Reorganization

The possibility of reorganization often comes into the picture when a company has run into difficulties due to internal or external causes. In general terms, the reason for reorganization is usually due to changed business circumstances, such as a deterioration in a company’s financial situation, a reduction in work, organizational changes, a (partial) termination of the company, automation of work or changing laws and regulations.

Business circumstances can also occur in combination. For example, a company struggling with job cuts will often have to deal with a deterioration in its financial situation. Depending on the urgency of the circumstances, a short-term or long-term reorganization may be necessary. Sometimes reorganization is even unavoidable to avoid bankruptcy and requires quick action. That said, it is an event of great impact for those involved. Therefore, a reorganization must be well thought out and prepared.

During a reorganization, proper preparation is essential. If a reorganization is not well prepared, you run the risk of delays, rejection of dismissal requests by the UWV or possibly even destruction of terminations that have already been realized. It is therefore strongly recommended to draw up a good reorganization plan with a realistic planning.

In the preparation of a reorganization, in particular, the dismissal requests to be followed must be substantiated. Among other things, it is important to clarify the severity of the business economic circumstances and thus the necessity of the measures to be taken.

A reorganization often involves rearranging the company. It is therefore relevant to clarify what changes will be made and their consequences. Any changes in the organizational structure will need to be able to be clarified by means of an organizational chart.

When assessing a reorganization, the UWV will take into account the policy rules laid down in the Implementing Rules on Dismissal for Economic Reasons. These state, for example, that in applications for dismissal based on organizational or technological changes, an employer must provide the following information:

• A description of the organizational and/or technological changes and an explanation showing that they are necessary for effective operation;
• An organizational chart of before and after changes;
• the impact of the changes on the various departments, functions present, the number of jobs per function and the distribution of any remaining work;
• If new positions are created, their job descriptions.

When preparing for a reorganization, it is important to gather the information needed for the dismissal requests in a timely manner. Use can be made of the UWV’s Manual on Requests for Dismissal for Economic Reasons. This provides a clear overview of the information and documents that must be provided with a request for dismissal. You should then incorporate this information into a preliminary reorganization decision.

If there is a works council, you must involve it in deciding on the proposed reorganization. A works council must be established in an enterprise if it employs more than 50 employees.

If your company employs between ten and fifty people, under circumstances you will have to discuss the reorganization with any existing employee representation. The latter is the case if the proposed reorganization decision will lead to a loss of jobs or a change in the work of at least 25% of the workforce.

If you employ fewer than 10 people, but the reorganization decision will still result in at least a 25% reduction in jobs, you will have to submit the proposed decision to the staff meeting.

A request for advice from the works council, employee representation or staff meeting must be made in writing. You can submit the preliminary reorganization decision when doing so.

It is advisable to involve the aforementioned participation bodies in (the intention of) a reorganization in good time. In this way, possible questions from the works council, staff representatives or staff meeting can be anticipated and the advice process will usually be more effective and faster. In any case, the request for advice should be made at such a stage that the advice can still have a substantial influence on the decision-making process surrounding the reorganization. The final reorganization decision is therefore taken only after you have obtained advice.

For employees, a reorganization will cause turmoil and uncertainty. It is therefore important to mention a proposed reorganization in good time, but not too early. Drawing up a social plan ensures that the uncertainty for employees is limited. In such a plan, agreements are made about the consequences of a reorganization and how they are to be absorbed.

A social plan is drawn up between the employer and employee representatives, such as a union or works council. If there is no co-determination body, an employer itself may decide to draw up a social plan. Individual employees are not bound by the plan until they have agreed to it.

Drafting a social plan is not required by law, but there may be agreements in a collective bargaining agreement (CBA).

In addition to drawing up a social plan, the possibilities for redeployment of the employees must be identified. The UWV only agrees to a reorganization if there are no possibilities to redeploy the redundant employees to another suitable position within the company or group of companies within a reasonable period of time. This redeployment obligation requires an active attitude on the part of an employer. The moment it becomes clear that an employee’s job will be eliminated, the employer is no longer free from that moment on to hire, for example, an external person for a suitable vacancy.

If you have no redeployment options within your own company or group, outplacement may be a solution. This means that you offer employees facing dismissal support in finding a new job. An outplacement agency is often used for this purpose. The cost of the process is usually linked to the employee’s salary. The advantage of offering outplacement is that an employee may be more likely to accept a proposal to terminate their employment and thus avoid a cumbersome procedure through the UWV.

If it appears that jobs will be structurally lost for business economic reasons and there are no real redeployment opportunities, the reorganization process can be initiated.

The final part of a reorganization process is the termination of one or more employment contracts. An employment contract can be terminated in several ways:

• termination;
• dissolution;
• by mutual agreement.

You cannot proceed with dismissal without reason. There must be “reasonable cause. In the context of a reorganization, these will be changed business economic circumstances. It is important that this ground for dismissal is sufficiently serious so that the employer cannot reasonably be required to maintain the employment contract any longer.

The employer will then have to apply to the UWV for a dismissal permit. The UWV will then determine whether the economic circumstances are serious enough to warrant dismissal. If the UWV refuses to grant permission for the dismissal, an employer can file a request for dissolution with the court.

It is important to check any applicable collective bargaining agreement (CBA). Sometimes it designates an independent dismissal committee. In that case, the request for dismissal must be submitted to this dismissal committee.

