A collective labour agreement, in Dutch a CAO, is the agreement between one or more employers or employers’ organisations and one or more trade unions on the terms of employment to be observed in individual contracts. It has mandatory effect: a clause in an employment contract conflicting with the CAO is void.
Legal basis
The Collective Labour Agreements Act contains the core. Article 12 declares conflicting clauses void and replaces them with the CAO provision, and Article 14 obliges a bound employer to apply the CAO to unaffiliated employees as well. The Act on declaring provisions of collective agreements universally binding allows a CAO to be extended across an entire sector, after which unaffiliated employers are bound too. Interpretation follows the CAO standard: what matters is the objective meaning of the wording, because employees were not involved in drafting it.
How it works in practice
The first question is always whether a CAO applies, which depends on membership, on the scope clause of a universally binding sector agreement, or on an incorporation clause in the employment contract. That scope is assessed by reference to the business’s actual principal activity, not to its Chamber of Commerce registration. After a CAO expires, its normative provisions continue to have effect in the individual contract until new arrangements are made.
Where it goes wrong
Businesses believe they fall outside a sector agreement and are confronted years later with an assessment from the industry pension fund and with salary claims. A second error is an incorporation clause referring to a CAO that has since lapsed. Third, it is forgotten that more favourable individual arrangements are permitted only where the CAO sets minimum standards.
Related terms
The CAO feeds into payrolling, the chain rule and the sick pay obligation.
Unsure whether a CAO applies to you? Our employment lawyers assess the scope clause.
