Reorganization and employee participation

What we do

Responsible for organizational changes, social policy, and/or employee participation within the organization? In our practice group, we have extensive expertise and (process) experience in this specialized area. With this, we are happy to assist the organization during significant developments and changes. Whether it concerns guidance during a reorganization – including consultation and negotiation with the Works Council and/or trade unions – or other advisory or consent processes. Examples include:

• Mergers and acquisitions
• Incorporating or divesting a business unit (transfer of undertaking)
• Collective dismissal process
• Social plan
• Business relocation
• Harmonization of employment conditions
• Change of remuneration system or performance appraisal
• Introduction to the work-from-home policy

We are also regularly engaged as an expert partner by law firms and clients from other countries. For example, when it comes to the structuring of a European Works Council.

Do you have questions regarding reorganization and employee participation? Please contact us.

Reorganization and employee participation within employment law

A reorganization strikes at the heart of employment law: you are changing the organization, but in doing so, you must respect the rules of employee participation and collective labor law. Our mixed teams of lawyers and in-house counsel guide both international corporations and the baker around the corner through this process – from drafting a solid reorganization plan to the final termination. Those who get the sequence of steps wrong face delays, reputational damage, or even a complete deadlock on the entire reorganization. Good preparation and the right timing are therefore not a luxury, but a prerequisite for success.

Right of advice of the Works Council (Article 25 WOR)

If your company has a Works Council (OR), it has the right to advise in the event of a major reorganization pursuant to Article 25 of the Works Councils Act (WOR). Article 25, paragraph 1 of the WOR covers, among other things, a significant change in the organization or in the distribution of powers (part e), a significant reduction, expansion, or other change in activities (part d), entering into, modifying, or terminating a lasting collaboration such as a merger (part b), and the termination of the company's activities (part c).

Timing is crucial: pursuant to Article 25, paragraph 2 of the Works Councils Act (WOR), advice must be requested at a time when it can still have a substantial influence on the decision. If you deviate from the advice, you must provide reasons for doing so pursuant to Article 25, paragraph 5 of the WOR. Subsequently, a one-month suspension period applies (Article 25, paragraph 6 of the WOR), during which the Works Council may lodge an appeal with the Enterprise Chamber of the Amsterdam Court of Appeal (Article 26 of the WOR). We draft the request for advice in such a way that it is legally sound and increases support within the consultation process.

When is a reorganization “important” enough for advice?

The difficulty with Article 25 of the Works Councils Act (WOR) is that the law does not specify exactly when a change is “significant.” Case law from the Enterprise Chamber provides guidance: even a relatively limited collective dismissal can fall under the right of advice. Whether advice is required depends on the nature, scope, and consequences of the decision for the personnel – not just on a percentage. We assess in advance whether a request for advice is necessary, so that you are not faced with proceedings before the Enterprise Chamber afterwards that halts your reorganization for months.

Right of consent regarding amendment of regulations (Article 27 Works Councils Act)

In addition to the right of advice, the Works Councils Act (WOR) includes the right of consent under Article 27 WOR. For the amendment, adoption, or repeal of certain personnel regulations—such as a remuneration system, a performance appraisal scheme, or a working hours or working conditions regulation—you require the consent of the Works Council. During a reorganization, the advisory and consent processes often overlap. We monitor which right applies to which aspect, ensuring that decisions do not later prove to be voidable because the correct procedure was not followed.

Collective dismissal: the WMCO and the role of the trade unions

If you wish to terminate the employment contracts of at least twenty employees within a single work area within three months, the Collective Redundancy Notification Act (WMCO) applies. You are then required to notify the UWV and the relevant trade unions of the intended collective redundancy in a timely manner, and to consult with those unions. The UWV will not process dismissal applications until the notification has been submitted and the Works Council has been consulted. A late or incomplete notification can delay the entire reorganization. We handle the notification, conduct the consultations with the unions, and monitor the waiting periods.

Mirroring principle and the UWV procedure

If the reorganization leads to dismissal for business economic reasons, the mirroring principle determines the order of dismissal: within each category of interchangeable positions, employees are divided into age groups, and within each group, the employee with the shortest length of service is considered for dismissal first. Before you can terminate the employment, you must investigate, pursuant to Article 7:669 of the Dutch Civil Code, whether redeployment is possible within a reasonable period. Subsequently, you apply to the UWV for a dismissal permit. We prepare the business economic justification and the mirroring analysis, submit the application, and defend it in the proceedings.

Social plan

A social plan sets out the consequences of the reorganization for the staff: examples include severance pay, training, a job-to-job transition program, or a hardship clause. A social plan can be agreed upon with the trade unions or – depending on the situation – coordinated with the Works Council. A good social plan reduces disputes, increases support, and accelerates the process. We negotiate the social plan, assess its legal validity, and ensure it aligns with the individual dismissal cases.

Transfer of undertaking and employee participation

If you divest a business unit or incorporate one, this may constitute a transfer of undertaking (Articles 7:662 et seq. of the Dutch Civil Code). The employees then transfer by operation of law while retaining their terms and conditions of employment, and information and participation obligations also apply in this case. The interplay between reorganization, transfer of undertaking , and employee participation requires tight control, which we manage for you.

Frequently asked questions about reorganization and employee participation

When must I ask the Works Council for advice?
In the event of a proposed important decision (Article 25, paragraph 1 of the Works Councils Act), and sufficiently in advance so that the advice can still have a substantial influence (Article 25, paragraph 2 of the Works Councils Act). In practice, this means: before the final decision has been made.

What happens if I bypass employee participation?
The UWV will not process the dismissal applications, and the Works Council can lodge an appeal with the Enterprise Chamber within one month (Articles 25 paragraph 6 and 26 of the Works Councils Act). The Enterprise Chamber can reverse the decision and prohibit its implementation – resulting in significant delays.

Do I always need a social plan?
By law, a social plan is not mandatory in all cases, but in the event of collective dismissal and major reorganizations, it is almost always advisable to agree on one with the trade unions or the Works Council.

Does this also apply to my small business?
Yes. Even without a Works Council, the WMCO and the principle of proportionality apply in the event of collective dismissal. We assist both the corporate group with a European Works Council and the smaller entrepreneur facing a reorganization for the first time.

Why SME Lawyers

At MKB Juristen, lawyers and in-house counsel work together as a single team. This allows us to combine the litigation skills of the legal profession with the practical, business-oriented perspective of the in-house counsel. We serve clients ranging from international corporations to the baker around the corner, at all levels – from the boardroom to the individual employee. Do you have a reorganization or employee participation issue? View our employment law expertise or contact us directly.