Undue disregard for, or failure to establish a Participation Body: not without consequences

The Dutch Works Councils Act (WOR) states that any entrepreneur carrying on an enterprise in which normally at least 50 persons are working shall establish a works council. In practice, entrepreneurs regularly fail to establish a works council, despite this statutory obligation. What also happens is that despite the existence of a participation body, this gets disregarded in the decision-making process. Any entrepreneur acting in this way may be faced with various consequences.

Law firm with no Works Council

On 12 December 2012 the Rotterdam District Court ruled in preliminary relief proceedings brought by three employees from a Rotterdam-based law firm. At that time, the firm employed more than 50 people. Despite that, no works council had been established. The firm wanted to push through a reorganisation, which would result in approximately 10 employees becoming redundant. Three of the employees threatened with redundancy sought a ruling ordering their employer to establish a works council. Pending the incorporation of the works council, they claimed the employer should suspend the reorganisation until the works council had been established and could issue advice on it.

In its defence, the employer submitted that there are still many companies in the Netherlands employing between 50 and 100 people, where a works council had also not been established. However, the judge held that this did not affect the statutory obligation in question. The judge hereby noted that a law firm should certainly have been expected to comply to the law.

The judge did not allow the claim for the establishment of the works council and suspension of the reorganisation and considered, inter alia, that the employees had been employed for a long period of time but were only now showing an interest in establishing a works council. The judge held that the wish to set up a works council was motivated by the fact that the employees were threatened with redundancy. The judge furthermore considered that establishing a works council would be a long, drawn-out process and that the reorganisation programme had been set in motion prior to the claimants' voicing their wish to establish a works council. The judge therefore deemed it unnecessary and undesirable for the entrepreneur to suspend the reorganisation pending the establishment of a works council.

Opportunities to put forward interests to the Dutch Employee Insurance Agency (UWV) or subdistrict court

In the above, the judge deemed it relevant that the employees concerned had had sufficient opportunity to put forward their interests with regard to the undue failure on the part of their employer to establish a works council. In a UWV procedure this argument could be put forward to counter the granting of permission to terminate employment. Furthermore, the judge deemed it possible that the undue failure to establish a works council could lead to higher compensation being awarded to employees in Dutch subdistrict court proceedings. This is because the rights relating to participation had not been sufficiently safeguarded by the employer. Thus the conduct of the law firm might then have financial and other consequences. Generally speaking, it is also possible - and this has happened - for a Dutch subdistrict court to reject a request for termination of an employment contract due to the fact that no works council had been established, when there was an obligation to do so.

Timing of initiative for establishment is relevant

It can be inferred from the above decision that the timing of the initiative to set up a participation body matters significantly. On 20 June 2009 the Zutphen Subdistrict Court gave a similar decision. Again, it was already known that the enterprise was going to be reorganised by the time the employees first showed an interest in establishing a works council. Again, the judge held that this did not need to wait until establishment of a works council.

The Amsterdam Subdistrict Court ruled differently in a case where initiatives had been taken, at an earlier stage, to set up an employee representation body (PVT). Without waiting until it had been established, the employer applied for permission to terminate the employment of 18 employees. In preliminary relief proceedings the employee representation body claimed withdrawal of the applications for permission to terminate employment or a ban on any permission given. The claim was allowed. The judge considered that it was not very likely that when it applied for permission to terminate employment the employer was ignorant of the fact that the employee representation body had already been set up or was due to be set up within a few days. The judge hereby referred, inter alia, to the fact that the elections had already taken place and that there had been written communication with the director regarding the establishment. In view of this, the employer should have been expected
to take a few days' respite and wait for the employee representation body to be set up before applying for permission to terminate employment.

Conclusion

Employees cannot prevent or postpone a reorganisation by claiming that employees' representation be established. The undue failure to establish a works council – and the failure to consult, or to be able to consult the works council as a result – can be considered in legal decisions on, inter alia, the acceptability of the termination of employment contracts of individual employees and the awarding of compensation to those employees. By the same token, the UWV can also, when assessing an application for permission to terminate employment, take into account whether a works council has been established.

The timing of initiatives to set up a participation body is relevant to the implementation of a reorganisation. If initiatives to establish a participation body are taken before the entrepreneur decides to reorganise, then the entrepreneur shall not be able to disregard this body or the body in the process of being established.