Some employers in the Netherlands conduct individual dismissals for reasons that may include unsatisfactory performance, culpable acts on the part of the employee, long-term illness or disability, or a seriously damaged working relationship (known as grounds for dismissal). A dismissal for economic reasons, however, usually affects more than one employee. The Labor Market in Balance Act (Wet arbeidsmarkt in balans in Dutch, or WAB), which entered in force on January 1, 2020, introduced some important reforms regarding employment contracts, dismissal, transition pay and other employment matters in the Netherlands, and it is imperative that you understand how the law has changed moving forward so you are aware of your rights. If your employment contract has been terminated as a result of a collective dismissal, our lawyers can help you navigate the collective redundancy, protect your legal rights and collect the transition pay you are entitled to upon dismissal.
- What is a Collective Redundancy?
- Reasons for Collective Redundancies
- Collective Redundancy Procedure
- Method of Selection for Collective Dismissals
- Obligation to Look for Alternative Employment
- Social Plans Under Dutch Employment Law
- Transition Payment
- Know Your Rights Under the Law
- Contact Our Experienced Lawyers Today
What is a Collective Redundancy?
Something that is “redundant” is no longer needed or useful. In terms of Dutch employment law, the term “redundancy” refers to the act of dismissing an employee who is no longer needed because there is no work available. In other words, making the employee redundant. If an employer in the Netherlands terminates or intends to terminate a number of individual employment contracts affecting 20 or more employees in one or more company locations within the same district of the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen in Dutch, or UWV), within three months, due to reorganization for economic reasons, this is known as a collective redundancy or collective dismissal. The rules governing collective dismissals in the Netherlands are laid out in the Collective Redundancy Notification Act (Wet melding collectief ontslag in Dutch, or WMCO). Under the WMCO, terminations by mutual consent are to be included in the number of dismissed employees for the purpose of classifying Dutch dismissal proceedings as a collective dismissal.
Reasons for Collective Redundancies
There are a number of reasons why a company in the Netherlands may consider a collective redundancy, one of the most common being as a consequence of a company reorganization or restructuring. The reorganization or restructuring of a business can result in significant adjustments in terms of staffing, and in some cases, there may be a need for the dismissal of multiple employees for economic reasons. Some other circumstances under which a collective redundancy may become necessary include relocation, bankruptcy and downsizing.
Collective Redundancy Procedure
Employers in the Netherlands intending to proceed with a collective redundancy have certain obligations under the law. Dutch employment law requires that employers considering a collective redundancy first report their intention to the UWV and consult the works council and employees’ trade unions to discuss ways in which the employer can avoid redundancies, keep the number of dismissals to a minimum, and mitigate the adverse effects for the employees involved. In notifying the UWV of the intended collective dismissal, the employer proposing the collective dismissal must provide the most accurate information possible regarding:
- The reasons for the proposed redundancy,
- The number of employees to be made redundant (divided by position, gender and age),
- The number of employees normally employed by the company,
- The criteria used to determine which employees are eligible for dismissal,
- The date of termination of their employment contracts, and
- The way in which any transition payments will be calculated.
When notifying the UWV of a proposed collective redundancy, the employer must also provide the following information:
- Whether a works council has been established,
- Whether the works council has a right to issue a formal opinion, and
- The date on which the works council was or will be consulted.
Once these steps have been completed, the employer must observe a one-month waiting period, during which time the employer cannot terminate the employees’ employment agreements. Once the employer has complied with these obligations and the consultation process is finalized, the employer can then request the dismissal permits from the UWV. If the dismissal permits are granted, the employer can give notice to the redundant employees before the end of the one-month period. Alternatively, the employer can terminate the employment contracts with mutual consent and give notice. However, if the employer fails to adhere to the one-month waiting period or fails to comply with the obligation to inform and consult with the UWV and trade unions, the employees dismissed under the collective redundancy can bring a claim in court to have the termination of their employment agreement reversed, so long as they do so within six months after the dismissal.
Method of Selection for Collective Dismissals
The UWV’s approval of an employer’s application for a collective redundancy depends on several different factors, including the reasons for the collective redundancy, the outcome of any trade union/works council consultations, and the method of selection used in the collective dismissal. According to Dutch employment law, employers should select which employees to make redundant on the basis of the balancing principle (afspiegelingsbeginsel, in Dutch). Under this principle, employees are selected for a collective redundancy using a formula that targets different categories of employees based on their position, gender and age, with the goal of maintaining balance. By targeting the age of employees, for instance, the balancing principle aims to ensure that the representation of age groups within the company remains more or less the same after the collective dismissal as before.
Obligation to Look for Alternative Employment
Employers intending to proceed with a collective dismissal have an obligation to search for alternative positions within the company or its subsidiaries that the employees to be made redundant may be able to fill. Only by proving that there are no existing positions within the company that the employee would be suitable for, can the employer show that the employee should be made redundant.
Social Plans Under Dutch Employment Law
When an employer in the Netherlands dismisses multiple employees due to reorganization, the dismissal can have considerable consequences for both the dismissed staff and the remaining staff. It is important that employers proposing a collective dismissal disclose how they plan to deal with matters such as transfers, re-training and transition pay for employees that will be made redundant, and one way to do this is by way of a social plan. A social plan may also regulate workplace changes, for example when the business is relocating, and other matters with regard to the employees who remain. In most cases, a social plan is developed during the consultation between the employer and the employees’ organization (trade union or works council). Keep in mind that a social plan is not required by law. However, the collective labor agreement may contain provisions regarding the development of a social plan.
With the passage of the Dutch Work and Security Act in 2015 came the transition payment, a statutory severance payment paid out to Dutch employees whose employment contracts have been terminated or whose fixed-term contracts have not been renewed on the initiative of the employer. The purpose of transition pay is to compensate employees for a loss of income resulting from a period of involuntary unemployment, including following a collective dismissal. If you are eligible for transition pay, you could receive a lump-sum payment equal to one-third of your gross monthly salary for each year you worked for your employer. Prior to the Labor Market in Balance Act, Dutch employees were only entitled to transition pay if they were dismissed after two or more years of employment. However, under the new law, employees are entitled to transition pay from their very first day of work.
Know Your Rights Under the Law
When it comes to collective redundancies in the Netherlands, employees are afforded certain rights under the law. Employers, too, are required to comply with specific obligations to ensure the protection of their employees’ legal rights and interests. Unfortunately, not all Dutch employers abide by the law when making employees redundant. If you have been the victim of an unfair dismissal in the Netherlands, you need a knowledgeable lawyer on your side who understands the intricacies of Dutch employment law and can help you get your dismissal annulled.
Contact Our Experienced Lawyers Today
Dutch employment law is notoriously protective of employees and this includes employees who are made redundant via a collective dismissal. When proposing a collective redundancy in the Netherlands, there are many statutory requirements employers must meet with regard to notifying and consulting the appropriate parties, using a fair method of selection when determining which employees to make redundant, paying transition compensation and looking for alternative employment for the redundant employees. Our legal team is skilled in all areas covered by Dutch employment law and we can help you navigate the provisions of the Labor Market in Balance Act as they apply to you. For instance, if your employment contract has been terminated in the Netherlands, we can advise you as to whether the dismissal is actually a collective redundancy and therefore falls within the scope of the WMCO. To learn more about your rights regarding Dutch dismissal law, transition pay and collective redundancies in the Netherlands, contact our knowledgeable labor and employment law attorneys today.