Collective redundancies

When a company wants to dismiss at least twenty employees for economic reasons, this is referred to as collective dismissal. When dismissing this specific number of employees within the statutory period of three months, the company must follow a fixed dismissal procedure. What steps must a company take and what is the order of dismissal for applying for collective dismissal?

Redundancy application for business reasons

Often, the circumstances within a company are the main reason for applying for collective redundancy. In this situation, we refer to redundancy for business reasons. Business reasons include, among other things, a poor financial situation of a company, a reduction in work, organisational or technological changes, the relocation of a company or the expiry of a wage subsidy. In these cases, it is a matter of the entrepreneur taking the necessary measures for efficient business operations.

When is it considered collective dismissal?

When a company dismisses twenty or more employees within a period of three months for economic reasons, this is considered collective dismissal. The condition is that these employees are all active within the same field of work. Regardless of how the employer organises the dismissal – via the UWV, the court or by mutual consent – the entrepreneur is bound by legal rules. The regulations governing collective dismissal are laid down in the Collective Dismissal Notification Act (Wmco, Article 685 of Book 7 of the Civil Code).

What are dismissed employees entitled to?

Employees who are dismissed in a collective redundancy for economic reasons are primarily entitled to a transition payment. In addition, in almost all cases, they are entitled to unemployment benefits, provided they meet the conditions set by the UWV. If a social plan has been agreed with the trade unions or works council, it may contain additional agreements. In some cases, employees may also claim additional compensation if it appears that the employer has not complied with the rules of the Collective Redundancy Notification Act (Wmco). It is therefore essential that employees are well informed about their rights in the event of collective redundancy.

Collective Redundancy Act

In the event of redundancy for economic reasons, the Collective Redundancy Act automatically comes into force. The Collective Redundancy Act (Wmco) requires employers to report any reorganisation to the UWV and the trade unions concerned. In order to comply with this reporting obligation, the employer is required to notify these authorities in writing.

The UWV must grant the employer a dismissal permit. Trade unions can enter into discussions with the employer to see whether job losses can be prevented or reduced. If dismissal appears to be the only option, the employer and the relevant authorities will work together to draw up a social plan to limit the consequences for dismissed employees where possible. The dismissed employees are entitled to unemployment benefits.

Social plan for collective redundancy

An employer who applies for collective redundancy for economic reasons draws up a social plan in consultation with, for example, the works council or a trade union. A social plan includes agreements regarding the redeployment of redundant employees, the order of dismissal and any redundancy arrangements.

Step-by-step plan for applying for collective redundancy

In order to apply for collective dismissal on economic grounds, an employer must submit a complete dismissal application in order to comply with the notification requirement. The following information must be provided:

Notification of collective redundancy Wmco

After reporting the redundancy plans, a company must wait at least one month before dismissing the employees concerned. The waiting period gives trade unions the opportunity to respond to the possible collective dismissal. There are a number of exceptions to this rule. For example, a company may proceed with the dismissal if the trade unions agree with the proposed decision, if the trade unions do not respond to the notification within two weeks, or if the trade unions notify the company in writing that they will not be consulting.

Please note: if an employer does not comply with the rules laid down in the Collective Redundancy Act, the dismissal will be deemed invalid. In this case, any termination agreements concluded or the termination of the employment contract may be annulled by the subdistrict court.

Reflection principle

In the event of collective dismissal for economic reasons, an employer must determine the correct order of dismissal. The reflection principle is applied for this purpose. The first step is to determine the workforce. This is an overview of all employees, including those with permanent contracts, those with temporary employment contracts and external employees. The overview is then divided into categories with interchangeable positions. Interchangeable positions are positions that are comparable based on:

After determining the workforce and the interchangeable positions, the employees are divided into groups. The Wmco has defined five groups:

Ranking system and age structure

After determining the employee groups for collective redundancy applications, the UWV requires a ranking of interchangeable positions. This is determined on the basis of age:

Based on the reflection principle and the ranking system, the employer determines the order of redundancies with the aim of distributing the age structure within the job group as evenly as possible. Within each age group of an interchangeable job, the employees who were hired last are identified. They will be the first to be made redundant.

In various situations, it is possible to deviate from the reflection principle in the event of collective redundancies, or an employer may not need to invoke it. The principle does not need to be used if:

An employer may also deviate from the reflection principle in certain other circumstances. This is possible when:

Works council’s right to be consulted in the event of dismissal

Companies with a works council that have plans for collective dismissal must consult the works council in good time. This is because the works council has the right to be consulted in the event of reorganisations. The law stipulates that the works council’s right to be consulted must be able to “significantly influence the decision to be taken”. If an employer decides to disregard the advice of the works council, this may have legal implications. Among other things, it may be determined that the decision must be suspended.

Complex regulations

The regulations surrounding collective redundancies for economic reasons are extensive and complex. Failure to comply with the applicable regulations of the Wmco can also result in severe penalties. If the subdistrict court determines that a report was wrongfully not filed or that an employer has not complied with the law, the dismissal can be overturned. In this situation, the employer must continue to pay the salaries of the employees who have already been dismissed, including for the period during which they did not work. An employee may also ask the court for additional financial compensation.

Employment law solicitor in Amsterdam

Given the complexity of employment law and the fact that a far-reaching decision such as a collective dismissal can cause considerable unrest, it is highly advisable to seek detailed legal advice. As employment law solicitors in Amsterdam, we provide legal advice on all matters relating to the dismissal of employees, including specific or isolated dismissal cases such as urgent reasons for summary dismissal, dismissal after two years of illness and failure to comply with reintegration agreements. Our solicitors specialising in dismissal law are happy to assist you and help you determine the best solution for your company and, above all, your employees. For more information, please feel free to contact Fruytier Lawyers in Business.

Authors: Employment law solicitors Judy Sliepen and Myrddin van Westendorp