Reorganisation and redundancy in the Netherlands: the procedure

A dismissal in a reorganisation in the Netherlands follows one fixed route: the employer needs permission from the UWV, the Dutch employee insurance agency, unless the employee agrees to leave in a settlement agreement. To get that permission on business-economic grounds under article 7:669 paragraph 3 subsection a of the Dutch Civil Code (BW), the employer must prove three things in this order: that the reduction of posts is necessary, that the employees to be dismissed were selected in accordance with the afspiegelingsbeginsel (the reflection principle), and that no suitable alternative position is available within a reasonable period. If any of the three fails, the UWV refuses permission. This article follows that route step by step; for the wider picture of what redundancy means and what you receive, see our guide to redundancy in the Netherlands.

When does a reorganisation lead to dismissal?

A reorganisation leads to dismissal when posts disappear and the employees holding them cannot be placed elsewhere. Not every reorganisation costs jobs. A reorganisation is simply a change in the way the business is organised: closing a location, merging departments, outsourcing an activity, redesigning roles or reducing headcount.

Dutch law calls this a dismissal on business-economic grounds. The ground covers a range of situations: a poor financial position, a structural fall in work, organisational or technological change, the closure of the business or of a part of it, and a relocation. What they have in common is that the reason for the dismissal lies with the business and not with the employee. That is why the employer, and not the employee, has to justify the decision. It is also why the procedure is designed as an external check rather than an internal one.

Two routes are closed to an employer who wants to dismiss in a reorganisation. It cannot simply give notice, because notice without permission makes the dismissal voidable. And it cannot go straight to the subdistrict court (kantonrechter), because for business-economic grounds the law sends the employer to the UWV first. The only alternative to the UWV route is agreement with the employee, in a settlement agreement.

What has to happen before any individual dismissal?

Before the individual files, the employer must deal with the works council and, where twenty or more jobs are at stake, with the rules on collective dismissal. Both obligations are easy to overlook, and both can delay or stop the process.

The first is the works council (ondernemingsraad). Under the Works Councils Act (Wet op de ondernemingsraden) an employer with a works council must ask its advice on a decision of importance. That expressly includes a significant reduction, expansion or other change of the activities of the business and a change in the organisation. The advice must be sought at a moment when it can still influence the decision. If the employer decides against the advice, it must suspend implementation for a month. During that month the works council can challenge the decision before the Enterprise Chamber (Ondernemingskamer) of the Amsterdam Court of Appeal. A reorganisation carried through without proper consultation can therefore be stopped, which makes this an important moment in the process.

The second is collective dismissal. Where an employer intends to end the employment of twenty or more employees within one UWV working area within a period of three months, the Collective Redundancy (Notification) Act (Wet melding collectief ontslag) applies. The employer must notify the UWV and consult the trade unions. As a rule no contract may be ended until a month has passed since the notification, unless the unions have confirmed that they have been consulted. The waiting month gives the unions time to discuss alternatives and a social plan. Dismissals given in breach of the Act can be annulled by the employee.

What must the employer prove to the UWV?

The employer must prove the necessity of the reduction, a correct selection and a genuine redeployment effort. It submits a dismissal request to the UWV for each employee it wants to dismiss. The UWV is an administrative body, not a court, and it applies a fixed test set out in the Dismissal Regulation (Ontslagregeling). The burden of proof rests entirely on the employer, and three elements have to be established.

• The business-economic necessity. The employer has to show, with figures and documents, why posts must disappear: annual accounts and interim figures, order books, forecasts, the current and the intended organisation chart, and an explanation of which posts lapse and why. An assertion that costs must come down is not enough; the UWV wants to see the reasoning and the numbers behind it. Within reason the UWV respects the freedom of the employer to organise the business as it sees fit, but the necessity of the reduction itself must be substantiated.
• The correct selection. The employer has to show that it identified the interchangeable roles correctly and then applied the reflection principle to them. This is the part of the file where errors are easiest to make and to find.
• The redeployment effort. The employer has to show that there is no suitable vacancy for this employee within the company, or within the group to which it belongs, that could be filled within a reasonable period, if necessary after training.

Once the request is complete, the UWV sends it to the employee, who has two weeks to file a written defence. The employer may respond, and in some cases a second round follows. The UWV usually decides within about four weeks of a complete request, and longer if a second round is needed. In dismissals on business-economic grounds it consults an independent advisory committee. Its decision is a permission or a refusal. It does not award compensation and it does not decide about the transition payment.

How do you use the two weeks for your defence?

Use the two weeks to test the file on necessity, selection and redeployment, and to collect evidence for each point. The defence is the one moment at which the employee shapes the file, and the three lines of attack can be combined. The first is the necessity: the figures may not support the claim, the reduction may be smaller than presented, or the work may in reality have moved to self-employed contractors or agency staff rather than disappearing. The second is the selection: the roles grouped together as interchangeable may not be interchangeable, employees may have been left out of or wrongly placed in the group on the reference date, or the calculation may simply be wrong. The third is redeployment: an internal vacancy that the employer did not offer can be decisive. Collect the evidence before writing, including job descriptions, organisation charts, internal vacancy notices and correspondence. File within the deadline, because the UWV does not extend it lightly.

How does the reflection principle decide who is selected?

The reflection principle selects employees per group of interchangeable roles, spread over age groups, and within each age group by length of service. It is a mandatory, arithmetical rule. Its purpose is to keep the age structure of the workforce broadly intact and to remove personal preference from the decision. The employer cannot select the employees it finds least convenient or most expensive.

Step one: which roles are interchangeable?

Roles are interchangeable if they are comparable in content, in the knowledge, skills and competences required, and in level and pay. The rule is applied per category of interchangeable roles (uitwisselbare functies) and per business establishment, following article 13 of the Dismissal Regulation. The test is whether an employee could take over the other role after a short handover. Interchangeability is judged on the role, not on the person: an employee who happens to be exceptionally good at something does not make the role different. Where a role disappears entirely and is unique, the reflection principle does not apply at all, and the holder of that role is dismissed without any selection.

This is the step to check first, because it determines the entire pool. Compare your own job description and your actual duties with those of colleagues who have not been selected. Look closely at whether the employer has drawn the boundary in a way that conveniently excludes them.

Step two: how are the age groups formed?

All employees in a category of interchangeable roles at the establishment are divided over five statutory age groups: 15 to 24, 25 to 34, 35 to 44, 45 to 54, and 55 and older. Under article 12 of the Dismissal Regulation the count is made on the reference date, which is the moment the employer submits the dismissal request to the UWV. The number of redundancies in the category is then spread over the age groups in proportion to the size of each group. The age distribution after the reorganisation should resemble the distribution before it.

Step three: who goes first within each age group?

Within each age group the employee with the shortest period of service is dismissed first, then the next shortest, and so on: last in, first out. Length of service can include previous contracts with the same employer that followed each other after a short interruption, and periods worked for a predecessor in a transfer of undertaking.

An illustrative example. A category of interchangeable roles at one establishment has 40 employees, and seven posts disappear. The table shows how the seven redundancies are spread over the age groups.

Three qualifications matter in practice. First, flexible workers go first: under article 7:671a paragraph 5 BW, before an employee in a category is dismissed, the employer must as a rule first end the work of agency workers, on-call workers and others in that category who do the same work on a flexible basis, subject to the exceptions in the Dismissal Regulation. Second, the employer may leave an employee out of the selection in narrowly defined cases. Article 11 of the Dismissal Regulation names an employee with such special knowledge or skills that dismissal would seriously harm the business, and an employee with an occupational disability who falls under the Dutch job agreement scheme. A collective labour agreement may also set up its own selection committee and rules. Third, an error in the calculation is fatal to the request: the UWV refuses permission, and if notice has already been given the dismissal can be challenged.

When is the employer obliged to offer another position?

The employer must offer another position whenever a suitable one is available within the company or the group, even if the reduction is necessary and the selection correct. It must investigate, actively and demonstrably, whether the employee can be placed in another position. Under article 9 of the Dismissal Regulation this includes positions in other companies belonging to the same group, and posts that will become vacant within the redeployment period.

