Netherlands: Beware of the obligation to consult the Works Council in case of reorganisations!

Based on the Works Council Act (in Dutch: WOR), a company must consult the works council about, (among other things), significant downsizing, expansion, and significant changes in operations, the distribution of tasks, or structure of the company. The Works Council Act does not define when such a change is considered “significant.” This depends on the specific circumstances of the case. Recently, two companies misjudged whether a change was significant and were reprimanded by the Dutch Enterprise Court (in Dutch: Ondernemingskamer) for not consulting the works council. As a result, the companies had to completely reverse their reorganisation measures.

 

Even the reduction of one position can be a significant change

Insight Nederland decides to eliminate the position of Senior Solution Manager. Insight Nederland does not consider this to be a significant change, as it is only the elimination of a position, and has, therefore, not consulted the works council. The works council disagrees, arguing that the elimination of the Senior Solution Manager position is a significant change in the company’s structure and that the works council should have been consulted. The works council, therefore, brings the matter before the Dutch Enterprise Court. The Dutch Enterprise Court agrees with the works council that the abolition of the position of Senior Solution Manager is a significant organisational change, even though only one position is affected. The Senior Solution Manager was individually responsible for the supervision of 10 managers in the sales department, and the elimination of this management level position has significant consequences for the organisation of the company. Therefore, the works council should have been consulted. The Dutch Enterprise Court demands that Insight Nederland reverse the changes made by eliminating the position. If they still want to eliminate the position, they must first consult the works council.

 

Layoff of 19 employees is a significant downsizing

At the end of last year, Spotify announced a global reorganisation wherein 19 out of 172 employees in the Netherlands would be laid off. According to Spotify, this is not a significant change because Spotify’s organisational structure in the Netherlands remains largely unchanged. No new positions have been created, no organisational levels or departments have disappeared, been added, or merged, and there are no changes in the management team. The Dutch Enterprise Court does not agree with Spotify’s reasoning. According to the Dutch Enterprise Court, there is a significant downsizing because 19 out of 172 employees in the Netherlands will lose their jobs. In addition, the Dutch Enterprise Court ruled that Spotify did not sufficiently demonstrate that the reorganisation did not involve a significant change in the structure of the organisation. As a result, Spotify should have consulted the works council and must reverse any steps it may have taken with respect to the reorganisation in the Netherlands.

 

Conclusion

The rulings discussed illustrate that the works council’s right to be consulted regarding reorganisations is strong and that the question of whether there has been a significant change must be considered on the basis of the specific circumstances of the case. If a company misjudges this, the consequences can be substantial, as the reorganisation actions will have to be reversed and the works council will still have to be consulted.

Key Issues

• Works Councils Act (WOR) in the Netherlands mandates companies to consult the works council on significant changes like downsizing, expansion, or operational changes.
• The Act doesn’t precisely define what constitutes a “significant change,” and it depends on the specific circumstances of each case.
• Recent cases highlight the importance of correctly assessing the significance of changes to avoid repercussions from the Dutch Enterprise Court.
• Depending on the position, even the elimination of a single position may be considered a significant organisational change.
• And even when layoffs don’t impact the structure of the organisation, advice from the works council may still be mandatory if a significant number of jobs are lost.
• Failure to consult may lead the works council to bring the matter to the Dutch Enterprise Court, potentially resulting in the mandatory reversal of reorganisation measures.

Key Action Points for Human Resources and In-House Counsel:

To determine whether it is obligated to consult the works council in the event of a reorganisation, assess the impact of the reorganisation on both:

• The structure of the organisation
• The total number of affected individuals

 

Significant changes in the structure or a significant number of job losses as a result of a reorganisation will trigger the works councils’ right to be consulted.

Neglecting consultation obligations may prompt the works council to escalate the matter to the Dutch Enterprise Court, which could potentially lead to the mandatory reversal of any reorganisation measures.