The Works Council’s right of advice
Employee participation is a constitutional right in the Netherlands. When a company employs 50 or more people, the employer (the entrepreneur) is obliged to establish a Works Council (WC).
The rights and obligations of the WC are governed in the Works Council Act (WCA). The purpose of the WCA is twofold. On the one hand, to stimulate employee participation in the decision and policy making process of the organization and, on the other hand, to provide important information to the entrepreneur/management from the workplace. Compliance with WCA rights and good and constructive communication between the WC and management ensures that employees’ interests are taken into account in the decision-making process. This can also create broad employee support for management decisions.
In this blog, we briefly explain the right of advice of the WC.
Right of Advice (Article 25 WCA)
If the entrepreneur wants to take certain (important) decisions of a financial-economical or organizational nature, the entrepreneur should first request advice from the WC.
The entrepreneur must request the advice of the WC on any intended decision with regard to:
- Transfer of control of the company or any part thereof;
- The establishment, take-over or relinquishment of control of another company, or entering into, making a major modification to or severing a continuing collaboration with another company, including the entering into, effecting of major changes to or severing of an important financial holding on account of or for the benefit of such an company;
- Termination of operations of the company or a significant part thereof;
- Any significant reduction, expansion or other change in the company’s activities;
- Major changes to the organisation or to the distribution of powers within the company;
- Any change in the location of the company’s operations;
- Recruitment or borrowing of labour on a group basis;
- Making major investments on behalf of the company;
- Taking out major loans for the company;
- Granting substantial credit to or giving security for substantial debts of another entrepreneur, unless this is normal practice and part of the activities of the company;
- The introduction or alteration of an important technological provision;
- Taking an important measure regarding the management of the natural environment by the company, including the taking or changing of policy-related, organisational or administrative measures relating to the natural environment;
- Adopting a provision relating to the bearing of the risk mentioned in Article 40, paragraph (1) of the Social Insurance Funding Act;
- Commissioning an expert from outside the company to advise on any of the matters referred to above and formulating his terms of reference.
The entrepreneur must request the advice of the WC in writing at a time when it can still have a substantial influence on the decision. The entrepreneur must also explain the reasons for the proposed decision, the expected consequences of the proposed decision regarding the employees and the proposed measures to deal with these consequences. The proposed decision must be discussed at least once in a consultation meeting and the WC must respond to the request for advice in writing. After the WC’s response, the entrepreneur must communicate his formal decision to the WC. If the entrepreneur’s final decision differs from the WC’s advice, or if facts and circumstances have become known that would have led to a different WC’s advice, the WC may appeal the decision. The appeal must be filed with the Company Section of the Court of Appeal (Ondernemingskamer) in Amsterdam within one month after the WC has been notified of the decision.
Exercise your rights!
Particularly in international companies, employee participation rights under the WCA are not always respected, despite the fact that employee participation is a constitutional right in the Netherlands. We therefore advise (internationally-oriented) WC’s to ensure that their rights are respected. After all, this is in the interest of both the employees and the company itself.
Attorney at law