The ketenregeling under Dutch law
The chain rule (ketenregeling) limits the number and duration of consecutive fixed-term employment contracts (arbeidsovereenkomsten voor bepaalde tijd) that an employer may offer before the employee automatically acquires a permanent contract (arbeidsovereenkomst voor onbepaalde tijd). The rule is set out in Article 7:668a of the Dutch Civil Code and was significantly tightened by the Work and Security Act (Wet werk en zekerheid, WWZ) and subsequently adjusted by the Balanced Labour Market Act (Wet arbeidsmarkt in balans, WAB) from 1 January 2020.
Under the current rules, a permanent contract arises automatically in two situations: (1) when more than three consecutive fixed-term contracts have been concluded, or (2) when the total duration of consecutive fixed-term contracts exceeds three years. Each time a new fixed-term contract is offered within six months of the expiry of the previous one, it counts as a link in the chain. A gap of more than six months breaks the chain and restarts the count.
Exceptions and derogations under Dutch law
The three-year maximum period may be extended to six years by a collective labour agreement (CAO) if the nature of the business so requires - for example, in sectors with seasonal or project-based work. The number of contracts in the chain may similarly be expanded by CAO to a maximum of six contracts over six years.
Specific rules apply to fixed-term contracts with employees in certain categories, including young workers under 18 working fewer than 12 hours per week, employees doing replacement work, and agency workers. For the latter, the chain rule is modified by the applicable sector CAO (ABU or NBBU).
Conversion to a permanent contract in the Netherlands
When the chain rule is exceeded, the most recent fixed-term contract is automatically converted to a permanent contract by operation of law - no court order or administrative act is required. The employer cannot prevent this conversion by inserting a clause in the contract. Employees who believe their fixed-term contract has converted to a permanent one should seek advice from an employment lawyer in the Netherlands promptly, as the right to rely on conversion may be subject to time limits.
The chain rule has undergone significant reform over the past two decades. Under the Flexibility and Security Act of 1999 the rule allowed up to three contracts or three years, with a three-month break period. The Work and Security Act of 2015 (WWZ) extended the required break period from three to six months and reduced flexibility for collective agreement derogations. The Balanced Labour Market Act of 2020 then restored some pre-2015 flexibility, permitting collective agreements to extend the maximum period to 48 months and the maximum number of contracts to six, but only for specific functions where the nature of the business genuinely requires it (Article 7:668a(5) of the Dutch Civil Code). The employer must also notify the employee in writing at least one month before the expiry of a fixed-term contract whether it will be renewed and on what terms - failure to do so triggers a penalty equal to (a pro rata share of) one month's salary under Article 7:668 of the Dutch Civil Code.