced by 70% of the income earned by this person from employment or self-employment during this month (section 6.2.2, subsections 1 and 4). The report states that the eventual earnings or assets of the members of the family of the beneficiary are not taken into account in determining the IVA benefit. The Committee of Ministers notes that the amount of the incapacity benefit payable to a fully and permanently incapacitated employee who is not engaged in any gainful employment or self-employment, exceeds the level of 50% of the previous wage prescribed by the Code, as amended by the Protocol. The Code and the Protocol, however, do not authorise any reduction of the benefit in case a fully incapacitated person (66.6-100% disabled) is able to earn additional income from any gainful occupation, leaving them free to combine invalidity benefit with work. The Committee of Ministers observes that the IVA scheme could be made fully consistent with the Code by deleting section 6.2.2 of the WIA;
c. WGA benefits: the Committee of Ministers notes detailed explanations provided by the government on the main features of the Return to Work Scheme for the Partially Disabled (WGA). The WGA scheme consists of two phases: the wage-related WGA benefit and the subsequent phase, during which the benefit is related to the statutory minimum wage;
d. Wage-related WGA benefit: the particularity of the wage-related WGA benefit consists in that it currently integrates the unemployment benefit for the partially disabled persons who satisfy the eligibility requirements. A person with 65-80% disability maintains a certain working capacity and is, for that part, considered to be unemployed and must register as a jobseeker, make sufficient attempts to obtain suitable work and accept an offer of such work (section 4.1.4, subsection 1, of the WIA), conditions which normally apply to unemployment benefit recipients. By combining the unemployment benefit (WW) with the previous disability benefit (WAO), the WIA made it possible for a partially disabled person to apply for a single benefit, instead of for two benefits, which is calculated so that it is equal to the sum of the WW and the WAO benefits that he would have received. The Committee of Ministers observes that this new design integrating social security benefits for unemployment and partial disability is unique and could not have been foreseen by the drafters of the Code some 50 years ago. One has to admit that this arrangement has the merit of ensuring, on the one hand, that a partially disabled person automatically receives compensation for his loss in earnings as a result of unemployment and, on the other hand, that he is immediately stimulated to resume work and to use the employment service to speed up the reintegration process.
The Committee of Ministers has to point out however that Part IX of the Code does not deal with the contingency of partial disability and therefore should normally only be concerned with the wage-related WGA benefit for the category of persons with 65-80% disability, who would fall under the definition of fully and not partially disabled under the Protocol. The wage-related WGA benefit falls outside the scope of Part IX of the Code also because its eligibility requirements are those of the unemployment benefit and not those of the invalidity benefit. The Committee of Ministers also takes into account the fact that it is a short-term benefit (paid for 1.5 years after 15 years of employment history, for example) and persons who do not meet its eligibility requirements are immediately entitled to the long-term WGA benefits of the subsequent phase;
e. Wage supplement: the government indicates that, after the wage-related WGA benefit, the disabled person will be entitled either to a wage supplement if he works and fulfils an income requirement based on his residual earning capacity (section 7.2.3, subsection 3), or to a prolonged benefit (section 7.2.2, subsection 1). The Committee of Ministers points out that the residual earning capacity and the wage it brings to a person with two-thirds invalidity should not be taken into account for the purpose of his entitlement to the invalidity benefit under the Code. Consequently, with respect to the category of persons with 65-80% disability, the invalidity benefit in the form of the wage supplement, by its very nature, falls outside the conceptual scope of Part IX of the Code. Consequently, only the prolonged benefit provided for in the WGA scheme complies with the requirements of Part IX of the Code;
