Collective redundancies

When a company wants to lay off at least 20 employees due to an economic reason, this is known as collective redundancy. When dismissing this certain number of employees within the statutory three-month period, the company must follow a set dismissal route. What steps should a company take and what is the dismissal order for collective dismissal applications?

Dismissal request for business economic reasons

Often, circumstances within a company are the main reason for collective dismissal requests. In this situation, we refer to a dismissal for business economic reasons. Business economic reasons include a company’s poor financial situation, a reduction in work, organisational or technological changes, the relocation of a company or the loss of wage subsidy. These cases involve the entrepreneur taking necessary measures for efficient management.

When does collective redundancy occur?

The moment a company dismisses 20 or more employees for economic reasons within a period of three months, we speak of collective dismissal. The condition is that these employees are all active within one working area. Regardless of how the employer organises the dismissal – through the UWV, the courts or by mutual agreement – the entrepreneur is bound by statutory regulations. The regulations on collective dismissal are laid down in the Collective Redundancy (Notification) Act (Wmco, Article 685 of Book 7 of the Civil Code).

Collective Redundancy (Notification) Act

A dismissal for economic reasons automatically triggers the Collective Redundancy (Notification) Act. The Collective Redundancy (Notification) Act requires employers to report any reorganisation to the UWV and relevant trade unions. To comply with this notification obligation, the employer is obliged to inform these bodies in writing.

The UWV must grant the employer a dismissal permit. Trade unions can enter into discussions with the employer to see if job losses can be prevented or reduced. Does dismissal turn out to be the only option? Then the employer and relevant bodies will work together to conclude a social plan to reduce the impact on dismissed employees wherever possible. Redundant employees are entitled to unemployment benefits.

Social plan in case of collective dismissal

An employer applying for collective redundancy for economic reasons draws up a social plan together with, for instance, the works council or a trade union. A social plan includes agreements on the redeployment of superfluous employees, the order of dismissal and any redundancy arrangements.

Step-by-step plan for collective redundancies

To request collective redundancy for economic reasons, an employer must submit a complete redundancy request to comply with the notification obligation. The following information must be submitted:

• The reason for the collective redundancy;
• The number of employees to be made redundant;
• An overview of the functions, ages and gender of the employees to be made redundant;
• The number of workers employed by the company;
• The date of termination of the employment contracts;
• The method used to select the workers to be made redundant;
• The method used to determine the severance payment (transitievergoeding);
• The termination route of the employment contracts.

Notification of collective redundancy Wmco

After notifying redundancy plans, a company must wait at least one month before dismissing affected employees. The waiting period gives unions room to react to the possible collective dismissal. A number of exceptions apply to this rule. For instance, a company is allowed to proceed with dismissal if the unions agree with the proposed decision, unions do not respond to the notification within two weeks, or unions notify in writing that they wish to refrain from deliberation.

Note that if an entrepreneur does not comply with the prescribed rules of the Collective Redundancy Act, the dismissal will be declared as not legally valid. In this case, concluded termination agreements or the termination of the employment contract can be annulled by the subdistrict court.

Graduation principle

In a collective dismissal for economic reasons, an employer must determine the correct order of dismissal. For this purpose, the principle of separation of numbers is applied. The first step is to determine the workforce. This is an overview of all employees, both those on permanent contracts and those on temporary contracts and external workers. The overview is then divided into categories with interchangeable functions. Interchangeable jobs are jobs that are similar based on:

• Job content;
• Required knowledge and skills;
• Functions of temporary or structural form;
• Job level and remuneration or rate of pay.

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

• Group 1: external employees (self-employed, temporary workers, secondees);
• Group 2: employees who have reached the state pension age;
• Group 3: staff with zero hours contracts or on-call contracts;
• Group 4: employees with a fixed-term employment contract (which ends within 26 weeks of obtaining a dismissal permit from the UWV).
• Group 5: employees with a permanent contract and employees with a temporary employment contract that continues longer than 26 weeks after receiving the UWV’s response to the collective redundancy request

Ranking scheme and age structure

After determining the employee groups for collective dismissal applications, the UWV requires a representation of the ranking of interchangeable jobs. This is determined by age:

• 15 to 25 years;
• 25 to 35 years;
• 35 to 45 years;
• 45 to 55 years;
• 55 years and older.

Using the ageing principle and the ranking system, the employer determines the order of dismissal with the aim of dividing the age structure within the job group as best as possible wherever possible. Within each age group of an interchangeable job, it looks at which employees were hired last. They are dismissed first.

In various situations, the age grouping principle can be deviated from for collective dismissals or an employer does not have to use it. The principle need not be used if:

• The company or branch of a company closes;
• A unique function ceases to exist;
• An entire category of interchangeable functions ceases to exist;
• This is included in the collective agreement or collective bargaining agreement.

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

• The hardship clause applies (employees work under the supervision and management of a third party);
• An employee is an ‘indispensable employee for the company’;
• An employee cannot perform work, or can perform it less, due to illness or disability;
• An employee is subject to a notice prohibition;
• The wage subsidy for an employee an employer wants to dismiss has expired;
• Advisory right of works council in case of dismissal;
• Companies with a works council that have plans for collective redundancies should ask the works council for advice in good time. This is because the works council has an advisory right in reorganisations. The law stipulates that the Works Council’s advisory right must be able to “substantially influence the decision to be taken”. If an employer decides to disregard the Works Council’s advice, this may have legal implications. Among other things, it can be determined that the decision must be suspended.

Complex regulations

The regulations surrounding a collective dismissal for economic reasons are extensive and complex. Moreover, failure to comply with the applicable regulations of the Wmco can result in severe sanctions. If the subdistrict court determines that no notification was wrongly made or an employer did not comply with the law, the dismissal can be annulled. In this situation, the employer must continue to pay the salaries of the already dismissed employees. Even for the period when they did not work. Also, an employee can ask the court for additional financial compensation.

Lawyer dismissal law Amsterdam

Given the complexity of labour law and the fact that a drastic decision such as collective dismissal can cause considerable unrest, it is highly advisable to seek extensive legal advice. As an employment law lawyer in Amsterdam, we provide legal advice on all matters relating to the dismissal of employees, including specific or isolated dismissal cases such as an urgent reason for instant dismissal, dismissal after two years of illness and in the event of failure to comply with agreements on reintegration. Our lawyers specialised in dismissal law will be happy to assist you and help you determine the best solution for your company and especially your employees. For more information, please feel free to contact Fruytier Lawyers in Business.