The Works Council and reorganization: what role does the works council play?

Advisory rights of the Works Council

The works council has several rights, including access to all necessary information (information right) and the ability to make unsolicited proposals (initiative right). However, the two most important rights a Dutch works council has are the advisory right and the right of consent, with the advisory right being especially crucial during reorganizations. This right enables the works council to advise management on major organizational decisions, such as (i) ceasing operations or a significant part thereof, (ii) substantial downsizing or expansion, and (iii) major changes in the company’s organization.

Reorganizations often fall within the scope of the advisory right due to their significant consequences, such as layoffs or job changes. Even decisions as seemingly minor as eliminating a single role can trigger advisory obligations if they substantially impact the organizational structure, as ruled by the Enterprise Chamber in 2023 (ruling in Dutch here).

Consultation meetings

Entrepreneurs planning a reorganization should consult the works council as early as possible in the process. In these meetings, the employer must share which proposed decisions are being prepared that require works council advice or consent. Given the sensitivity of reorganizations, confidentiality agreements between the works council and employer are essential.

Substantial influence of the Works Council

When plans take shape, the works council must be consulted in time to exert its substantial influence on the proposed decision. Consulting the works council is not a mere formality; it provides an opportunity for collaboration on proposed changes. Failure to adequately involve the works council could lead to legal challenges. The works council has the right to appeal to the Enterprise Chamber and ask for the reorganization decision to be reversed. Additionally, the advisory process is an essential step for a request for dismissal with UWV (the Dutch governmental organization that decides on terminations in redundancy cases): without the works council’s advice, the request for dismissal will be refused and redundant employees cannot be terminated. 

The works council should fully understand the reasons behind the reorganization, its impact on employees, and the mitigating measures for those affected. This information should ideally be shared before or during the advisory process. Engaging a specialized employment lawyer can help the works council evaluate the selection of redundant employees, assess new roles and their interchangeability with redundant roles, and ensure the legality of the social plan. Please note that legally, the employer bears the cost of such expertise.

Key points to consider during reorganization

Reorganizations involve numerous considerations. We have listed a few key points below:

• Collective Dismissal (‘WMCO’) Notification: If 20 or more employees are dismissed within three months in a single UWV region for economic reasons, the employer must notify trade unions and the UWV under the Collective Dismissal Notification Act (or ‘WMCO’). This facilitates discussions on reducing dismissals and mitigating consequences, for instance with a social plan. Failure to notify can render employment terminations voidable. The works council may also coordinate with unions on the social plan.
• Confidentiality: Employers should clearly define what information is confidential, the duration of confidentiality, and its scope. When the works council consults its constituency, confidentiality may present challenges, so it’s wise to establish a process for resolving related issues.
• Works Council’s role: Contrary to popular belief, the works council serves both employee and organizational interests – it’s not a trade union. For instance, the works council must not just negotiate better severance terms for redundant employees, but must also weigh the financial implications of these severance arrangements on the company and its remaining employees.
• Employee representation: If there is no works council, employees must be consulted in a town hall meeting when a reorganization affects at least 25% of positions within the company. Unlike works councils, the employees cannot appeal to the Enterprise Chamber.

How we can help

Reorganizations are intricate and impactful. Timely involvement of the works council is essential. Our employment law and employee participation team at Ploum supports entrepreneurs and works councils throughout the reorganization process, whether it’s a small-scale change or a complete business closure. Our expertise ensures a smoother transition for all parties involved.

Interested? Contact us, subscribe to our newsletter, or explore our training courses on employee participation for works councils and entrepreneurs. We are happy to help you out!