Dismissal in the event of reorganisation
Reorganisations and restructurings: after a relatively quiet period the headlines are full of them again. Companies like Philips, Intel, Twitter and Facebook have announced that they are letting some of their employees go. Unlike in most countries around the world, in the Netherlands the employer must request permission from the Employee Insurance Agency (UWV) in order to dismiss employees due to a reorganisation. Because this procedure takes time and effort, and also because there is a risk that the UWV will reject the dismissal request, employers often first try to reach a mutual termination arrangement with an employee. So, what should you take into account as an employee when facing dismissal in the event of reorganisation? And, above all, what should you not do?
In a recent ruling by the Court of North Holland, an employer had attempted to avoid the UWV procedure. The employee was employed by the employer under a temporary employment contract. Two months before the intended end date, the employer in question had no more work for the employee due to business reasons not specified in the ruling. It was verbally agreed that the employee would therefore leave employment from 1 May 2022, two months earlier than the end date in the employment contract. Accordingly, on 28 April 2022, the employer notified the employee in writing that the dismissal would take effect from 1 May 2022.
An error? Thanks!
The subdistrict court held that the termination of the employment contract was not legally valid. Dismissal for business economic reasons requires prior permission from the UWV and a mutual termination agreement is only valid if it is entered into in writing. This had not happened at all. This was an expensive mistake on the part of the employer. The court ordered the employer to pay an amount equal to three months’ salary. On top of this, the court also ordered the employer to pay the employee a penalty of one months’ salary since the employment would ‘normally’ have continued for another two months and because the employer had failed to observe the notice period. The employer will also owe the employee a transitional compensation payment and all the above amounts will be increased by statutory interest due to the employer’s late payment.
In the above case, it would have been more cost effective if the employer had simply left the employee on the payroll for two more months or agreed to a termination agreement in which the employee would be paid for two more months. It is always a good idea to check whether an amicable settlement can be reached, not only in the case of fixed-term employment contracts and reorganisations. Nevertheless, it is prudent to start the process of applying for a dismissal to avoid an employee calling in sick during the negotiations and a prohibition on dismissal becoming effective. Are you planning to make employees redundant due to restructuring or reorganisation? Avoid making costly mistakes and preferably consult a lawyer at an early stage.
Business economic reasons
An employee who is surplus to requirements may be unwilling to agree to being made redundant. Or they may impose conditions that make an amicable settlement unattractive to you. In such cases, you should contact the UWV. The application to make the employee redundant should at least explain the reasons for the reorganisation and the resulting dismissal.
There are various possible reasons for dismissal. A reorganisation may be necessary because of a deteriorating financial situation. There may be less work, or jobs may actually have to be cut to accommodate organisational or technological changes. A company relocation can also trigger a reorganisation or the end of a wage cost subsidy. If the company or a business unit closes down altogether, this is also a logical reason to dismiss employees. There may also be a combination of the above reasons. If there are varying reasons for the dismissal of employees, the UWV requires documents to accompany the dismissal request.
Consequently, while an employer is entitled to shape its business as it sees fit, it must be able to explain why it makes certain choices. Eespecially if that includes redundancies. It is therefore important that an employer is able to explain the reason for the reorganisation. And also why it is necessary that redundancies occur as a result.
Do you have any questions? Or would you advice about dismissal in the event of reorganisation? Then please do not hesitate to contact us.
District Court of North Holland 04 October 2022, ECLI (abridged): 8594
This article appeared earlier in Rendement.
Amber works as a lawyer within the Employment & Pension law department at GMW lawyers.