1. Introduction
In light of the pandemic, collective redundancies are a more pressing topic than ever. This blog contains a high-level overview on how the Netherlands and Germany implemented the EU Directive on collective redundancies (98/59/EC) by pointing out similarities and differences between the national implementation acts.
2. EU Directive on collective redundancies
In July 1998, the EU Directive on collective redundancies (the Directive) entered into force. According to Article 1 of the Directive, collective redundancies are “dismissals effected by an employer for one or more reasons not related to the individual workers concerned”. The Directive seeks to improve protection of workers by stipulating information and consultation requirements before collective redundancies can be initiated.
The Netherlands implemented the Directive in the Dutch Collective Redundancy Notification Act (Wet Melding Collectief Ontslag, WMCO). In Germany, the relevant provisions on collective redundancies can be found in the third section of the Protection against Dismissal Act (§§ 17ff. KSchG)
3. Implementation in the Netherlands and Germany: similarities and differences
3.1 Thresholds for collective redundancy
First the thresholds for collective redundancy. Under the Directive (Article 1), the employer is required to notify the competent public authority in writing of any projected collective redundancies if:
- either over a period of 30 days, the number of redundancies is:
- at least 10 workers in establishments normally employing more than 20 and less than 100 workers;
- at least 10% of the number of workers in establishments normally employing at least 100 but less than 300 workers;
- at least 30 workers in establishments normally employing 300 workers or more.
- or over a period of 90 days, at least 20 workers are made redundant, whatever the number of workers normally employed in the establishments in question.
While the Netherlands chose the 90-days-option, Germany opted for the 30-day period and chose to deviate from the thresholds set forth in Article 1 of the Directive, which is permitted under Article 5 of the Directive, because it is more favourable for employees.
As such, under German law, five dismissals in an establishment normally employing more than 20 and less than 60 employees, 10% of the total number of employees or more than 25 employees in establishments regularly employing between 60 and 499 employees or at least 30 dismissals in establishments with more than 500 employees will be considered a collective redundancy.
Looking at the German thresholds, one might argue that the 30-day period gives more leeway to employers since the notification requirement can be avoided by staggering dismissals. However, the short timeframe for dismissals is balanced out by the fact that five dismissals in small establishments are already sufficient to trigger consultation and notification requirements.
The 90-day period under Dutch law on the other hand leaves little room to circumvent the notification requirement, but has the downside that small establishments may never meet the threshold of 20 employees. Still, this downside is mitigated by the fact that – different from Germany – the number of dismissals does not refer to a single establishment. Instead, dismissals by one employer in several establishments are added up for purposes of the threshold, if the dismissals affect the same geographical area, i.e. Friesland, Groningen and Drenthe; Overijssel and Gelderland; North Brabant and Limburg; Holland and Zeeland; Flevoland and Utrecht or North Holland.
Consequently, despite having made different choices, both jurisdictions comply with the collective redundancy threshold under the Directive and strike to fulfil its purpose.
3.2 Definition of dismissal
More differences become visible when looking at the definition of a dismissal that falls within the scope of a collective redundancy.
For instance under Dutch law, while in line with the Directive, essentially only terminations for redundancy reasons are dismissals for the purpose of the WMCO. In addition, terminations during probationary periods do not qualify as a dismissal within the meaning of the WMCO. It may be debated whether this exception is in line with the Directive, since the Directive itself does not provide for such an exception and excluding the dismissals during probationary period would not fall under Article 5 of the Directive, as this cannot be considered more favorable.
In contrast, the German implementation act provides more protection for employees, as terminations during the probationary period as well as all other dismissals – regardless of the reason for dismissal – fall within the scope of Section 17 of the KSchG.
3.3 Works council and trade union involvement
The biggest difference, however, lays in the competent workers' representatives that should be involved in case of a collective redundancy.
Under Dutch law, the employer needs to consult with the trade unions, to the extent involved with the relevant company, to mitigate the consequences for the employees and to negotiate a social plan. A social plan contains the termination conditions and arrangements (financial and otherwise) for employees to be made redundant. In addition to the potential consultation with the involved trade unions, consultation and advice of the works council, if established, will generally be required in advance of taking a decision to restructure or when carrying out significant headcount reductions.
In Germany, there is no immediate role for trade unions. Instead, an employer must inform and consult with the competent local works council at the latest two weeks before the notification to the German Federal Employment Agency. The works council however has no veto right regarding the planned collective redundancy.
3.4 Notification to competent public authority
Furthermore, Article 3 of the Directive stipulates that employers must notify the competent public authority in writing of any projected collective redundancies. For the Netherlands, this is the Dutch Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV). For Germany, this is the German Federal Employment Agency. This notification must contain all relevant information concerning the projected collective redundancies and the consultations with workers’ representatives and particularly the reasons for the redundancies, the number of workers to be made redundant, the number of workers normally employed and the period over which the redundancies are to be effected.
For the most part, the Netherlands and Germany both closely adhere to the Directive. However, in practice it is advisable to use the forms provided by the UWV (link to UWV-forms) and the German Federal Employment Agency (link to German forms), because there are numerous particularities that employers need to consider when notifying the public authorities.
3.5 Timing and waiting period
Finally the timing and waiting periods. These differ between both countries.
Under German law, as said, the employer has to inform the local works council at least two weeks prior to filing the notification with the local Employment Agency and at the same time provide the local Employment Agency with a copy of this written information. The information requirement is followed up by a duty to consult with the works council about ways to prevent or limit dismissals or to mitigate their consequences. Only after this consultation process, the employer may move forward to notify the local Employment Agency of the planned dismissals (for content of the notification see paragraph 3.4 above). Lastly, one month after the date of receipt of the collective redundancy notification by the local Employment Agency, the employer can give notice of dismissal to the employees provided the general prerequisites are met.
Under Dutch law, the sequence is somewhat different. Usually, the UWV (the competent public authority), the involved trade unions and (if established) the competent works council are notified (and consulted) in parallel, also since the WMCO dictates that both the UWV and the trade unions will have to receive a copy of the notification made to the other. Similarly to Germany, Article 5a WMCO determines that the employment contract cannot be terminated earlier than one month after the (complete) notification of the intention of collective dismissal has been submitted.
4. Conclusion
Despite the differences, both implementation acts on the one hand generally comply with the Directive, but on the other hand demonstrate that the Directive still leaves room for national peculiarities. Each country acted to fulfil the purpose of the Directive (being better protection of workers in case of a collective redundancy), but made different choices in doing so. In light of the pandemic, employers and employees are more than ever challenged to find workable solutions, especially when a collective redundancy becomes inevitable. At the same time, a lot of responsibilities lie with the workers’ representatives, as they bear the burden to get the best possible outcome for their employees in these difficult times.
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For more information on collective redundancies, please see our Employment Reorganisation Roadmap, an easy to use resource providing guidance on the key legal, procedural, timing and cost implications of employment reorganisations in 35 jurisdictions across Europe (including the Netherlands and Germany), Asia-Pacific, Africa, the Middle East and North America.
