The right of the Works Council to be consulted about reorganization plan

In recent proceedings Canon was berated for not following the proper advice from its Work Council in a reorganization decision. The Works Council that started the proceedings against Canon, had not been provided with enough information about the employment consequences of the reorganization proposal by Canon. Dutch employment lawyer Sander Schouten explains, based on this ruling, what the powers of the Works Council are.


Planning reorganization: consult the Works Council

The cause of the proceedings between Canon and its Works Council were the reorganization plans that Canon proposed for its IT organization. Canon asked the Work Council for its advice and submitted the plans. The proposed reorganization would have two stages: changing the corporate culture (stage 1) and adapting the company to the changes implemented (stage 2).

Advice Works Council not adopted by board

In its advice the Works Council pointed out that the plan lacks provisions for those employees who become redundant after implementation of stage 2, or whose jobs are changed. The Works Council therefore advised implementing the current redundancy plan. However, Canon did not adopt this advice. According to Canon, the implementation of stage 2 is too far in the future to be able to assess, at this point, the consequences for the employees. Canon does not want to commit to implementation of the redundancy plan in advance, which may be obsolete in future.

Appeals proceedings with the Enterprise Division

The board of Canon adopted the reorganization resolution without the adjustment proposed by the Work Council. The Works Council appealed this decision at the Enterprise Division of the Court of Appeals of Amsterdam. The Enterprise Division finds, pursuant to article 25 of the Works Councils Act, that, when asking the advice of the Works Council, an employer has to submit a survey of the reasons for the decision, as well as the expected consequences of the decision for the employees of the company and the measures taken accordingly.

Inability to reasonably reach a decision

Although Canon of course does not have a crystal ball and cannot state exactly how many redundancies there will be in a reorganization in 3 years time, Canon can state how it will handle the consequences. For example, which severance plan it has in mind or – as advised – by implementing the redundancy plan. The Enterprise Division blames Canon for not providing this information, especially as it seems likely that a reorganization of this scope will inevitably entail forced redundancies. The Enterprise Division finds that Canon could not reasonably reach a decision and prohibits Canon from implementing the decision to the extent that this relates to stage 2.

Powers of Works Council in reorganization

A Works Council has a legal right to be consulted about many issues. Apart from reorganization, the employer has to consult the Works Council, among others, about taking over another company, ceasing activities, altering the company location and making major investments in the company. If the employer fails to follow the advice, the Works Council can appeal to the Enterprise Division. This appeal can only be based on the reason that the employer, in balancing the interests involved, could not in all reasonableness have reached his decision.