Reorganisation and redundancy in the Netherlands: the procedure

A dismissal in a reorganisation in the Netherlands follows one fixed route. The employer must first obtain permission from the UWV on business-economic grounds under article 7:669 paragraph 3 subsection a of the Dutch Civil Code, and to obtain it 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 permission is refused. 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 a reorganisation leads to dismissal

A reorganisation is a change in the way the business is organised. It may mean closing a location, merging departments, outsourcing an activity, redesigning roles or reducing headcount, and not every reorganisation costs jobs. It becomes a matter of dismissal law at the point where posts disappear and the employees holding them cannot be placed elsewhere.

Dutch law calls that 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 all of them have in common is that the reason for a dismissal in a reorganisation lies with the business and not with the employee. That is why the employer, and not the employee, has to justify the decision, and why the procedure is designed as an external check rather than an internal one.

Two routes are closed to the employer who wants to carry out a dismissal 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, because for business-economic grounds the law directs the employer to the UWV first. The only alternative to the UWV route is agreement with the employee, in a settlement agreement.

Before any individual dismissal: works council and collective notification

Two obligations come before the individual files, and both are regularly overlooked.

The first is the works council. Under the Works Councils Act an employer with a works council must ask its advice on a decision of importance, which 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, and 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 be stopped, which makes this the single most powerful 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 applies. The employer must notify the UWV and consult the trade unions, and 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 is meant to give the unions time to discuss alternatives and a social plan. Dismissals given in breach of the Act can be annulled by the employee.

The UWV procedure: what the employer must prove

The employer 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. 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 entrepreneurial 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 where most files are attacked, and successfully.
• 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 is given two weeks to file a written defence. The employer may respond, and in some cases a second round follows. The UWV usually decides within four to six weeks of a complete request, and it consults an independent advisory committee in dismissals of this kind. Its decision is a permission or a refusal; it does not award compensation and it does not decide about the transition payment.

What to do with the two weeks

The defence is the one moment at which the employee shapes the file. Three lines of attack are usually available, and they 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 been transferred to self-employed contractors or agency staff rather than disappearing. The second is the selection: the roles that were grouped together as interchangeable may not be, the reference date may have been chosen to produce a particular outcome, or the calculation may simply be wrong. The third is redeployment: an internal vacancy that the employer did not offer is often decisive. Collect the evidence before writing, including job descriptions, organisation charts, internal vacancy notices and correspondence, and file within the deadline, because the UWV does not extend it lightly.

The reflection principle: who is selected and in what order

The afspiegelingsbeginsel decides which employees are put forward for dismissal. It is a mandatory, arithmetical rule whose 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: interchangeable roles

The rule is applied per category of interchangeable roles (uitwisselbare functies) and per business establishment. Roles are interchangeable if they are comparable in content, in the knowledge, skills and competences required, and in the level and remuneration attached to them, so that 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, and look closely at whether the employer has drawn the boundary in a way that conveniently excludes them.

Step two: age groups

All employees in a category of interchangeable roles at the establishment are divided over five statutory age groups, measured on the reference date chosen by the employer: 15 to 24, 25 to 34, 35 to 44, 45 to 54, and 55 and older. The number of redundancies in the category is then spread over the age groups in proportion to the size of each group, so that the age distribution after the reorganisation resembles the distribution before it.

Step three: length of service within each group

Within each age group the employee with the shortest period of service is the first to be dismissed, then the next shortest, and so on: last in, first out. Length of service includes previous employment with the same employer where the interruptions were short, and includes periods worked for a predecessor in a transfer of undertaking.

Three qualifications matter in practice. Flexible workers go first: before any employee on a permanent contract in a category is dismissed, the employer must first end the work of self-employed contractors, agency workers, on-call workers and employees on fixed-term contracts ending within a set period who do the same work. An employer may deviate from the outcome in narrowly defined cases, notably for an employee who is indispensable because of exceptional knowledge or skills, or for an employee whose position on the labour market is weak, and a collective labour agreement may set up its own selection committee and rules. And 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.

The redeployment obligation

Even where the reduction is necessary and the selection is correct, the dismissal fails if a suitable position was available. The employer must investigate, actively and demonstrably, whether the employee can be placed in another position within the company or within the group of companies to which it belongs, including establishments abroad within that group, and must offer such a position if it exists.

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.

The redeployment period runs in principle for the length of the notice period that applies to the employee, counted from the day the UWV decides, and it is longer, twenty-six weeks, for an employee with an occupational disability. Vacancies that arise during that period count, including vacancies filled by agency staff or contractors. The employer must also 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, and 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 one of the most common reasons the UWV refuses permission.

After the decision: notice, restoration and the re-employment condition

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, but 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, on the ground that the dismissal did not meet the statutory requirements. Two months is a hard deadline and it 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.

One protection continues after the dismissal. For twenty-six weeks after the permission, if the employer wants the work done again, it must first offer the position to the employee it dismissed, on the same terms. An employer that fills the post with someone else within that period exposes itself to a claim for fair compensation. It is worth keeping an eye on the vacancies of a former employer for half a year.

Money: transition payment, social plan and settlement agreement

An employee dismissed on business-economic grounds is entitled to the transitievergoeding (transition payment) under article 7:673 BW. It is calculated as 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, but 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 amount of 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.

There is no obligation 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.

Illness and the other prohibitions on notice

Dutch law forbids notice in a number of situations, and the prohibition during illness is the one that matters most in a reorganisation. As a rule the employer may not give notice during the first two years of incapacity for work. 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 undertaking are terminated altogether, the prohibition falls away. Whether it also falls away when only a part of the business closes is contested: the statute preserves the protection of the sick employee in that situation, while case law has accepted that a genuinely independent business unit, with its own organisation and administration, can count as the undertaking for this purpose. If your department is closing and you are ill, this is a point to take advice on rather than to 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, and there is 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.

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 undertaking closes entirely. Note that 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 remuneration, 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 point at which most selections are successfully challenged.

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 normally takes four to six 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, most reorganisations run for two to four months from the first announcement to the last day of employment.

How Law and More can help

A reorganisation is decided on the file. For employers that means building a request the UWV will grant: a substantiated business case, a defensible definition of interchangeable roles, a correct calculation and a documented redeployment effort, with the works council and, where applicable, the collective dismissal rules dealt with in the right order. For employees it means using the two weeks that the procedure gives them, and the negotiating room that a settlement agreement offers, before deadlines close. Our employment lawyers advise and act on both sides, from the first announcement through the UWV procedure to proceedings before the subdistrict court. Contact Law and More as soon as a reorganisation is announced, rather than once the decision has been taken.