How do you reorganize a business under Dutch law?
A business reorganization in the Netherlands often entails redundancies of current employees. Under Dutch employment law, the employer must comply with specific obligations in this regard, to protect the legal rights and interests of their employees.
What Is Collective Redundancy in the Netherlands?
If over 20 employees are made redundant within a three-month period, this is categorised as a collective redundancy under the Collective Redundancy Notification Act (Wet Melding Collectief Ontslag, WMCO).
With the termination of multiple employment contracts, the employer’s duties will include notifying relevant third parties. This entails:
- notifying the relevant trade unions (the employer should also be conferring and actively working with these trade unions on the issues at hand and reasonable handling of the redundancy)
- notifying the Employee Insurance Agency of the events that are unfolding due to the reorganisation of the business
- and if the business has over 50 employees, notifying the appointed works council.
It is important to highlight, that these redundancies must occur within a 3-month timeframe. Further, if a works council does exist, in certain cases, this could give rise to the applicability of the Works Council Act.
How Do You Determine Who Is Made Redundant When Reorganizing a Business in the Netherlands?
If an employer in the Netherlands is seeking to dismiss multiple employees for financial and economic reasons, it must abide by the reflection principle (afspiegelingsbeginsel). This formula balances the selection of employees across different age groups, so the representation of age groups in the company remains more or less the same after the reorganization.
What Is the Reinstatement Obligation Under Dutch Labor Law?
Under Dutch labor law, the reinstatement obligation (in Dutch: wederindiensttredingsvoorwaarde) requires the employer to prove that there are no existing positions in the company the dismissed employees would be suitable for, before it may hire externally for a comparable role.
Does the Employer Need UWV Permission for Redundancies During a Reorganization?
Yes. When an employer wishes to dismiss employees for economic reasons as part of a business reorganization, it must first obtain a dismissal permit from UWV, the Employee Insurance Agency. UWV assesses whether the employer has a valid business-economic ground for the redundancies and whether the reflection principle has been correctly applied, and without this permit the employer cannot lawfully terminate the employment contracts on the basis of redundancy.
What Is a Social Plan Under Employment Law in the Netherlands?
Under Dutch employment law, the employment contract termination in reorganizations and the compensation package for employees is often handled by way of a social plan (sociaal plan). This is developed by a company to embody the mutual consent of both parties in terminating an employment agreement and outlines the regulations and options available to employees.
A social plan typically covers:
- re-employment opportunities that can be found inside or outside the company
- calculation of severance payments
- and notice period and termination date.
A social plan is generally constructed through consultation between the employer and the employee representative body (unions or a works council), and is in most cases a useful method to prevent court proceedings.
Key legal sources
- Collective Redundancy Notification Act (Wet Melding Collectief Ontslag)
- Article 3 WMCO – employer's duty to notify trade unions and UWV