A position is suitable if it fits the education, experience and capabilities of the employee, taking into account training that can reasonably be provided within the redeployment period. It need not be at the same level or on the same salary. A position at a somewhat lower level can be suitable, and refusing a genuinely suitable offer without good reason weakens the position of the employee considerably.

Under article 10 of the Dismissal Regulation the redeployment period equals the notice period that applies to the employee, counted from the day the UWV decides. For an employee with an occupational disability it is twenty-six weeks. Vacancies that arise during that period count, including vacancies filled by agency staff or contractors. The employer must look at posts that will become vacant within the period, not only at those open on the day it looks.

For the employee the practical response is to make the obligation concrete. Keep a record of every internal vacancy you see, on the intranet, on the company website or through colleagues. Put in writing to the employer that you consider yourself suitable and why. An employer that then fills the post with someone else has a serious problem in the procedure, and a documented internal vacancy is a strong argument against permission.

What happens after the UWV decides?

If the UWV grants permission, the employer still has to give notice, and the permission is valid for four weeks. The notice period is the statutory or contractual period for that employee. The employer may deduct the time the UWV procedure took, provided at least one month of notice remains. The employment therefore usually ends one to a few months after the decision.

Permission is not the end of the road for the employee. Within two months of the day the employment ended, the employee can ask the subdistrict court to restore the employment relationship, or to award fair compensation (billijke vergoeding), on the ground that the dismissal did not meet the statutory requirements. Two months is a hard deadline and cannot be repaired afterwards.

If the UWV refuses permission, the employer can ask the subdistrict court to dissolve the contract on the same ground, within two months of the refusal. The court applies the same test, and a refusal by the UWV is a poor starting point for the employer.

One protection continues after the dismissal: the re-employment condition (wederindiensttredingsvoorwaarde). If, within twenty-six weeks after the notice, the employer wants the same work done again, it must first offer that work to the employee it dismissed, on the usual terms. This also applies when the employer wants to use agency staff or contractors for that work. An employer that ignores this exposes itself to a request to annul the notice or to award fair compensation (article 7:681 BW). It is worth keeping an eye on the vacancies of a former employer for half a year.

What money do you receive: transition payment, social plan and settlement agreement?

An employee dismissed on business-economic grounds is entitled at least to the transition payment (transitievergoeding) under article 7:673 BW. It is one third of a gross monthly salary for each full year of service, with the remaining period calculated pro rata, and it accrues from the first day of employment. The statutory maximum is indexed each year and published by the Ministry of Social Affairs and Employment. The claim must be brought within three months of the end of the employment. Our explanation of the transition payment sets out the calculation in more detail.

In a larger reorganisation the transition payment is often only the floor. A social plan, agreed between the employer and the trade unions or the works council, commonly provides for a higher severance sum, an outplacement or training budget, a period of paid leave from duties, an arrangement for company property such as a car or a laptop, and the treatment of bonus and pension entitlements. An employer is not obliged to make a social plan. Where unions are involved in a collective dismissal there will usually be one, and its terms bind the employer towards the employees covered by it.

Many reorganisations never reach the UWV, because the employer offers a settlement agreement (vaststellingsovereenkomst) instead. That is a negotiation, not a formality, and the first proposal is an opening position. Three points determine whether the agreement is safe for the employee. It must record that the initiative came from the employer and that the reason is business-economic. It must observe the applicable notice period, because ending the contract earlier costs weeks of unemployment benefit. And it must state that there is no culpable conduct on the part of the employee. Beyond those, the negotiable elements are the severance sum, exemption from work with continued pay, a contribution to the cost of legal advice, an outplacement or training budget, the release from a non-compete or non-solicitation clause, a positive reference, and the date of termination. The employee has a statutory reflection period of fourteen days after signing, in which the agreement can be revoked without giving reasons. Our page on the settlement agreement explains what it should contain.

You do not have to sign. Refusing simply means the employer has to take the UWV route, which costs it time and carries the risk of refusal. That is precisely where the bargaining power of the employee comes from.

Can you be dismissed while you are ill or otherwise protected?

