Article 27 of the Works Councils Act requires that the works council's prior consent be obtained for decisions to adopt, amend or withdraw rules on certain subjects. Although Article 27 lists the subjects to which this applies, many situations are not clear-cut. On 28 July 2009 the Rotterdam Subdistrict Court held that Unilever Nederland Holdings B.V. was not required to obtain the central works council's consent in order to, with respect to certain groups of managers: (i) terminate the right to "WTR days" (working time reduction days) and to age-dependent days off (i.e. days off granted to employees older than a certain age); (ii) freeze hiring for an indefinite period; (iii) freeze salaries; and (iv) change the criteria for awarding bonuses. Unilever had introduced these changes without obtaining the consent of the central works council, which subsequently sought to invoke their nullity under Article 27.
Article 27 Works Councils Act
Under this provision, the works council’s prior consent must be obtained for each proposed decision to adopt, amend or withdraw rules that regard the "social policy" within the company. Article 27 includes a list of the relevant rules. These rules regard the following subjects:
- a pension, profit-sharing or savings scheme;
- rules regarding working hours, rest periods or holidays;
- a system pertaining to remuneration or job classification;
- rules regarding working conditions, absenteeism due to illness or the reintegration policy;
- rules regarding hiring, dismissal or promotion policies;
- rules regarding employee training;
- rules regarding employee evaluation;
- rules regarding welfare services for employees within the enterprise;
- rules regarding work consultation;
- rules relating to the handling of grievances;
- rules relating to the processing and protection of personal data pertaining to those working in the enterprise;
- rules relating to measures directed at or suitable for monitoring or supervising the presence, conduct or performance of those working in the enterprise.
Article 27 applies to arrangements, policies and decisions with general effect and not to measures with respect to individual employees.
If Article 27 is applicable and the works council withholds its consent, the company may request authorisation from the competent Subdistrict court to make the relevant decision notwithstanding the works council’s opposition. The works council can invoke the nullity of a decision within the scope of Article 27 that is made without its consent and without judicial authorisation.
Decision of Rotterdam Subdistrict Court
As noted above, the Rotterdam Subdistrict Court held that none of the changes challenged by Unilever's central works council required the works council's consent. The reasons in each case are discussed below.
Termination of right to WTR days and age-dependent days off
In 2000 the Supreme Court held that a change in a special leave arrangement – where the change amounts to a reduction in the number of holiday days – must be considered as a change in the primary employment conditions (i.e. those pertaining to financial remuneration, in contrast to the secondary employment conditions, which pertain to fringe benefits). As such, it need not be submitted to the works council for consent. The Supreme Court explained that Article 27 was not intended to require the works council's consent for decisions to adopt or amend primary employment conditions. According to the Supreme Court, the reference in Article 27 to "rules regarding holidays" is limited to rules regarding the manner or period in which holiday days may be taken and not to those regarding the entitlement to such days.
The Rotterdam Subdistrict Court concluded that in this context there is no essential difference between holiday days, on the one hand, and WTR days or age-dependent days off, on the other hand. The loss of either of these constituted a change in the primary employment conditions and not a change in a rule regarding holidays within the meaning of Article 27.
Likewise, the change in question did not, according to the court, constitute a change in a remuneration system that would require the work council's consent. The relevant employees received an increase in their gross salary as compensation for the loss of these days off. Here too, the court concluded that the measure entailed a change in the primary employment conditions, i.e. salary.
With respect to the age-dependent days off, the Rotterdam Subdistrict Court referred to a 2002 decision of the Supreme Court in which it held – referring to the legislative history that when determining whether a rule relates to working conditions (within the meaning of Article 27) it is necessary to look to the rule's purpose. The Rotterdam Subdistrict Court concluded that the works council had not shown that the purpose of the age-dependent days off was to set up a rule with respect to working conditions.
The Rotterdam Subdistrict Court also held that the hiring freeze did not constitute a change in a "rule regarding hiring policies" within the meaning of Article 27. According to the court, this category refers to general rules relating to the enterprise's hiring practices (such as the application process and the use of temporary employment contracts). A decision as to whether or not to hire at all is made before the whole question of hiring practices and policies even comes into play. The court further concluded (as had the Court of Appeal of The Hague in a decision dating from 2002) that a hiring freeze is even more fundamental than a decision regarding primary employment conditions. Since the legislature did not intend that the adoption or amendment of primary employment conditions be subject to the works council's consent, it certainly did not intend that a hiring freeze be subject to that consent.
Based on the legislative history, the Rotterdam Subdistrict Court held that a "system pertaining to remuneration" within the meaning of Article 27 does not refer to salary levels as such but rather to the system for determining the relative salaries paid to different categories of employees in the enterprise, as embodied in, for example, pay scales and pay grades. According to the court, a decision limited to freezing of the salaries of a particular group of employees, such as occurred at Unilever, constitutes a change in the primary employment conditions and not in a system pertaining to remuneration.
Change in criteria for awarding bonuses
Here too, the Rotterdam Subdistrict Court concluded that a change in the criteria for awarding bonuses to a particular group of employees did not constitute a change in a system pertaining to remuneration. In addition, the fact that Unilever had sought the works council's consent for previous changes in the rules on the allocation of bonuses did not mean that it was automatically required to do so in the future. Such an increase in the works council's powers would require a written agreement or a commitment to this effect by Unilever.
Rotterdam Subdistrict Court's judgment upheld on appeal
The Rotterdam Subdistrict Court's judgment was recently upheld by the Court of Appeal of The Hague with respect to all of the changes discussed above. The appellate decision has not yet been published, however, so the Court of Appeal's specific findings are not yet known.
The lower and appellate court decisions discussed above have provided additional clarity on the scope of the obligation to obtain the works council's consent under Article 27. However, each case must be assessed individually to determine whether the decision in question falls into any of the categories of rules listed in Article 27.