f. Prolonged WGA benefit: according to the government, if the WGA recipient does not work, he or she is entitled to the prolonged benefit which, for incapacity of 65-80%, is equivalent to 50.75% of the minimum wage and is thus higher than the 50% rate prescribed by the Protocol for a person with two-thirds invalidity. The government further indicates that any recipient of the WGA benefit is considered to be unemployed to the extent that the recipient’s remaining working capacity is not utilised and must therefore register as a jobseeker, make sufficient attempts to obtain suitable work and accept such work, if offered (section 4.1.4, subsection 1, of the WIA). The WGA recipients are also obliged to prevent the occurrence of incapacity, to limit the existence of such incapacity, to acquire the potential to perform suitable work and to make sufficient reintegration efforts (sections 4.1.2 and 4.1.3). Non-fulfilment of these obligations is sanctioned by the benefit being refused wholly or partially, permanently or temporarily, or by applying fines (Chapter 10 of the WIA). The Committee of Ministers cannot but observe that the nature and the extent of many of these obligations go beyond what may be reasonably required from a person with two-thirds invalidity and sanctioned under Article 68 of the Code. It appears, moreover, that the regime of obligations and sanctions imposed by the WIA is construed in such a way as to effectively deprive an insured person of the prolonged WGA benefit in case of non-compliance. The Committee of Ministers also considers that, while the regime of obligations and sanctions imposed by the WIA may indeed produce a positive reintegration effect with regard to persons belonging to disability categories of 35-45% and 45-55%, the psychological and physical pressure it may put on more fragile invalids with 65-80% disability could result in some undesirable results, such as deterioration of their state of health under the constant stress of trying to make full use of their remaining working capacity and fear of losing the benefit if their efforts are deemed insufficient;
III. concerning the financial crisis, that European social security systems are set to pass through the worst financial and possibly economic crisis since the systems were first created. Many national indicators are giving the convergent message that the impact of the crisis may be severe, global in its scope and pose a real threat to the financial viability and sustainable development of social security systems. The Committee of Ministers recalls that, to enable member states to discharge their general responsibility for the financial viability of social security, Article 70.3 of the European Code of Social Security places each state under the obligation to “take all measures required for this purpose”. The Committee of Ministers trusts that the measures adopted or envisaged by governments will be commensurate with the gravity of the financial situation and the primary responsibility of the state to ensure the viability and sustainable development of social security.
In this connection, the Committee of Ministers wishes to emphasise that the system of regular reporting and supervision of the application of the Code could serve as an additional channel of first-hand information on the legal and regulatory measures taken by member states to combat the crisis;
Finds that the law and practice in the Netherlands give full effect to Parts II, III, IV, V, VII, VIII and X of the Code and the Protocol, and that they also ensure the application of Part IX, subject to the points mentioned below;
Decides to invite the Government of the Netherlands:
I. concerning Part IV (Unemployment benefit), in conjunction with Article 68.f: to draw the attention of the UWV and of the corresponding courts of appeal to the obligation of the Netherlands, under Article 68.f of the Code, to apply sanctions only where neglect or recklessness amount to wilful misconduct directly causing the unemployment of the person concerned;
II. concerning Part IX (Invalidity benefit):
a. IVA benefit, to consider deleting section 6.2.2 of the WIA with a view to enhancing the social protection and well-being of persons with over two-thirds incapacity in line with the Code, taking into account that the financial impact of this measure on the insurance scheme would in all probability be negligent;
b. prolonged WGA benefit, to consider bringing the regime of legal obligations and sanctions imposed by the WIA on the recipients of the prolonged WGA benefit in the disability category of 65-80% in line with Articles 54 and 68 of the Code, as amended by the Protocol, taking into account that, under the Protocol, a person with two-thirds invalidity should be liberated of any obligation to make use of his remaining working capacity;
III. concerning the financial crisis, and with a view to helping the Council of Europe bodies to forge a concerted response to the crisis, to furnish, under Part V of the report form which requests a general appreciation of the difficulties encountered in the application of the Code in practice, detailed information on the impact of the current financial and economic crisis on national social security systems and the measures taken or planned with a view to maintaining their financial viability and reinforcing social protection for the most vulnerable groups of the population.