What you need to know in case of a restructuring

Tesla, Rabobank, Deloitte and FrieslandCampina: a few companies that recently went through restructurings with lay-offs, or are intending to do so. Since 2022, the number of companies that went through a restructuring in the Netherlands has been on the rise again.

A few things you need to know in case your employer is going through a restructuring.

The employer needs to seek advice from the Works Council

In the early stages of the restructuring, often before the other employees are informed, the employer has to seek the advice of the works council on the intended restructuring. The works council must be informed about, among other things, the reasons behind the intended restructuring and the consequences the decision will have for the employees. If the restructuring aims to make only a limited change, or only one or a few employees in a sizeable company are impacted, no advice may need to be sought. Not every company has a works council. Companies with fewer than 50 employees are not required to have one.

Who determines which employees are laid-off? The so-called ‘principle of reflection’

Next, the employer must determine which employees to propose for dismissal. The employer will have to consider this on a job-by-job basis. After all, the employer decides which position will be eliminated, but if more employees hold the same position, the employer may not choose which employee to keep and which not. He needs to take into account for this the ‘principle of reflection’ (in Dutch: ‘afspiegelingsbeginsel’). The employees are divided up in age categories, in which in each age category the employee who was last employed in principle is put forward for dismissal first, until the required job cut is achieved.

The employer is obligated to seek for redeployment options within the company

Once the employees to be offered for dismissal have been identified, the employer must first identify whether re-employment in the company in another suitable position is possible. While salary is not a measure of assessment of whether a position is suitable, it is generally considered that a position with a salary lower than 30% of the former salary need not be accepted. Please know that you are not always free to refuse a suitable redeployment offer without consequence. For more information I kindly refer to our other article about redeployment obligation of the employer.

How does the UWV-procedure for termination as a result of a restructuring work?

Without your permission, your employer can only terminate your indefinite term employment agreement as a result of the restructuring with prior permission of the UWV, the Dutch institute on Employee Insurance. This UWV procedure is a written administrative procedure, in which the employer must convince UWV of the necessity of the restructuring and be able to explain that it has complied with the above rules concerning i.e. the principle of reflection and redeployment. The procedure takes usually between one and three months, depending on how quickly UWV has all the necessary information to reach a decision and if you are filing a defense or not.

Compensation in case of termination

If UWV gives permission to terminate your employment contract, you are entitled to payment of the statutory transition payment, amounting to 1/3e of your monthly salary multiplied with the years that you worked for your employer. In some cases, a social plan applies. A social plan is a contract between your employer and the group that talks on behalf of the employees: the unions or the works council. A social plan contains agreements to deal with the consequences of a restructuring for you. Based on the social plan, you may be entitled to higher compensation than the statutory transition compensation.

Termination by agreement

In the Netherlands, if you are on an indefinite term contract, your employer can only terminate your employment contract as a result of a restructuring with prior permission of the UWV as stated in the above, or with your permission. If you are impacted by the restructuring, you will usually have been informed of this in a meeting with your manager and received a letter with a termination agreement enclosed. It is always wise to have the agreement checked by a lawyer. Usually, the agreement will offer a budget for reimbursement of lawyer’s fees.

More information

We understand that reorganisation, especially when you are impacted, involves a lot. We are happy to review your termination agreement, assist you in UWV proceedings or, if you are in need of a trusted partner, to help you and explain the overall process. Please feel free to contact me or one of our other employment lawyers.