Reorganization

Reorganization

As an employer, various financial setbacks may necessitate a reorganization. Furthermore, a reorganization may be required for an organizational change. To implement a reorganization as an employer, various regulations must be complied with. An employer can only submit a (collective) dismissal application to the Employee Insurance Agency (UWV). A collective dismissal application is filed when an employer dismisses more than 20 employees within three months during a reorganization. In the case of a collective dismissal, the employer must adhere not only to the normal dismissal rules but also to the conditions arising from the Collective Dismissal Notification Act (Wmco). The employee organization or trade union often agrees on a Social Plan in the event of such a reorganization. A Social Plan is an arrangement that includes the key agreements regarding the reorganization.

Questions regarding reorganization? Please contact us.

Reorganization within restructuring and insolvency

Within the broader context of restructuring and insolvency, often an instrument to avert impending bankruptcy. While the employment law aspect revolves around dismissal, a reorganization in financial distress also involves cost reduction, downsizing the company, and restoring healthy, viable operations. Therefore, the mixed teams at MKB Juristen—lawyers and in-house counsel—look not only at the workforce but at the company as a whole: from an international group restructuring an entire division to the baker on the corner looking to make the business profitable again with just a few employees. A reorganization can be initiated independently, but also in combination with a suspension of payments, a creditors' agreement , or the divestment of business units.

Reorganization and the WHOA

In a company facing financial difficulties, a personnel reorganization frequently runs parallel to a process under the Private Agreement Homologation Act (WHOA). It is important to note that these two tracks run parallel but cannot be merged. Article 369, paragraph 4 of the Bankruptcy Act stipulates that a WHOA agreement cannot alter employee rights arising from an employment contract. Consequently, the WHOA can enforce a creditors' agreement with financiers and suppliers, thereby creating financial breathing room, but you must reorganize the personnel through the ordinary labor law channels. In practice, therefore, anyone wishing to reduce both their debt burden and wage costs conducts two separate procedures, which we guide for you in conjunction.

The legal steps during a reorganization

A careful reorganization proceeds in fixed steps. First, you draw up a substantiated reorganization plan demonstrating the business necessity. If the company has a works council (in principle mandatory from 50 employees), it has the right to advise on the proposed organizational change pursuant to Article 25 of the Works Councils Act (WOR), and the works council must be consulted for advice in a timely manner and at a still substantial moment. If collective dismissal is involved (at least 20 employees within three months in a single UWV service area), the Collective Dismissal Notification Act (Wmco) applies: the employer notifies the trade unions and the UWV of the intention simultaneously and consults the unions. After the notification, a waiting period of one month generally applies before termination may be initiated. Only after this period do you start the actual dismissal procedure at the UWV.

Mirroring, redeployment and transition payment

In the event of dismissal for economic reasons, the UWV applies strict scrutiny. The employer must adhere to the correct order of dismissal in accordance with the mirroring principle set out in the Dismissal Regulations: within each category of interchangeable positions, employees are divided into age groups so that the age structure remains as similar as possible and the employee who was hired last within a group is the first to be let go. If a unique position or an entire category of interchangeable positions is eliminated, mirroring does not apply. In addition, pursuant to Article 7:669 paragraph 1 of the Dutch Civil Code, there is an obligation to reassign: termination is only possible if reassignment to another suitable position within a reasonable period is not possible or not reasonable. This is an obligation of effort, not an obligation of result. Upon termination, the employer is in principle liable for a transition payment pursuant to Article 7:673 of the Dutch Civil Code, calculated over the duration of the employment. Incorrect mirroring, a flawed reassignment investigation, or an incomplete notification may lead to the UWV refusing permission.

Reorganization or a restart?

Not every company can be saved by a reorganization. Sometimes it is wiser or unavoidable to opt for a restart , whether or not following a bankruptcy filing. Together with you, we assess whether a reorganization within the existing company is sufficient, or whether a more extensive restructuring better protects the viable parts. Mapping out the options in a timely manner—reorganizing, downsizing, an agreement with creditors, or a controlled restart—precisely prevents a company from ending up in bankruptcy unnecessarily.

Frequently asked questions about reorganization

When is there a collective dismissal?

Collective dismissal occurs when the employer intends to dismiss at least 20 employees within three months who are employed within a single UWV service area. In that case, the notification and consultation obligations under the Collective Dismissal Notification Act apply.

Am I allowed to reorganize my staff under the WHOA?

No. Pursuant to Article 369, paragraph 4 of the Bankruptcy Act, a WHOA agreement does not affect rights arising from employment contracts. A personnel reorganization always proceeds via the regular employment law route, possibly parallel to a WHOA process.

Do I need a works council during a reorganization?

An undertaking with 50 or more employees in principle is required to establish a Works Council. Pursuant to Article 25 of the Works Councils Act, that Works Council has the right to advise on a proposed reorganization and must be involved in a timely manner.

Are employees entitled to a transition payment?

Yes, in the event of termination due to business economic reasons, the employer is in principle liable for a transition payment pursuant to Article 7:673 of the Dutch Civil Code, calculated over the duration of the employment.

Whether you are an international corporation or the baker on the corner: our lawyers and corporate counsel guide you through every step of the reorganization. Questions regarding reorganization? Please contact us.