The Works Council and the social plan

Why the works council is increasingly involved

Employers experience that negotiations with trade unions can sometimes be difficult. Trade unions primarily represent the interests of their members and of employees in general. The union’s own interests also play a role. Trade unions can exert pressure by organising collective action.

A works council is closer to the organisation and has a better understanding of day-to-day operations. Under the Dutch Works Councils Act (Wet op de ondernemingsraden, WOR), the works council must weigh not only the interests of employees, but also those of the undertaking. Discussions with the works council about a social plan can lead to more tailor-made solutions, less unrest, and quicker results.

In addition, union membership levels are low in many sectors. In such cases, there is often no applicable collective labour agreement (CAO) and too few union members within the reorganising company. Trade unions may then decline an invitation to negotiate a social plan – even though such an invitation is required under the Collective Redundancy (Notification) Act (Wet melding collectief ontslag). In that situation, involving the works council in the social plan is the obvious course of action. In sectors with high union density, trade unions can (virtually) not be excluded.

Legal status: company-level agreement

A social plan agreed with the works council qualifies as a company-level agreement (ondernemingsovereenkomst) within the meaning of Article 32 WOR. It is not a collective labour agreement, but a written agreement between the employer and the works council. Such an agreement may even include provisions on primary terms and conditions of employment, provided that these are not already regulated by a collective labour agreement – in which case the CAO prevails (the so-called primacy of the CAO).

Employees are not automatically bound by a social plan agreed with the works council. This can be addressed by including an incorporation clause in the employment contract. This means that the employee agrees in advance that agreements between the works council and the employer will automatically be incorporated into the employment contract. More commonly, the social plan is offered to a redundant employee through a settlement agreement, which the employee then accepts.

Can the works council enforce compliance with the social plan?

Yes, it can. Although the works council does not have legal personality, the WOR and case law establish that the works council may bring legal proceedings if the employer fails to comply with agreed arrangements. In the Ardent judgment, the court held that the works council, as a contracting party, could demand compliance with the social plan.

In a major reorganisation, it may occur that so many employees leave that too few members remain for the works council to continue to exist, or that the employer’s obligation to have a works council ceases to apply. Case law shows that a works council, or even a former works council, may nevertheless remain authorised to enforce agreements through the courts.

A clearer statutory framework

As works councils are increasingly involved in the creation of social plans, a clearer statutory framework would be desirable. The WOR could explicitly regulate the works council’s authority to conclude a social plan on behalf of employees and to enforce compliance with it. This would provide greater legal certainty.

Conclusion

The involvement of works councils in social plans is on the rise. For employers and HR professionals, this offers opportunities: the works council knows the organisation, can act quickly, and represents both the interests of employees and those of the undertaking. A social plan agreed with the works council requires timely involvement, careful negotiation, and clear written arrangements.

Questions about this? Please contact our Employment Law team.