Collective labour agreement (CAO): when does it apply to you?

A collective labour agreement (collectieve arbeidsovereenkomst, CAO) applies to you if your employer is a member of an employers’ association that signed it, or if the Minister of Social Affairs and Employment has declared the sector CAO generally binding. Where a CAO applies, a clause in your employment contract that is less favourable than the CAO is void; a more favourable clause stands.

A CAO is an agreement between one or more employers or employers’ associations and one or more trade unions on terms of employment such as pay scales, working hours, allowances, notice periods and pension. Checking which CAO applies, and whether a declaration of general bindingness is in force, is the first step in almost every Dutch employment question.

When is a CAO binding?

A CAO binds the employers and employees who are members of the organisations that concluded it (Article 9 of the Collective Labour Agreement Act, Wet op de collectieve arbeidsovereenkomst, Wet CAO). Beyond that, it binds everyone in the sector once it has been declared generally binding.

An employer bound by a CAO must, unless the CAO provides otherwise, also apply its terms to employees who are not union members (Article 14 Wet CAO). In practice, most employment contracts also contain a clause that declares the CAO applicable, so the non-member can rely on it directly.

Under the Act on Declaring Collective Agreements Generally Binding (Wet AVV), the Minister can extend a sector CAO to all employers and employees in that sector, members or not. This declaration (algemeen verbindend verklaring, AVV) applies for a fixed period and prevents employers from undercutting the agreed terms. The Ministry of Social Affairs and Employment publishes which CAOs are currently generally binding.

What happens if your contract conflicts with the CAO?

A clause in the individual contract that conflicts with a binding CAO is void, and the CAO term applies in its place (Article 12 Wet CAO). The CAO is a floor, not a ceiling: your contract may always offer more.

If the CAO for your position sets a minimum salary of EUR 2,800 gross per month, your employer may pay EUR 3,200 but not EUR 2,600. The same applies to holiday days, allowances and notice periods. Some CAOs contain standard provisions (standaardbepalingen) that allow no deviation at all, not even in the employee’s favour; the CAO text itself says so.

Which formal rules apply to a CAO?

A CAO must be laid down in a notarial or private deed (Article 3 Wet CAO) and may run for no more than five years (Article 18 Wet CAO). It takes effect only after the Minister has confirmed receipt of the notification (Article 4 of the Wages Act, Wet op de loonvorming).

A fixed-term CAO that is not terminated is renewed for the same period, but for no more than one year at a time, unless the CAO provides otherwise (Article 19 Wet CAO). The parties must notify the Minister when they conclude, amend or terminate the agreement.

What does a CAO usually contain?

Most CAOs set pay scales, working hours and leave, and often link to a sector pension fund. The details differ per sector, so always read the CAO that applies to you.

• Pay: salary scales (loonschalen) per job level, annual increments, shift and overtime allowances.
• Working hours: the standard working week, often 36, 38 or 40 hours, and rules for overtime and rest.
• Leave: extra holiday days above the statutory minimum of four times the weekly working hours, and special leave.
• Sickness: the statutory minimum is 70% of the wage during the first two years (Article 7:629 BW); many CAOs top this up to 100% in the first year.
• Termination: probation, notice periods, and sometimes a social plan or an alternative to the transition payment.
• Training: training budgets or training days per year.

Pension follows its own track. Compulsory participation in a sector pension fund results from a separate order of the Minister under the Mandatory Occupational Pension Scheme Membership Act (Wet verplichte deelneming in een bedrijfstakpensioenfonds 2000). An employer can therefore be bound by the pension fund even where the CAO itself does not apply.

What happens when a CAO expires?

Terms of an expired CAO that have become part of your individual contract continue to apply until a new CAO takes effect; this is called after-effect (nawerking). After-effect does not apply where the CAO bound the employer only through a declaration of general bindingness.

If the CAO applied only because of the AVV, that effect ends when the declaration expires. Between two declarations the employer is then bound only by the statute and the individual contract. New employees hired in that period may be offered terms below the old CAO, as long as the statutory minimum wage and other mandatory rules are respected.

How is a CAO negotiated and enforced?

Trade unions and employers negotiate; the union members vote on the negotiated result (onderhandelingsresultaat) before it is signed. Strikes are possible when talks fail, subject to the limits set by the courts.

Enforcement lies mainly with the CAO parties and the employees themselves. An employee can claim what is owed under the CAO before the subdistrict court (kantonrechter), and the unions can sue a non-complying employer. The Netherlands Labour Authority (Nederlandse Arbeidsinspectie) enforces statutory rules such as the minimum wage and working time, not the CAO as such. Where a generally binding CAO is not observed, the CAO parties can ask the Minister to have an investigation carried out.

What is the difference between a company CAO and a sector CAO?

A company CAO is concluded by one employer with the unions; a sector CAO by an employers’ association for a whole industry. Only a sector CAO can be declared generally binding.

Large employers sometimes have their own company CAO. If a sector CAO has been declared generally binding, an employer with its own company CAO can ask the Minister for an exemption (dispensatie) from it.

What should you check as an employee?

The CAO may give you more than your contract shows. Check these points.

• Which CAO does your contract refer to, and is it the right one for the employer’s main activity?
• Is that CAO currently declared generally binding, or is your employer a member of the signing association?
• Are you in the correct salary scale and step for your job level?
• Do you receive the CAO allowances, extra holiday days and sick pay top-up?
• Does the CAO contain different notice periods or an alternative to the transition payment?

What should you check as an employer?

Applying the wrong CAO, or none, can lead to back-pay claims for several years. Check these points.

• Which sector CAO matches your company’s main activity as defined in its scope clause?
• Is that CAO generally binding, and for which period?
• Are you obliged to join a sector pension fund, regardless of the CAO?
• Do your contract templates refer to the applicable CAO and stay above its minimums?
• Have you applied the latest scale increases on the effective date?

What can we do for you with a CAO?

Our employment lawyers advise employees and employers on collective agreements.

• We determine which CAO applies to your company or your job, including the scope clause and any AVV.
• We check an employment contract against the applicable CAO.
• We calculate back pay owed under a CAO and claim it from the employer.
• We advise employers on an exemption request or a change of CAO.
• We conduct proceedings before the kantonrechter on CAO entitlements.

Summary

• A CAO binds members of the signing parties and, after an AVV, everyone in the sector.
• Contract terms that are less favourable than a binding CAO are void (Article 12 Wet CAO).
• A CAO runs for at most five years (Article 18 Wet CAO) and takes effect after the Minister confirms receipt.
• After expiry, incorporated terms continue (nawerking), but not where the CAO applied only through an AVV.
• Sector pension fund participation follows a separate obligation, independent of the CAO.

Frequently asked questions