A management board decides to implement a reorganisation, despite the works council (OR) having issued a negative opinion. The management board nevertheless intends to proceed with the decision. How far does its discretion to organise the company extend? A recent decision by the Enterprise Chamber of the Amsterdam Court of Appeal (OK) shows that this discretion is broad, provided that the management board follows the employee participation process carefully and provides a sound justification for its decision.
For major organisational decisions—such as a reorganisation, the closure of a department, or the merger of management teams—the management board must seek the advice of the works council (OR) pursuant to Section 25 of the Dutch Works Councils Act (Wet op de ondernemingsraden (WOR)). The OR is entitled to ask questions, propose alternatives, and issue a reasoned opinion. If the management board decides to depart from a negative opinion, it must provide a proper justification. The OR may then appeal the decision to the Enterprise Chamber of the Amsterdam Court of Appeal.
The right to be consulted is not a veto. The Enterprise Chamber assesses whether, having weighed all relevant interests, the management board could reasonably have reached its decision. This is a marginal review: the court does not substitute its own judgment as to which organisational structure would be preferable.
For the purposes of due process, it is important that the works council includes any alternative scenarios and all objections in its formal opinion. The management board formulates its final decision on the basis of that opinion. Arguments or objections that are not included at that stage will generally not be taken into account by the court. The works council cannot introduce new objections during the appeal proceedings.
Recent case law confirms that management's discretion expressly includes the right to organise the company as it sees fit. The mere fact that the works council has a different view on the preferred organisational structure does not render a decision unreasonable.
For example, the Enterprise Chamber held that it fell within the discretion of Erasmus MC to decide that it would no longer accept the structural losses incurred by its Cardiology Research & Development department. The fact that other departments were also operating at a loss, that the Cardiology department as a whole remained profitable, that the BME research group delivered work of excellent quality, and that the increase in permanent employment contracts resulted from successful research grant applications did not alter that conclusion.
The Enterprise Chamber held that the fact that the works council preferred an alternative organisational model did not mean that the decision was manifestly unreasonable. This illustrates that the management board enjoys considerable discretion in determining how the organisation should be structured.
First and foremost, the management board must ensure that the employee participation process has been conducted properly. A consultation meeting must have taken place, and the works council must have received all information reasonably required to perform its statutory duties.
Although management enjoys broad discretion, it is not unlimited. If the management board decides to deviate from the works council's opinion, it must properly substantiate its decision and respond substantively to the objections raised by the works council.
Concrete commitments can play an important role in this respect. In the Erasmus MC case, for example, the management board's willingness to agree on tailored arrangements for PhD candidates affected by the reorganisation contributed to the Enterprise Chamber's conclusion that the interests of employees had been given sufficient consideration. Similar efforts have been taken into account in other cases when assessing whether a decision was reasonable.
The works council has a strong voice through its statutory right to be consulted, but it does not have a veto. Where the management board has carefully prepared its decision, genuinely considered the works council's objections, and provided a well-reasoned explanation for its choices, it enjoys broad discretion to organise the undertaking as it sees fit.
Are you preparing for a reorganisation and would you like to know how best to organise the consultation process with the works council? Or are you a works council seeking assistance in preparing an effective opinion? Please contact one of our specialists in the Employment, Employee Participation & Mediation team.
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