Employee rights in the event of reorganisation

Companies in dire financial straits sometimes need to reorganise to remain viable. A reorganisation can make the company viable again, but often has major consequences for staff. The reorganisation process is usually a lengthy process, during which the employer must respect the rights of the employee and other stakeholders. As an employer, how do you prepare for a reorganisation? And how do you decide which employees to part with?

Consequences for employees

A reorganisation offers a company in bad financial shape a chance to avoid bankruptcy and ensure its survival. The way in which the reorganisation is designed can have various consequences for an employee. For instance, an employee may be given a different position, be transferred (reassignment), have to reapply for their own job, fringe benefits may be adjusted or an employee may be dismissed.

Reassignment obligation

When a redeployment opportunity exists 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. In doing so, the employer is free to decide which employee is offered the redeployment opportunity, provided there is equal treatment. An employer is obliged by law to comply with the redeployment obligation. The moment an employer fails to comply, the UWV can reject the dismissal request. However, there are circumstances in which the employer can invoke the ‘unreasonableness’ of the redeployment option.

Draw up a sound reorganisation plan

A reorganisation is a radical and complicated process, often with major consequences for staff. Therefore, in preparation for the intended reorganisation, an employee should draw up a proper reorganisation plan. This reorganisation plan should demonstrate why reorganisation is necessary and how the new organisation will be shaped. In order to convince of the necessity, employees, the works council, the UWV – and possibly at a later stage the subdistrict court – and any trade unions must be properly and thoroughly informed in the preparation phase.

What should a reorganisation plan contain?

The reorganisation plan in the preparation phase must meet several legal obligations. Among other things, a reorganisation plan must include the following elements:

• The intention to reorganise the organisation;
• The impact of the reorganisation on the company;
• An organisation chart and description of the current organisation and situation;
• The reason for the reorganisation;
• The vision of the future organisation;
• The future situation of the organisation after the reorganisation;
• The financial, strategic and economic benefits of the reorganisation;
• The way in which the reorganisation will be realised;
• The consequences of the reorganisation for the personnel;
• The way in which the consequences of the personnel will be dealt with;
• An inventory of the current workforce per position;
• A comparison of interchangeable jobs;
• The redeployment options for redundant employees;
• Collective Redundancy (Notification) Act.

If a reorganisation involves dismissing more than 20 employees within a three-month period for economic reasons, an employer is bound by the Collective Redundancy (Notification) Act. Moreover, these employees must operate in one working area. The law requires the employer to notify the collective dismissal to the UWV in advance and consult the trade unions about the proposed reorganisation. If an employer does not comply with the obligations under the Collective Redundancy Notification Act, the court can reverse the dismissal.

Is a social plan obligatory in case of reorganisation?

A social plan is not compulsory in the event of reorganisation. Often, agreements on social matters are laid down in the CAO. Is there a works council? If so, the company must advise the Works Council on the personnel consequences of a reorganisation. However, a social plan is necessary in case of collective dismissal. A social plan contains agreements between employer, works council or unions regarding the dismissal. Think about the transition compensation or alternative compensation in case this is laid down in the collective labour agreement. For employees who remain in employment, the social plan provides for changes in the workplace, such as relocation.

Reorganisation plan and communication plan

After drawing up the reorganisation plan, a roadmap for the reorganisation is drawn up. Here, the employer indicates how and when actions will be taken towards those involved within the organisation. A communication plan is also drawn up to properly and specifically inform all those involved about the plans. This timeline outlines a clear analysis of stakeholders and interests and a timetable on when which employee or stakeholder will be informed about what information and when.

The following people and organisations are usually (depending on the scope) involved in drawing up the roadmap and communication plan:

• Management, human resources, project manager;
• Employees;
• Works council (OR);
• Trade unions;
• UWV;
• The advisory right of the works council.

The proposed decision to make a major change within the organisation of a company with a works council triggers the Works Council’s advisory right. These laws and regulations are laid down in the co-determination law. This means that in the case of a reorganisation, the employer must first request advice from the works council. The request for advice must be submitted to the staff council in good time. This is because the law stipulates that the Works Council’s advice must still have a substantial influence on the decision to be taken.

The request for advice should include a detailed description, including a justification of the decision. The OR must also be informed about the expected consequences for employees and the measures to be taken in this regard. Looking at the measures, the consultation between the employer and trade unions can possibly be referred to in the request for advice.

Reintegration and reintegration process

A reorganisation does not exempt an employer from the obligation to reintegrate an employee. Even when a company is reorganising, the employer must continue to promote the reintegration of a sick employee, for instance through a reintegration process. During the first 104 weeks of incapacity for work, there is a ban on terminating the employment contract. This ban only expires in case of bankruptcy or closure of a company.

Termination of an employment contract during illness is not allowed in case of reorganisation, nor is dissolution of the employment contract. A ban on termination also applies to redundant employees who are pregnant. The Work and Care Act has a number of ‘absolute’ or ‘during’ notice prohibitions (Art. 7:670, Civil Code), including the prohibition of notice during pregnancy. This prohibition applies during the period of pregnancy and maternity leave until six weeks after resumption of work.

Individual dismissal in the event of reorganisation

The social plan is a collective dismissal scheme, but a reorganisation may also involve individual dismissal requests. To agree on an individual dismissal scheme when reorganising a company, employee and employer jointly negotiate the conditions for the end of the employment contract. One of the conditions is determining the severance payment. Following an agreement between employer and employee, the severance payment is set out in a settlement agreement or termination agreement. In both collective dismissals and individual dismissals, the employee is entitled to WW benefits.

Advice and assistance with reorganisation

A good reorganisation requires good preparation. Especially given the personnel changes or consequences, care is needed. The lawyers at Fruytier Lawyers in Business have extensive experience in the legal design of reorganisations. We can support you in mapping out the business economic circumstances, as well as provide expert legal advice from an employment law perspective. Please contact one of our employment lawyers for more information.