News

Employee participation law keeps developing. Below are some alerts for those who are interested in or concerned with employee participation.

Information obligation remuneration (forthcoming regulations)

Each year, the board of directors of companies employing at least 100 employees has to enter into discussions with their works council about the extent and content of the terms of employment. This also applies to their own remuneration. In addition, the development of the internal pay ratio (remuneration differences) in the company has to be discussed annually. On 23 January 2018, the Lower Chamber (‘Tweede Kamer’) agreed to an amendment of the Works Council Act (“WOR”), which imposes this obligation on the board of directors. On the basis of the current regulatory requirements, information about the extent and content of the terms of employment of staff and board members already has to be shared with the works council, but the obligation has been further strengthened by stipulating that this has indeed to be discussed in the consultative meeting. The prime objective is to make any pay differences in the organization more open for discussion.

Right of consent on the sale of shares (calling on works council at an early stage, even when advisors are engaged).

It is clear from an October 2017 judgment of the Enterprise division (of the Amsterdam Court of Appeal) that the works council has to be involved in a sales process at a very early stage. In short, the Enterprise division ruled that the decision to sell shares in the company had to be revoked, because of the infringement of the obligation of care towards the works council of the sold company. Among others, the following can be inferred from this ruling:

• On the basis of article 24 clause 1 WOR (Works Council Act), a company is obliged to discuss with the works council the general course of affairs and the decisions being prepared. In these discussions, agreements have to be made about when and in what manner the works council will be involved in the decision making process. Informing the works council about the intended sale, when in fact the bidding process has been completed and only one single buyer remains, is too late.
• Based on article 25 clause 1 sub a WOR, the works council has to be given the opportunity to give advice on the intended decision to transfer control of the company. This advice has to be called upon at such a moment when it can actually influence the decision. The rights of the works council in a sales process are insufficiently safeguarded when asserting that the sale will take place irrespective of the advice of the works council. In addition, the intended decision was insufficiently underpinned – in this case it was for example not clear why the draft purchase agreement had not been shared – and the deadlines imposed on the works council were much too tight, also given the poorly executed request for advice.
• Based on article 25 clause 1 sub n WOR, on a mandatory advisory subject, the works council has a right of consent concerning the giving and formulating of advice to an external expert. In this ruling, the Enterprise division has interpreted this (very) broadly; other than what had been previously assumed, all advisors were meant here irrespective of whether the recommendations of the expert form the basis of the intended decision. Think here for example also of legal advice.

In case of a company sale, on the basis of the beforementioned (even) more than previously, timely and sufficiently substantiated advice should be asked for.

Relationship between works council and internal supervisor

Various organizations have a supervisor, think of the Supervisory Board (RvC – Raad van Commissarisen) or a Regulatory Council (RvT – Raad van Toezicht). In most organizations, there is little contact between the supervisor and the works council, but meeting each other can sometimes be effective and is also recommended in order to arrive at a degree of good governance within the organization. In this respect, the Works Council Act also provides a few handles; thus, one or more members of the RvC or RvT will in principle have to be present at a meeting of the director with the works council when discussing the company’s general state of affairs (article 24 WOR). This obligation to be present also applies to the consultations about important advice-mandated intended decisions (article 25 clause 4 WOR). Sometimes, on the basis of the statutes, collective labour agreement (CAO) or when it is a matter of the regime structure, the works council also has a right to the recommendation or nomination of a member of the RvT or RvC. In addition, on the basis of article 31d WOR, the works council of a company with at least 100 employees also has a right to information on the employment regulations and arrangements and the total of compensations due to a supervisory organ.

Introduction of new privacy legislation

In May 2018, the Personal Data Protection Act will be replaced by the General Data Protection Regulation (AVG – Algemene Verordening Gegevensbescherming). The new rules impose upon the companies more obligations to protect personal data. These also concern employee data. Data can only be processed for a specific purpose. The storage must be secure and last no longer than necessary. Registers have to be created showing that privacy rules are being adhered to. At present, many companies are working very hard drawing up policy and preparing the introduction of the new rules. Many aspects of privacy policies (think of for example staff-monitoring systems) are subject to consent according to article 27 WOR. It can also be that obligatory advisory decisions will emerge with the introduction of the new regulations (e.g. IT-investments). The harmonization of the sharpened privacy guidelines with other regulations, among others in the field of re-integration of sick employees, can be complicated, because the legislation does not say precisely which data about e.g. an employee’s health can be processed and which cannot. For this reason, employer organizations are asking the government to postpone the introduction of the act another year. With or without postponement, the preparations will have to continue and this demands coordination with the employee participation council.