European Court consultation is obligatory before collective redundancies

In December 1999, the holding company of Fujitsu Siemens decided, at the level of the holding company, to divest itself of the factory at Kilo in Finland but without making a concrete decision about the personnel. After that, a consultation process was commenced. Already as of February 2000, hundreds of employees were made redundant.

Finnish unions considered that the consultation process should have preceded the decision from which the redundancies actually resulted and took it to court. They considered that the procedure was in conflict with the European Directive regarding collective redundancies (Directive 98/59), which specifies that an employer is obliged to inform and consult employees’ representatives in the event of intended collective redundancies. In the first instance, the unions were ruled against, but, upon appeal, the Finnish judge stated that the European Directive generates a lack of clarity that the Court of Justice of the EC should eliminate. On 10 September 2009, after nine years, the Court did that.

The purport of the judgement concurs in several respects with the intentions of the EWC Directive. Subsidiaries cannot use the argument of the holding strategyin order to avoid the information and consultation obligation. The Court also states that the employees’ opinion must be requested, in “good time during the whole consultation procedure”. The obligation already takes effect already as of the moment when the Holding company considers the decision, also there must be room for influencing it. It does have to be certain which subsidiary will be the object of collective redundancies. Otherwise, it is not clear which employees’ representatives have to be consulted. The consultation procedure must be entirely completed before concrete implementing measures are possible (or dismissals in the framework of collective redundancies).

Unions in Europe consider that the ruling strengthens the position of the European works councils. When an EWC has the right of consultation about a decision that effects employment, this consultation process must be completely concluded before the implementation of the decision, the redundancies can take place. The consultation process can only be finalised if, all information obligations are fulfilled. They are of the opinion that the judgement is logically build on other statements (eg Alcatel-Lucent and Gaz de France). In the Alcatel case, the right to information of the EWC was specified more precisely, and, in the Gaz the France situation, it appeared that non-compliance can have consequences for the legitimacy of the redundancies.

That evaluation was not opposed but more specified by Meester Suzan de Lange (AKD Prinsen van Wijmen attorneys and notaries). On her website, she points out that the judgement was no reinforcement in all respects because it was also specified that the consequences of the non-compliance with the information and consultation obligations must be borne by the subsidiary and not by the holding company. In this way, she notes, a holding company can quite easily circumvent the directive by shifting the consequences to a subsidiary. She would much rather have seen an instrument with which the subsidiaries would be able to have their parent company provide the information needed for true consultation in a timely manner. At present, the management of holding companies can still opt to frustrate compliance with the law.

In the Netherlands, employees could already challenge the reasonableness of a collective redundancy if the rights of unions and/or workers’ councils have been violated. This can lead to the UWV Werkbedrijf, which has to test collective redundancies, suspending the operation until the obligation is satisfied. Under Dutch law on reporting collective redundancies (WMCO: Wet melding collectief ontslag), the UWV can decide that, in urgent cases, it makes no sense to wait for the advice of unions and employees’ councils, but, in practice, it does not make use of this authority. Opposition against collective redundancies being forced through too hastily is thus promising.

If consent for collective redundancies has already been granted, it will rarely been withdrawn. Employees, however, can demand greater compensation on the grounds that the consultation rights of unions and employees’ councils have not been respected. For the complete judgement. For the commentary of Suzan de Lange.