Consultation obligation from the time of collective redundancy plan

The Court of Justice of the European Union ("CJEU") recently decided that the consultation obligation in the event of collective redundancies arises at the time when the employer, in the context of a restructuring plan, plans a reduction of employment positions that may reduce the number of employment positions by 20 or more over a period of 3 months.

The Collective Redundancy (Notification) Act

In the Netherlands Article 3(1) of the Collective Redundancy (Notification) Act (Wet melding collectief ontslag) imposes 2 obligations on employers that plan to dismiss 20 or more employees within 3 months: (i) notify – and consult – the trade unions and (ii) notify employee insurance agency UWV. Employers must provide certain information with these notifications, such as the considerations that led to the planned collective redundancies and the criteria that will be applied when selecting the employees considered for dismissal.

A key element of Article 3(1) of the Collective Redundancy (Notification) Act is that employers must submit these notifications at the time when they plan to dismiss 20 or more employees within 3 months. In other words, this obligation arises before there is any definite decision on collective redundancies. After all, the purpose of the consultation obligation is to enable the trade unions to influence the final decision making. For example, Article 3(2) of the Collective Redundancy (Notification) Act provides that the consultations must at least cover the possibilities of preventing the collective redundancies, reducing the number of redundancies or mitigating the impact of the redundancies.

Preliminary questions concerning the start of the consultation procedure

In its recent judgment of 22 February 2024, the CJEU once again confirmed that the consultation obligation in the event of collective redundancies indeed arises at the time when the employer plans a reduction of employment positions and this plan may result in a reduction of 20 or more employment positions within 3 months.

This particular case was about a hotel operator with 43 employees. Unfortunately, this employer was not doing well: the number of hotels it was operating dropped from 20 to 7 between August 2019 and December 2019. In other words, the employer had reduced its operations by 13 hotels. Seven of these were acquired by AE. AE required ten new employees as a result of the acquisition, and the employer asked its employees to apply for a job with AE. After the job interviews, nine employees signed a document on 30 December 2019 in which they stated that they would leave the employer and join AE with effect from 14 January 2020. 
In January 2020, the employer had only 32 employees left, i.e. 11 employees less, including the 9 employees who had voluntarily joined AE. On 31 January 2020, the employer then dismissed another nine employees "for organisational and production reasons". Consequently, the employer had dispensed with the services of 20 employees in less than 3 months. Two employees therefore brought an action against their dismissals. In their view, the employer should have submitted a notification for collective redundancies, as the 9 employees who had left voluntarily should be equated with dismissed employees, meaning that the threshold of 20 employees within 3 months had been met. 

The Spanish court referred questions to the CJEU for a preliminary ruling on this subject, including:

Does the consultation obligation arise at the time when the employer, in the context of a restructuring plan, contemplates or plans a reduction of employment positions, the number of which may exceed the threshold of 20 employment positions over a period of 3 months, or only at a time when the employer became certain that the number of employment positions would be reduced by 20 or more?

In a previous judgment, the CJEU decided that an employer must start the consultation procedure once a strategic or commercial decision compelling it to contemplate or to plan for collective redundancies has been taken. 

The CJEU also previously ruled that the consultation procedure should not be started too early either, as this could overly restrict the flexibility for restructuring and cause uncertainty for workers about the safety of their jobs. All relevant facts and circumstances must be known to establish whether the case involves collective redundancies.

In this specific case, the CJEU observed that the employer had reduced the number of hotels operated by it by as much as 13 between August 2019 and December 2019. According to the CJEU, in view of the extent of this reduction and the reasonably foreseeable consequences for the workload at the employer's hotels, the employer's decision to commence negotiations with AE on the transfer of the 7 hotels could be regarded as a strategic or commercial decision which compelled the employer to contemplate collective redundancies, which could result in a reduction of employment positions by 20 or more over a period of 3 months. 

However, the CJEU has left it up to the referring Spanish court to ultimately decide whether the employer's decision to commence negotiations with AE should be considered a decision that compelled the employer to contemplate collective redundancies. 

Finally

What the referring Spanish court will decide is not yet known. Nevertheless, a key takeaway of this CJEU judgment is that the consultation obligation arises at the time when the employer contemplates a reduction of employment positions and this may result in a reduction of 20 or more employment positions over a period of 3 months. The mere possibility that 20 or more employees will have to leave within 3 months is therefore sufficient to create a consultation obligation. This means that the consultation obligation arises even before the employer is certain that it will have to reduce the number of employment positions by 20 or more over a period of 3 months. After all, by that time, any consultations will come too late to prevent the collective redundancies, to reduce the number of redundancies or to mitigate the impact of the redundancies. Consultations will be useless if it is already certain that 20 or more employment positions will be axed. 

The rules of play of collective redundancies often prove more complex in practice than they may seem in theory. We would be pleased to share our ideas with you and help you devise solutions any time. Please do not hesitate to contact us if you have any questions.