For companies and institutions operating in the Netherlands and internationally, it is essential to follow the right legal procedures when making far-reaching decisions. This is especially true when it comes to decisions that directly affect the organisation and its employees, such as reorganisations, strategy changes or the termination of certain lines of research. The recent decision of the Enterprise Chamber of the Amsterdam Court of Appeal of 14 November 2024 (ECLI:NL:GHAMS:2024:3423) underlines the importance of a careful advisory process with the works council (OR). In this article, you will read why a careful Works Council advisory process is crucial, what legal requirements it involves and how you can avoid disputes and proceedings as an organisation.
Why is a careful OR advisory process important?
The Works Councils Act (WOR) obliges companies to involve the Works Council in a timely and complete manner in important decisions. This is not only a legal duty, but also a way to create support and reduce risks of disputes. If, as a director, you take a decision without properly informing the Works Council or without seriously weighing up their advice, you run the risk of the Works Council going to the Enterprise Chamber. This can lead to the annulment of the decision and reputational damage for your organisation.
The case study: decision-making at the KNAW
The Enterprise Chamber's ruling of 14 November 2024 concerned a dispute between the works council of the Royal Netherlands Academy of Arts and Sciences (KNAW) and the KNAW board of governors. The board had decided on a gradual phase-out of scientific research with non-human primates, with complete cessation by 1 October 2032. The Works Council disagreed with this decision and felt that the board had not sufficiently taken into account the interests of the organisation, researchers and patients, and that the decision was insufficiently motivated.
The Enterprise Chamber ruled that the KNAW's board could not reasonably have reached the decision because it had not made clear how the various interests had been weighed up. The board had mainly referred to the desirability of the decision, without making concrete which interests were at stake and how they had been weighed against the interests of continuing the research.
Legal considerations: duty to state reasons and balancing interests
The crux of the ruling lies in the entrepreneur's duty to state reasons under Section 25 WOR. As a director, when requesting advice from the Works Council, you must make clear the reasons for the proposed decision. If you do not follow the advice of the Works Council, you must explain why you deviate from it in a motivated manner. This means that you must explicitly address the arguments of the Works Council and explain how you weighed up the different interests.
The Enterprise Chamber stressed that it is not enough to suffice with a position of principle or to refer to social trends. A concrete balancing of interests must take place, taking into account both the interests of the organisation and those of employees, patients and other stakeholders. Only then can you, as a director, make it plausible that you have reasonably arrived at the decision.
Practical lessons for your organisation
This ruling offers important lessons for companies and institutions dealing with advisory processes and possible disputes with the Works Council:
- Ensure a complete and transparent request for advice: provide the Works Council with all relevant information and substantiate your proposed decision with concrete arguments.
- Carefully weigh all interests: Identify not only the interests of the organisation, but also those of employees, customers, patients and other stakeholders.
- Deal explicitly with the OR's advice: If you do not follow the advice, clearly justify why and how you arrived at your decision.
- Document the process: Record which steps were taken, which consultations took place and how the balance of interests was made. This will help in any proceedings.
- Avoid one-sided decision-making: A principled standpoint without substantiation is insufficient. Involve the Works Council actively and seriously in the process.
What can you do in the event of a dispute?
If an organisation does end up in a dispute with the Works Council, it is important to seek legal advice quickly. The Enterprise Chamber conducts a marginal review, but looks closely at the reasons and the balance of interests. A well-prepared file and a transparent process increase the likelihood that your decision will stand in proceedings.
Conclusion
A careful Works Council advisory process is not only a legal obligation but also an essential part of good corporate governance. By communicating in a timely and transparent manner, carefully weighing up interests and taking the Works Council's advice seriously, you avoid disputes and proceedings.
More information.
Do you have questions about the Works Council advisory process, contract law or dispute procedures? Feel free to contact us. We will be happy to advise you on the best approach for your organisation and help you limit legal risks.