As a rule, no: the employer may not give notice during the first two years of incapacity for work (article 7:670 BW). Dutch law forbids notice in several situations, and the prohibition during illness matters most in a reorganisation. Two qualifications apply.

The first concerns timing. The prohibition does not apply if the employee reports sick after the UWV has received the complete dismissal request. Illness that starts before that moment blocks the notice; illness that starts after it does not. This is why the date on which the request was received, and the date on which the employee reported sick, are worth documenting precisely.

The second concerns closure. Where the activities of the whole undertaking end, the prohibition falls away. Where only a part of the business closes, the statute keeps the protection of the sick employee in place (article 7:670a BW). Whether a closing unit is in fact a separate undertaking depends on the facts. If your department is closing and you are ill, take advice on this point rather than assume. Our page on the prohibition on dismissal during illness sets out the rule.

Other prohibitions apply during pregnancy and maternity leave, during military or alternative service, to members of the works council and to employees who take up statutory leave. There is also a general prohibition on notice because of membership of a trade union or because the employee asserted a statutory right. These prohibitions do not stop a reorganisation, but they do determine who can lawfully be given notice within it.

What should an employer have ready before filing?

A reorganisation is decided on the file. For employers that means a substantiated business case, a defensible definition of interchangeable roles, a correct calculation on the reference date and a documented redeployment effort. The works council and, where applicable, the collective dismissal rules must be dealt with first and in the right order. For employees it means using the two weeks the procedure gives them, and the negotiating room a settlement agreement offers, before deadlines close. On both sides, the earlier the file is checked, the more options remain.

In summary

• Dismissal in a reorganisation requires UWV permission on business-economic grounds (article 7:669 paragraph 3 subsection a BW), unless the employee agrees in a settlement agreement.
• The employer must prove necessity, a correct selection under the reflection principle and a genuine redeployment effort; one failure means refusal.
• The works council must be consulted in time, and with twenty or more dismissals in three months the collective dismissal rules apply.
• You have two weeks for your defence at the UWV, and two months after the end of employment to go to the subdistrict court.
• You are entitled at least to the transition payment; a social plan or settlement agreement can add to it.

Frequently asked questions

Can I be dismissed in a reorganisation while I am ill?

Usually not, if you were already ill when the UWV received the dismissal request: the prohibition on notice during the first two years of incapacity applies. If you report sick after that moment, the procedure continues and the prohibition does not help you. The prohibition also falls away if the whole undertaking closes. Being ill does not remove you from the selection: the employer can still include you in the reflection principle and, if you are selected, ask the subdistrict court to dissolve the contract, where a different assessment applies.

What exactly is an interchangeable role?

Roles are interchangeable when they are comparable in content, in the knowledge, skills and competences they require, and in level and pay, so that the holder of one could take over the other after a short handover. The comparison is between the roles as they are described and performed, not between the individuals holding them. Because the definition of the group decides who is compared with whom, it is the first point to check in any selection.

Am I obliged to sign a settlement agreement?

No. A settlement agreement is a proposal, and refusing it obliges the employer to apply to the UWV. Signing can be sensible when the terms are better than the statutory minimum and the file against you is strong, but only if the agreement is drafted so that it does not endanger unemployment benefit. You also have fourteen days after signing to revoke the agreement in writing, without giving a reason. Have it checked before, not after.

What if my employer ignores the redeployment obligation?

Say so in writing, name the vacancies you consider suitable, and keep the correspondence. Redeployment is an obligation of effort that the employer must demonstrate, and a vacancy that was open during the redeployment period and was not offered to you is a strong argument. If the request is already with the UWV, put the point in your defence. If notice has already been given, it can support an application to the subdistrict court for restoration of the employment or fair compensation, within two months of the end of the contract.

How long does the whole procedure take?

From a complete request to a decision, the UWV usually takes about four weeks, longer if a second round of submissions is needed. Notice then follows, with the notice period reduced by the time the procedure took but with at least one month remaining. In a collective dismissal, add the notification and the month of consultation before the requests are filed. In total, a reorganisation often takes several months from the first announcement to the last day of employment.

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