Changing the Employee Participation Structure: A Step-by-Step Guide to Establishing a Joint Works Council

Modern organizations, especially international corporations, are more complex than in the past. This means that employers, as defined under the Works Councils Act (WOR), must carefully consider how to structure employee participation. This is often a complex puzzle. The WOR includes provisions on various employee participation bodies, such as the employee representative body (article 35c WOR), the works council, the central works council (article 33(3) WOR), the group works council (article 33(2) WOR), the joint works council (article 3 WOR), the business unit committees (article 15 WOR), and the European works council. However, the WOR does not specify when each employee participation structure is applicable. Legislative history indicates that employers can determine whether establishing a joint works council is conducive to proper application of the WOR, allowing for tailored solutions. However, employers, who bear primary responsibility for structuring employee participation, must adhere to several rules:

• Employee participation follows governance structure. The exercise of employee participation rights must occur at the level where governance over the enterprises is primarily exercised, as this is the most effective approach.
• The chosen structure must enhance the application of the WOR. This depends on factors such as the coherence in the nature, structure, and management of the various enterprises. The following aspects should be considered when evaluating whether to establish a joint works council:
• Do the enterprises share a common financial, strategic, and social policy? In other words, is there sufficient cohesion?
• Is the actual and legal governance consistently held by the same (legal) entity?

In reviewing an employer’s decision to establish a joint works council, the subdistrict court must take a restrained approach.

On April 15, 2024, the subdistrict court Zaanstad issued a ruling providing a clear overview of the considerations relevant to deciding on a joint works council. The case involved the works council of AH e-Commerce, which objected to the proposed restructuring of employee participation. Albert Heijn proposed to establish a joint works council for its entities, dissolving the AH e-Commerce works council and integrating it into the Albert Heijn works council. A business unit committee would be created for the AH e-Commerce unit.

The AH e-Commerce works council requested the court to declare that the proposed structure did not enhance the proper application of the WOR and to compel Albert Heijn to withdraw the decision, maintaining the current structure. The court rejected these requests. The court’s reasoning was the following:

• The decision’s alignment with the proper application of the WOR and employee participation must be assessed based on the case’s circumstances, including:
  • Whether the enterprises show sufficient coherence in their nature, structure, and management to justify establishing a joint works council.
  • Whether the employee participation structure aligns with the governance structure.
• In this case, both the actual and legal governance of AH e-Commerce and the physical supermarkets fell under Albert Heijn, supporting the establishment of a joint works council.
• Because of this, the enterprises show cohesion in their structure and management.
• The enterprises shared a common financial, strategic, and social policy.
• The restructuring ensured that employee participation followed governance structure.
• These factors justified the establishment of a joint works council, according to the court. 

This ruling clarifies how article 3 of the WOR on the establishment of a joint works council should be applied in practice. It aligns with previous case law, where courts typically apply limited review and respect the employer’s discretion within established boundaries.

Initiating a change in the employee participation structure can come from either the entrepreneur or the employee participation body. For broad support, it is crucial that both parties approach this process collaboratively. The following steps can guide this process:

1. Determine whether the entity qualifies as an enterprise under the WOR. Only then, the WOR is applicable.
2. Map out governance within the enterprise(s): Identify the organizational structure, clarifying the level and persons responsible for decision-making, including authorized representatives and delegates.
3. Assess the coherence between the enterprises: Evaluate whether the enterprises are sufficiently cohesive in their nature, structure, and management to justify a joint works council. If a centralized participation body is desired within a corporate group, consider whether a central works council (for all enterprises) or a group work council (for some enterprises) is appropriate. These type of works councils address issues of shared interest that cannot be handled individually by underlying works councils. In contrast, a joint works council serves multiple closely linked and intertwined enterprises where no works councils exist. If works councils were in place, they would be merged into the joint works council. Business unit committees can then be created for specific enterprises to address unit-specific matters.
4. Evaluate the added value of a joint works council:

• Does it reduce the need for the employer to engage with multiple bodies?
• Does it improve the quality of employee participation by enabling decisions to be assessed more comprehensively at a central level?
• Is the employee participation structure aligned with the governance structure as much as possible?

1. Discuss seat allocation within the joint works council: Ensure representativeness, for example by discussing whether certain seats will be earmarked for specificemployee groups, units, or locations.
2. Decide whether the joint works council will establish business unit committees: these committees can ensure participation on decentralized issues and provide input and expertise for central decision-making.
3. Gain employee support for the new employee participation structure: Broad support is essential to encourage candidates to participate in upcoming elections.
4. Review the terms in office of existing participation body members.
5. Draft a new provisional regulation and, if applicable, decisions establishing business unit committees.
6. Organize elections.
7. Evaluate the joint works council’s effectiveness: After about a year, review whether the joint works council meets the intended objectives and supports effective employee participation.
8. Evaluate whether the process can be managed internally or requires the help of an external expert.
    

The key question in this process is which employee participation structure best aligns with the governance structure of the enterprises involved. For a joint works council, it is critical that the enterprises demonstrate sufficient cohesion in their nature, structure, and management to justify its establishment, enhancing good employee representation. A joint evaluation of this, after an agreed period, is always advisable to ensure employee participation remains effective within the enterprise.

Need assistance determining whether a joint works council would enhance employee participation or more generally in deciding on and implementing an employee participation structure? Contact Montse Rodríguez Escudero, Attorney at law & MfN Mediator Employment & Employee Participation, or Barbara van Dam-Keuken, Paralegal Employment & Employee Participation.

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