Good governance: The right to be consulted of the Works Council

The management of a company has to consult the works council with respect to a number of important decisions – what kind of decisions are these?

The right to be consulted

The entrepreneur must consult the Works Council prior to taking certain decisions. That way, the works council can actively check the policy of the management, try to exercise an influence and to promote the interests of the employees. This obligation only applies to companies with more than 50 employees and therefore must have a Works Council.

The duty to consult the Works Council applies to, a.o., intended decisions regarding:

• Transfer of (part of) the undertaking
• Reorganization, expansion or termination of (an important part) of the activities
• Making major investments on behalf of the company
• Appointment or dismissal of a director of the company

What are the criteria a request for advice has to meet?

1. The advice must be requested by the director(s) of the company because the management represents the entrepreneur in consultations versus the Works Council.
2. The advice must be requested at a point in time when it can have a substantial effect on the decision that is to be taken. The management must turn to the Works Council when the internal preparations of the decision have reached a point that enables the management to present a coherent overview of potential consequences. In a consultation meeting the Works Council can request more detailed explanation of the management.
3. The Works Council must have the information necessary to assess the intended decision, including at least:
   1. The motives of the decision
   2. The consequences of the decision expected for the personnel
   3. The measures the management intends to take in connection with these consequences

Advice period

The management shall grant the Works Council a reasonable period to provide advice. It will depend on the circumstances which period is considered reasonable in an advisory procedure.

Taking decisions without waiting for the advice of the Works Council is not devoid of risks. The Enterprise Section of the Amsterdam Court of Appeal has ordered entrepreneurs for that reason several times to revoke the respective decision.

Decision deviating from the advice

When – after having received the (negative) advice from the Works Council or in the event no advice was received – the management takes the decision, the management shall notify in writing the Works Council as soon as possible of that decision. If the management does not follow the advice from the Works Council, they will have to explain why they deviated from the advice. In doing so, the management must discuss the specific objections in the advice of the Works Council.

Suspending a decision

The management is obliged to suspend the implementation of the decision up to one month from the day the works council was notified of the decision. Within this month the Works Council has to decide whether it intends to appeal against the decision to the Enterprise Section.

Action

• Check in time whether you need to ask the Works Council’s advice for an intended decision within your company.
• If so, provide the Works Council timely the opportunity to render advice in writing and check whether your request for advice meets all procedural requirements.
• Ask legal assistance if you are not familiar with the requirements of the advisory procedure, the Works Council has provided negative advice (or will provide negative advice or does not react at all) and/or you have to motivate a management decision.

More information

Do you have any questions on the right to be consulted and other rights of the Works Council, or any other questions regarding corporate law and employee participation? Please contact us: