COMPANIES GOING THROUGH GLOBAL reorganisations often have to deal with local rules and regulations relating to employee participation. Observing these rules and regulations is often of major importance to avoid any delay in the implementation of business decisions. This article describes some of the main aspects of the consultation process relating to works councils in the Netherlands. It covers the special provisions that apply to entrepreneurs employing at least 50 people.
Dutch works council Act 1971
The rights of Dutch employees to participate in the organisation they work at are set forth in several legal regulations of which the Dutch Works Council Act (WOR) 1971, as amended, is by far the most important. According to this Act, the employee representative body known as the works council (Ondernemingsraad) must be given an opportunity to comment on certain important management and business decisions. For several of these decisions, advice from the works council is a necessity.
Unlike legislation in some countries, Dutch law does not entitle employees to representation on the management body of an undertaking, nor does it entitle the works council to determine the allocation of profits.
Consultation process
Discussions between the entrepreneur and the employee representatives who comprise the works council take place at a consultation meeting. At this consultation meeting the entrepreneur is represented by the managing director or a competent member of the management board of the undertaking.
The general business of the undertaking must be discussed at the consultation meeting at least twice per year. In addition, there must be a meeting within two weeks of a request by either the works council or the entrepreneur. The request must set forth the reasons for the meeting.
The following must be discussed at the consultation meeting:
- matters that either the entrepreneur or the works council deem desirable; and
- matters required under the WOR 1971.
The works council may also submit proposals to the entrepreneur regarding these matters outside the framework of a consultation meeting. The entrepreneur cannot decide on these proposals until there has been at least one discussion at a consultation meeting.
Right of advice
Article 25 of the WOR 1971 says that the entrepreneur must give the works council an opportunity to provide advice on any decision it proposes to make which involves:
- transfer of control of the enterprise or any part thereof;
- the establishment, take over or relinquishment of control of another enterprise or the setting up, substantial modification, or discontinuation of long-term co-operation with other enterprises, including the setting up, substantial modification or discontinuation of a substantial financial participation by or on behalf of such an enterprise;
- discontinuation of the activities of the enterprise or of a major part of these activities;
- substantial change in the activities of the enterprise;
- substantial change in the organisation of the enterprise or in the allocation of responsibility within the enterprise;
- a change in the location where the enterprise carries on its activities;
- the furnishing of substantial credit and providing of a financial guarantee for substantial debts of another entrepreneur, unless this arises in the ordinary course of business in the enterprise; and
- the appointment of and formulation of terms of reference for an outside expert to provide advice on any of the foregoing matters.
The substantiality test depends inter alia on the size and nature of the enterprise. According to case law, a change in the activities of the enterprise that does not involve important, direct consequences may nevertheless be considered substantial because of its long-term structural consequences.
Paragraphs b) and h), as they relate to any matter referred to under b), do not apply if the other enterprise is, or will, be established abroad and if it is not reasonable to expect that the proposed decision will lead to changes under paragraphs c) through f) with regard to an enterprise maintained in the Netherlands.
Advice must be requested early enough for it to significantly influence the proposed decision. The request for advice must be accompanied by a detailed summary of the reasons for the proposed decision, the anticipated consequences for the employees of the enterprise and the proposed measures to be taken in relation to those consequences.
The works council may not provide its advice until there has been at least one consultation meeting on the subject. After the works council has submitted its advice, the entrepreneur may make a decision. The works council must be notified thereof in writing as soon as possible. If the advice has not been followed or has been only partially followed, the works council has to be informed why this was the case.
So what if the entrepreneur has made a decision involving one of the matters referred to in article 25 of the WOR 1971, that is contrary to advice given by the works council? Or what if facts and circumstances become known which, had they been known to the works council at the time of presenting its advice, might have led to a different result? In this case, the works council may appeal to the Enterprise Chamber of the Amsterdam Court of Appeal within one month of the entrepreneur’s written notification of their decision. During this one month period the entrepreneur must suspend the implementation of their decision.
Right of appeal
The only available ground for appeal is that the entrepreneur could not reasonably have reached the decision had it weighed the interests involved. Because of this limited scope of review, appeals are not easily granted on substantive issues. Procedural mistakes made by the entrepreneur have, however, often led to a judgment favourable to the works council. Procedural mistakes include insufficient presentation of information and inadequate justification of the decision to not follow the negative advice of the works council. The Enterprise Chamber has held that an entrepreneur’s failure to solicit the advice of the works council establishes an irrefutable presumption that it could not reasonably have reached its decision had it weighed the interests involved. If the Enterprise Chamber finds that the entrepreneur could not reasonably have come to the decision had it weighed such interests, the entrepreneur may be required to withdraw the decision, in whole or in part, and reverse specified consequences of that decision.
The Dutch courts have held that a subsidiary, as a separate legal entity formed under Dutch law, has its own interests to protect regarding its own rights and responsibilities vis-à-vis its holding company. Although, the courts will certainly consider the interests of a group of companies and its (international) group strategy, there must always be a balancing act between the economic interests of the group and the social interests of the employees involved.
Finally
Employee participation in the Netherlands involves fulfilling certain requirements in a correct and timely manner. A thorough preparation of documents and a well-planned timetable will help the entrepreneur avoid court cases and support the effective implementation of business decisions in the Netherlands.
By Eugenie Nunes, partner, labour law department, Boekel De Nerée.
E-mail: eugenie.nunes@boekeldeneree.com.
Boekel De Nerée is a leading independent Dutch law firm of advocaten and civil law notaries.
Based in Amsterdam, we offer specialist advice to clients in a wide range of industries. Our corporate practice includes an Anglo-American advisory group specifically geared to serving the interests of clients from English-speaking parts of the world, providing clients with a peace of mind when dealing with matters in the Dutch jurisdiction.
www.boekeldeneree.nl
