Reorganization and collective dismissal under Dutch law

From time to time, companies may need to adjust their organization as a result of changed market conditions. The reorganization of a company may have a significant impact and it may sometimes be economically necessary to make job redundant.

Under Dutch law, the employer must meet specific obligations in connection with a reorganisation, to ensure the protection of the legal rights and interests of employees. In this context, a business case should be drawn up that provides for this.

Prior to the decision-making process of the reorganization, advice may have to be requested from the Works Council (Section 25 WOR).

Collective dismissals

In the event that more than 20 employees are dismissed, within a period of 3 months and within one working area of the UWV (governmental instance to file for collective redundancy), this will be considered a proposed ''collective dismissal''. Collective dismissals are regulated by the Collective Redundancy Notification Act.

The proposed collective dismissal must be reported to:

  1. The trade unions involved;
  2. The UWV (Employee Insurance Agency);
  3. If the company has more than 50 employees, the designated works council must also be informed of the collective redundancy. If a works council does not exist, it may be necessary to establish one in certain cases.

In order to avoid delays in the reorganization, correct notification to the UWV and trade unions are required.

Dismissal order

In the event of an economic dismissal, the so-called "reflection principle" will be applied to determine which employees are eligible for dismissal within categories of interchangeable positions. In essence, the selection of employees is determined by a formula that balances the proportions within the company. This takes into account different groups or categories of employees, for example the age of the employees, so that the representation of the age groups in the company remains more or less equal.

Relocation obligation

For the dismissed employees, the employer must make it plausible that within a reasonable period of time there are no suitable positions available within the company for which they would be suitable, not even with the help of training.

Social plan

The method of terminating the employment contract in the case of reorganizations and the package of (compensation) conditions for employees who are dismissed are often included in a Social Plan. It outlines the rights and obligations for employees in the event of a corporate reorganization. For example:

  1. redeployment options within or outside the company;
  2. method of calculating severance pay;
  3. notice period and end date, etc.

A social plan is generally drawn up in consultation between the employer and employee representatives (trade unions or a works council). In most cases, it is a useful method of avoiding legal proceedings. Legal assistance in drafting the social plan is highly recommended.

For questions about reorganization and collective dismissal, assistance with the procedure and the drafting of a social plan, please contact our employment law attorneys here.