Business reorganisation and collective dismissal under Dutch law

In order to have a legally valid reorganisation in the Netherlands, there are several steps to take:

First, in the case of collective dismissal (20 or more employees within a time frame of three months) the Collective Redundancy Notification Act (Wet Melding Collectief Ontslag) is applicable. According to this act, the trade unions should be notified and consulted, and the dismissal should be reported to the Employee Insurance Agency (UWV). Second, the employer should verify whether its Works Council, if any (required in companies with 50 or more employees), has the right to advise.

Third, the employer has to establish which positions become redundant in accordance with the reflection principle (afspiegelingsbeginsel). In essence, this means the selection of employees is determined by a formula that acts to balance the scales. It targets different groups or categories of employees, for example the age of employees, so the representation of age groups in the company remains more or less the same.

After that, the employer needs to submit an application for dismissal to UWV to terminate the employment agreements. UWV investigates the reasons for the requested termination of the employment agreements. If there are suffcient grounds for termination, the approval (permit) by UWV will be granted and notice to terminate the employment agreement can be given.

As this is a time-consuming and sometimes risky procedure, it is very common that the employer instead takes the initiative first to terminate the employment agreement by mutual consent based on a Social Plan which, if trade unions are involved, has been negotiated by them and the Works Council. In such a Social Plan, the social and financial consequences for the employees are arranged (severance payment, termination date, notice period, outplacement, redeployment, etc). In this way, a business reorganisation can be arranged quite quickly and smoothly.

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