Outcomes of the compliance investigation WOR

Introduction

At the end of 2023, outgoing minister Van Gennip (SZW) informed the House of Representatives about the results of the compliance study on the Works Councils Act (WOR). Among other things, it showed that one in three employers obliged to have a works council (OR) has not established one. Furthermore, the minister gave an overview of the (intended) actions to improve compliance and update the WOR.

This blog contains a representation of the main outcomes of the compliance study and (intended) actions of the minister. We also address the legal question of the consequences for the employer of not having a works council, while there is an obligation to do so.

Outcomes of the compliance study on the WOR

The compliance study shows that compliance with the WOR is still not self-evident. Of all employers obliged to have a works council with fifty or more employees, 69% have actually established one. About a third of the employers therefore do not comply with this legal obligation. This is in line with the outcomes of previous compliance studies, where the compliance percentage varies between 78% (2005) and 67% (2017). There seems to be no clear downward or upward trend.

The compliance percentage differs depending on the size of the employer, the sector in which the employer operates and certain characteristics of the organization. The larger the number of employees, the higher the compliance percentage. For example, 58% of employers with fifty to one hundred employees have a works council, compared to 78% of employers with 100 to 199 employees and 89% of employers with 200 or more employees. There are also significant differences in compliance between sectors. The leader is the Government and public utilities sector (93-94%), followed by the Other services sector (83-84%) and the Health and welfare sector (78-80%). Compliance is lowest in the Transport (46-47%) and Hospitality (50%) sectors. These are also sectors that are characterized by a larger flexible layer. The study shows that the compliance percentage is lower as the share of the flexible layer is larger. Factors that have a positive effect on compliance are having many 50-plus employees, having many theoretically educated employees and having a company-level collective agreement.

Why do employers obliged to have a works council not establish one? In most cases, they refer to a lack of interest among employees (62%). They also often argue that employees are involved in decision-making in another way (44%) and/or that there are insufficient candidates (35%). Interestingly, an earlier study from 2020 among employees gives a different picture. Only ten percent of the employees point to a lack of interest among employees. They more often point to the role of the employer: "the employer does not want this" and "the employer says it is not necessary" score 16.9% and 10.3% respectively. There is therefore a contradiction in the picture painted by employers compared to the picture of employees, where both sides see the absence of a works council as a decision of the other.

The compliance study also shows that employers who have established a works council are generally satisfied with the functioning of the employee participation. The works council scores an average of 7.1 for the quality of the consultation. Also, 80% of the employers indicate that the works council has influence on the decision-making.

Legal consequences of not having a works council

The WOR is enforced by private law. This means that there is no authority that checks whether a works council has been established and that there are no sanctions for not establishing a works council. However, interested parties (such as employees or a trade union) can enforce compliance in court. This follows from article 36 WOR.

If no works council has been established due to insufficient interest among the employees, the question arises whether the employer can continue to make decisions that fall under the right of advice or consent. The starting point is that this remains possible. For the employer, it is then wise to regularly gauge the interest among the employees for establishing a works council. This prevents the employer from being accused of having thwarted the establishment of a works council. The foregoing may be different if employees have already requested the establishment of a works council or if a start has already been made to its establishment. This applies in particular if a decision with a major social impact is taken without a reasonably identifiable interest in waiting for this decision until the works council has been established. There are some examples of this in case law, for example Rb. Alkmaar 29 October 2009, ECLI:NL:RBALK:2009:BK7946 and Rb. Amsterdam 11 March 2013, ECLI:NL:RBAMS:2013:BZ4291 (NB this concerned the establishment of a PVT).

For implementing a reorganization, the employer usually has to ask the works council for advice. This concerns, for example, a significant reduction of the activities, relocation of a company, changing the organization or stopping the production. The UWV considers a dismissal application premature if the works council has not been consulted yet (par. 1.5.1 UWV Implementation rules dismissal for economic reasons). The UWV explicitly addresses the situation that no works council has been established. In that case, the rules for a company with 10 to 50 employees apply. This means that any decision that can lead to a loss of jobs of at least 25% of the staff must be discussed in a meeting of employees and advice must be asked about it. If the employer does not follow the advice of the staff meeting, there is no mandatory suspension period and no right of appeal to the Enterprise Chamber of the Court of Appeal in Amsterdam.

Other consequences of not having a works council are:

• it can weigh in a judicial procedure about changing employment conditions; 
• it can weigh in an inquiry procedure; and 
• limited possibilities for possibly deviating from certain labor law rules and regulations, including the Working Conditions Act, the Flexible Working Act, the Work and Care Act and the Working Hours Act.

In general, employers obliged to have a works council do well to enthuse their employees for employee participation and establish a works council.

Intended actions of the minister (SZW) to improve compliance and update the WOR

Following the compliance study, the minister has drawn up an overview with (intended) actions to improve compliance and update the WOR. Below is an overview of the main actions.

• Improving compliance

The minister finds a compliance percentage of 69% insufficient. The differences in the reasons given for non-compliance between employer and employees raise questions. For that reason, the minister has a further study carried out into the reasons for not establishing a works council and the obstacles that employers encountered in establishing a works council. For sectors that lag significantly behind in terms of compliance, the minister makes budget available to develop information and tailor-made information in collaboration with the Commission for the Promotion of Employee Participation of the SER (SER CBM). In addition, the minister comes up with a mix of policy instruments. The following actions are on the agenda:

• Employee participation and working conditions

The SER advises in its advice on the Arbo vision 2040 to promote the involvement of employee participation in safe and healthy work. The SER advises that all companies obliged to have a works council must establish an Arbo or VGWM committee (Health, Safety, Welfare and Environment) for consultation on safe and healthy work. The minister will further elaborate on the obligation to establish an Arbo or VGWM committee. This is on the agenda for 2024/2025.

• Updating the WOR

The involvement of the works council in social issues is laid down in the WOR in the right to information, the right of advice and consent and in stimulating tasks of the works council. The minister is of the opinion that the formulation of these articles lags behind the current jargon and that some themes from the WOR do not yet come into their own. The WOR also does not really invite long-term thinking, while the minister considers the involvement of the works council in the strategic policy important. The SER CBM will soon come up with a note on strategic employee participation. That note will be used by the minister to update and future-proof the WOR. The following actions are on the agenda:

• OR membership

The compliance study shows that a quarter of the works councils have vacancies and that in many companies no works council elections take place because there are just enough or insufficient candidates. The minister wants to do something about that. To this end, the following actions are on the agenda:

• Employee participation in the government

Since 1995, the WOR also applies to employee participation in the government. A group of members of employee participation bodies in the government, scientists and trade unions believes that the primacy of politics, as it is now interpreted by the Supreme Court, limits employee participation in the government too much. The minister has asked the SER CBM to issue an advice on this in collaboration with, among others, the Council for Public Administration. This is planned for Q2 2024.

• European works council

The employee participation for multinational companies at European level is regulated in the European Works Councils Act (WEOR). The European Commission is currently working on revising the European directive (2009/38 /EC) that underlies the WEOR. A proposal for this was published on 24 January 2024. In anticipation of the revision of this directive, the minister has a study carried out into the functioning of EORs based in the Netherlands. The results are expected in the summer of 2024.

We will keep you informed of developments in the field of employee participation law via our blog.