Next, the order of dismissal must be determined. This involves determining which employee is first eligible for dismissal. In the event of dismissal for economic reasons, the principle of separation by age group will have to be applied for each establishment. This principle implies that the employees within the same establishment are divided into age categories and that within each age group the employee with the shortest employment will be considered for dismissal. In addition, so-called interchangeable jobs are taken into account. If a job is interchangeable – in other words, the jobs are comparable in terms of content, the required knowledge, skills and competencies – then within that job group, the principle of attrition must be applied.

After you have classified the employees into groups of interchangeable positions, you must identify which group each employee belongs to:

1. external employees (seconded, temporary, self-employed and hired workers);
2. workers who have reached state pension age;
3. workers on zero-hours contracts;
4. employees with a fixed-term employment contract whose contract ends within 26 weeks (after the day of the UWV’s decision on the dismissal request);
5. employees with indefinite employment contracts and employees with fixed-term employment contracts exceeding the 26 weeks referred to above.

Broadly speaking, within a given interchangeable function, the workers in the first group are the first to be considered for dismissal. If more layoffs are to occur after that, then the remaining employees (from groups 2 through 5) within the same interchangeable function must be assigned to age groups:

• 15 to 25 years;
• 25 to 35 years;
• 35 to 45 years;
• 45 to 55 years old;
• 55 years and older.

This classification is relevant because for each interchangeable position, the age structure before and after the reorganization should remain the same as much as possible. For each age category, you should therefore strive to dismiss a proportionate number of employees, whereby the shorter the period of employment, the sooner the employee is eligible for dismissal.

It is also relevant to establish that the employee in question cannot be redeployed to another suitable position, at least not within a reasonable period of time. This redeployment effort extends not only to the employer itself, but also to any group companies if there is a concern.

If both parties agree to the termination of employment, they may choose to record it in a settlement agreement. With this termination agreement, the employment contract ends by mutual agreement. In this situation, the UWV does not have to give permission.

It is expressly preferable to keep open the possibility of a voluntary departure of the employee by concluding a settlement agreement in the preparation of the intended dismissal or round of dismissals. That possibility can be worked out in a social plan. If there are only a few dismissals, this possibility can also be incorporated immediately into a settlement agreement to be offered.

In the case of a reorganization, an employer will often have to dismiss several employees. In addition to the above steps, it is therefore relevant to check whether the so-called Notification of Collective Redundancy Act (WMCO) applies. If so, additional rules apply.

If the following conditions are met, it is called “collective redundancy” and the WMCO applies:

• 20 or more employees are laid off;
• within a period of 3 months;
• the dismissal is for business economic reasons;
• the relevant employees work in the same work area.

The number criterion of at least 20 employees does not include terminations for personal reasons. This could include dysfunction, culpable actions or a disturbed working relationship. In addition, terminations of fixed-term employment contracts do not count.

Next, it is irrelevant how employment contracts end. Both dismissals through the UWV and terminations through a settlement agreement are counted.

The 3-month period commences the moment the intention to proceed with dismissal is expressed in an act, for example the expected date of submitting a request to the UWV or entering into a termination agreement. It is irrelevant here on which day the employment contracts end. Moreover, this time period is not static, meaning that it is necessary to look again and again at which period the greatest number of dismissals occurred.

Article 26 of the Dismissal Regulations distinguishes the following areas of operation:

• Friesland, Groningen and Drenthe;
• Overijssel and Gelderland;
• North Brabant and Limburg;
• South Holland and Zeeland;
• Flevoland and Utrecht;
• North Holland.

In determining the work area of the employee in question, the area in which the employee performs or has performed his or her work is leading. If this area varies too much, then the employee’s place of employment should be considered. If this also does not provide a solution, then the location of the employer from which the report is filed is relevant.

If there is a collective redundancy, an employer will have to take the following steps under the WMCO:

• report the intention of collective dismissal to the UWV;
• notify the intention of collective dismissal to unions with members within the company;
• enter into consultations with the relevant trade unions regarding the proposed layoffs;
• If there is a works council, staff representative body or staff meeting, the proposed decision will have to be submitted to it.

The purpose of this roadmap is primarily to allow unions to consult on the extent of the layoff. Through the social plan, the consequences of the dismissal can possibly be mitigated. In addition, it gives the government (the UWV) the opportunity to possibly take measures to prevent unemployment.

The notification of the intention of collective dismissal to the UWV can be made by submitting a digital form. In doing so, you must provide the following information:

• the reasons for collective dismissal;
• The number of employees you plan to lay off, broken down by position, age and gender;
• The number of employees you normally employ;
• The date you intend to lay off the employees;
• the selection criteria;
• the calculation of any severance packages;
• The manner in which you wish to terminate employment contracts;
• Whether there is a works council and when it is consulted.

The notification of the intention of collective dismissal to the UWV and the unions must be simultaneous.

In summary, we suggest you consider the following concerns:

• good preparation is half the battle;
• Gather all relevant information before making the reorganization decision;
• submit a preliminary reorganization decision to your works council, employee representation or staff meeting in a timely manner;
• Provide a consistency rationale for the reorganization;
• the better the justification, the less resistance from the UWV, your works council, employee representation or staff meeting;
• pay close attention to whether collective dismissal regulations apply;
• Get timely advice; it is customized.