Employee rights in the event of reorganisation
Companies experiencing financial difficulties sometimes need to restructure in order to remain viable. Restructuring can restore a company’s viability, but often has significant consequences for its staff. The reorganisation process is usually a lengthy one, during which the employer must respect the rights of the employee and other stakeholders. How do you, as an employer, prepare for a reorganisation? And how do you decide which employees to let go?
Consequences for employees
A reorganisation offers a company in financial difficulty the chance to avoid bankruptcy and guarantee its continued existence. The way in which the reorganisation is structured can have different consequences for an employee. For example, an employee may be given a different position, transferred (redeployment), have to reapply for their own job, have their fringe benefits adjusted, or be dismissed.
Redeployment obligation
If there is a redeployment opportunity for an employee – the redundant employee is suitable for redeployment in a suitable position – the employer must, in principle, offer the position to the employee. The employer is free to determine which employee is offered the redeployment opportunity, provided that equal treatment is applied. An employer is required by law to comply with the redeployment obligation. If an employer fails to comply with this obligation, the UWV may reject the application for dismissal. However, there are circumstances in which the employer can invoke the “unreasonableness” of the redeployment opportunity.
Drawing up a thorough reorganisation plan
A reorganisation is a radical and complicated process, often with major consequences for the staff. It is therefore important that an employer draws up a good reorganisation plan in preparation for the proposed reorganisation. This reorganisation plan must demonstrate why reorganisation is necessary and how the new organisation will be structured. In order to convince others of the necessity, employees, the works council, the UWV (Employee Insurance Agency) – and possibly, at a later stage, the subdistrict court – and any trade unions must be properly and thoroughly informed during the preparatory phase.
What should a reorganisation plan contain?
The reorganisation plan in the preparatory phase must comply with various legal obligations. A reorganisation plan must include the following elements, among others:
- The intention to reorganise the organisation
- The consequences of the reorganisation for the company
- An organisational chart and description of the current organisation and situation
- The reason for the reorganisation
- The vision for the future organisation
- The future situation of the organisation after the reorganisation
- The financial, strategic and economic benefits of the reorganisation
- The manner in which the reorganisation will be implemented
- The consequences of the reorganisation for the staff
- The manner in which the consequences for the staff will be dealt with
- An inventory of the current workforce per position
- A comparison of interchangeable positions
- The redeployment options for redundant employees
How long does the reorganisation process take?
The duration of a reorganisation process varies, but on average it takes several months to a year, depending on the size and complexity of the organisation and the preparation. Factors that influence this include the need to request advice from the works council, any notifications to trade unions, the drafting of a social plan and the dismissal procedure via the UWV. Replacement efforts and notice periods also play a role. Good preparation and a legally sound plan ensure a smoother and more efficient process, with less risk of delays or legal complications.
Collective Redundancy Notification Act
If, in the course of a reorganisation, more than twenty employees are made redundant within a period of three months for economic reasons, the employer is bound by the Collective Redundancy Notification Act (Wmco). These employees must also be active in the same field of work. The Act stipulates that the employer must notify the UWV (Employee Insurance Agency) in advance of the collective dismissal and consult with the trade unions about the proposed reorganisation. If an employer fails to comply with the obligations under the Wmco for the notification of collective dismissal, the court may reverse the dismissal.
Is a social plan mandatory in the event of a reorganisation?
A social plan is not mandatory in the event of a reorganisation. Agreements regarding social matters are often laid down in the collective labour agreement (CAO). Is there a works council? If so, the company must advise the works council about the personnel consequences of a reorganisation. A social plan is necessary in the event of collective redundancies. A social plan contains agreements between the employer, works council or trade unions regarding the redundancies. These include transition payments or replacement payments if these are laid down in the collective labour agreement. For employees who remain in service, the social plan provides for changes in the workplace, such as relocation.
Roadmap and communication plan for reorganisation
After drawing up the reorganisation plan, a roadmap for the reorganisation is drawn up. In this roadmap, the employer indicates how and when actions will be taken towards those involved within the organisation. A communication plan is also drawn up to ensure that all those involved are properly and specifically informed about the plans. This timeline provides a clear analysis of those involved and their interests, as well as a schedule of when which employee or person involved will be informed about which information.
Depending on the scope of the reorganisation, the following persons and organisations are usually involved in drawing up the roadmap and communication plan:
- Management, human resources, project manager
- Employees
- Works council
- Trade unions
- UWV
The works council’s right to be consulted
When a decision is proposed to make a significant change within the organisation of a company with a works council, the works council’s right to be consulted comes into effect. These laws and regulations are laid down in the employee participation law. This means that in the event of a reorganisation, the employer must first consult the works council. The request for advice must be submitted to the staff council in good time. The law stipulates that the advice of the Works Council must still have a significant influence on the decision to be taken.
The request for advice must include a detailed description, including a justification for the decision. The works council must also be informed about the expected consequences for employees and the measures that will be taken in this regard. With regard to the measures, the request for advice may refer to the consultation between the employer and the trade unions.
Reintegration and reintegration process
A reorganisation does not release an employer from the obligation to reintegrate an employee. Even when a company is reorganising, the employer must continue to promote the reintegration of an employee who is on sick leave, for example through a reintegration programme. During the first 104 weeks of incapacity for work, there is a prohibition on terminating the employment contract. This prohibition only lapses in the event of bankruptcy or closure of a company.
Terminating an employment contract during illness is not permitted in the event of a reorganisation, nor is the dissolution of the employment contract. A prohibition on termination also applies to redundant employees who are pregnant. The Work and Care Act contains a number of “absolute prohibitions on termination” or “during” prohibitions on termination (Section 7:670 of the Civil Code), including the prohibition on termination during pregnancy. This prohibition applies during the period of maternity leave and childbirth leave until six weeks after the employee returns to work.
Individual dismissal request in the event of reorganisation
The social plan is a collective redundancy scheme, but in the event of reorganisation, there may also be individual dismissal requests. In order to agree on a dismissal scheme on an individual basis when reorganising a company, the employee and employer negotiate the terms and conditions for the termination of the employment contract. One of the conditions is determining the severance pay. After an agreement between the employer and employee, the severance pay is laid down in a settlement agreement or termination agreement. In the event of both collective dismissal and an individual dismissal application, the employee is entitled to unemployment benefits.
Advice and guidance on reorganization
A successful reorganization requires thorough preparation. Careful consideration is essential, particularly in view of the personnel changes or consequences. The solicitors at Fruytier Lawyers in Business have extensive experience in the legal structuring of reorganizations. We can support you in assessing the economic circumstances of your business and provide expert legal advice from an employment law perspective. For more information, please contact one of our employment law solicitors.
Authors: Employment law solicitors Judy Sliepen and Myrddin van Westendorp