Based on the Works Councils Act (in Dutch: WOR), a company must consult the works council about (among other things) significant downsizing, expansion and significant changes in operations, 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 reorganization measures. Read below this article to find out what lessons can be learned.
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 organizational 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 has significant consequences for the organization 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 significant downsizing
At the end of last year, Spotify announced a global reorganization in which 19 out of 172 employees in the Netherlands will be laid off. According to Spotify, this is not a significant change because Spotify’s organizational structure in the Netherlands remains largely unchanged. No new positions have been created, no organizational 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 reorganization did not involve a significant change in the structure of the organization. As a result, Spotify should have consulted the works council and must reverse any steps it may have taken with respect to the reorganization in the Netherlands.
Conclusion
The rulings discussed illustrate that the works council’s right to be consulted in regard to reorganizations 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 reorganization actions may have to be reversed and the works council will still have to be consulted. This can cause significant delays.