No-deal Brexit: what should you do as an employer?

One of the Brexit scenarios is still that the United Kingdom and the European Union may not reach a deal (a no-deal scenario) and that the United Kingdom will no longer be a member of the European Union from 31 October 2019. What does this mean for employers who have British national employees working in the Netherlands?

Existing cases: employees who base themselves in the Netherlands before Brexit

In a no-deal situation, citizens of the United Kingdom and their family members who are already living in the Netherlands will no longer be able to rely on EU citizenship for their residency status. This means they will no longer be able to take advantage of the free movement of people within the European Union. To avoid this, there will be a transitional period, from the date of Brexit, for British citizens and their families who were already living and working in the Netherlands before Brexit. This group will retain the right to live and work in the Netherlands until 1 July 2020. Up until that date, they can apply for a residence permit on the same admission terms as other EU citizens (Brexit residence permit).

• British people  who have been living lawfully in the Netherlands for more than 5 years before Brexit can obtain an unlimited residence permit on the same terms as those on which EU citizens can obtain a permanent residence right.
• British people who have been living lawfully in the Netherlands for less than 5 years will be able to obtain a      standard, limited period residence permit if they satisfy the conditions applicable to EU citizens who have been resident in the European Union for less than 5 years. This permit will allow British citizens to keep their free access to the employment market. Employers will not therefore need a work permit to start or keep employing these British citizens.

British citizens will actually satisfy the Dutch conditions for residency in most cases. If a current employee does not satisfy the conditions for residency and therefore does not obtain a work permit, but is still entitled to work in the Netherlands on the basis of the terms of his or her employment contract, the question arises as to whether an employer will be entitled to terminate the employment contract.

The law offers a facility for terminating an employment contract if an employee does not have a work permit, under what is called the H ground (the catch-all ground). There is a question whether this ground also contemplates the situation where an employee will no longer be able to obtain a work permit following Brexit. We believe this is likely. The fact is that the employment contract will in many cases have “lost its substance”, as it simply will not be able to be performed if there is no work permit. The situation might be different if the employer has a branch in a foreign country where the employee could be relocated. If the court dissolves the employment contract, following successful reliance on the H ground, the employer will in principle be due to pay the transition payment to the employee.

New cases: employees who want to base themselves in the Netherlands after Brexit

British citizens who want to base themselves in the Netherlands after Brexit can apply for a residence permit as what is termed a “third-country national”. Employers who want to take on these British citizens will have to apply for a permit for residence and employment (for instance based on the knowledge migrant scheme) or else a work permit in just the same way as they now do for third-country nationals.

We recommend the inclusion of a suspensive condition in the employment contracts for this group, so that the start of the contract is suspended until the work permit has been acquired. We would also recommend the inclusion of a resolutive condition, so that the employment contract comes to an end automatically at the point when the employee cannot obtain a valid work permit. What is important is that the employer has an obligation to make an active effort in obtaining the work permit for its employee. The employer should therefore make sure that the proceedings for the work permit application are all in order. If not, there is a risk that the resolutive condition may not be upheld.

Conclusion

Having regard to the factors outlined above, it is important in a no-deal Brexit for employers who have British national employees on their books to make sure their employees apply for new residence permits. The deadline for this is the end of June 2020. For new British national employees, it is important that a work permit is applied for and that any new contracts cater for situations where a work permit is refused or withdrawn.