Involve the Works Council on time and with care in your reorganisation decision!

Recently, we are seeing more and more reorganizations. We find that in practice, with regard to reorganizations, important steps are often overlooked. One of these steps is the request for advice to the Works Council (WoCo). The entrepreneur must request timely advice from the Works Council on each important proposed decision of a financial, economic and/or organisational nature. The entrepreneur does this in time if the Works Council can actually influence the decision to be taken. As to the question of whether a decision is ‘important’ – and therefore subject to advice – there is no clarity under the law, and the Works Council and the entrepreneur sometimes argue about this. In this article, I address this issue based on the restructure decision by Spotify NL.

Spotify NL’s reorganisation

Spotify is going to reorganize; it involves a global reduction of 1530 jobs. In the Netherlands, 19 employees will be affected by the decision. Spotify NL believes that the reduction of operations in the Netherlands is limited and that there is no significant downsizing. Furthermore, according to Spotify NL, there is no significant change in the organisational structure: no new positions have been created, the name remains unchanged, the scope of the positions remains unchanged, departments have not been merged, split or disappeared and the management team has not changed. The works council thinks otherwise and turns to the Enterprise Chamber (EC). The EC rules in favour of the WoCo: this is an important decision and the WoCo was wrongfully not involved.

When is a decision important?

The law does not define the term ‘important’. It can therefore be difficult to determine which decisions are considered important. This open standard must be filled in according to the circumstances of the case. The decisive factor is whether the decision can objectively be considered ‘important’. The questions below provide starting points when evaluating a decision:

  • Financial: to what extent is future growth and/or revenue affected by the decision? What is the impact of the investment or change in business operations?
  • Economic: is it a decision outside the normal course of business?
  • Organisational: what is the impact on employees? How many redundancies will there be? Will the redundancies fall in one round of redundancies, or in several rounds? What is the ratio of downsizing to overall operations? Will a core activity disappear?

Consequence of bypassing the WoCo

In our example, the EC concluded that the decision was important. One reason for this was Spotify NL’s failure to provide insight into the above questions. The lack of transparency and concrete substantiation by Spotify NL left the EC with no option but to conclude that the decision was important. So, it may pay to provide transparency on the rationale, especially since in cases like this the WoCo is protected.

Lessons for practice

Spotify NL has not adequately disputed that a decision is important. The lesson to take away from this: do not underestimate the importance of co-determination, substantiate why a decision is (un)important and take the right steps in a restructuring process.

In fact, bypassing the WoCo can lead to very unpleasant consequences. Need help? If so, please contact us.

Mirjam Scheper

Published On: 3 June 2024

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