8.1 Introduction: “co-determination follows decision-making”

It is a generally accepted fact in the Netherlands that employees must have a say in the decision-making within the enterprise. That involvement is based on two pillars. On the one hand employees must be able in a democratic society to influence decisions that significantly affect them. That is the participation notion, which is aimed at a better development of employees in the enterprise in which they work. Another pillar of co-determination is the notion that a company benefits from its employees’ influence. Decisions are more broadly supported and can be implemented faster and more easily if the employee representatives are involved in those decisions. In the history of co-determination law, the latter objective initially came first. The participation notion was added at a later stage. Both objectives can be found in Section 2 of the Wet op de ondernemingsraden (Works Councils Act).

Co-determination is also embedded as a fundamental right in the Dutch Constitution and in European regulations. The implementation of that constitutional right can be found in several Acts. There is not one single co-determination act; rather, the influence of employee representatives can be found in a wide range of acts and areas of the law. The main Act regulating employee co-determination is the Works Councils Act, which gives employees the right to be informed, the right to be consulted, and the right of consent. The Works Councils Act applies to all enterprises, irrespective of the legal form in which they are conducted and irrespective of whether they have a profit motive. The term “enterprise” is defined as an organisation in which work is performed under employment contracts or on the grounds of an appointment under public law. The enterprise is conducted by an entrepreneur (a legal entity or natural person), represented by the managing director in respect of the obligations under the Works Councils Act.

The works council’s powers under the Works Councils Act are fairly broadly formulated. They are rights to be consulted regarding financial and organisational decisions such as mergers, acquisitions, investments, loans, reorganisations, the appointment of managing directors and the right of consent regarding social decisions. In principle, decisions must be involved that are made or proposed by the management of the enterprise regarding the enterprise – the labour organisation.

The basic principle in organising the co-determination structure and exercising the powers is “co-determination follows decision-making”. For instance, the works council has the right to be consulted or the right of consent only if the entrepreneur makes or proposes a decision. In other words: the works council plays a reactive role. A decision or proposal of the entrepreneur precedes co-determination. The works council itself may make proposals to the entrepreneur, but the entrepreneur cannot be force in court to follow those proposals. The reason for this is that the entrepreneur has freedom of policy and neither a court nor the works council may step into the entrepreneur’s shoes. The entrepreneur makes a decision and that decision is then presented to the works council for its advice or consent. That does justice to the fundamental co-determination right without disproportionately infringing on the entrepreneur’s freedom of policy. The organisation of the co-determination structure is also based on the “co-determination follows decision-making” principle. In intragroup relations, for instance, co-determination must be in keeping with the organisational relations.

It is a sound principle that the works council is not dependent on any specific legal form, particularly in light of the objective of spreading co-determination as broadly as possible. In a number of cases, however, the legal definitions used are not in keeping with the organisational structure or legal form in which the enterprise is organised, or with the situation that it is in. It makes no difference to the applicability of the Works Councils Act whether a resolution is adopted or proposed by a company limited by shares or by a one-man business, since they are both entrepreneurs within the meaning of the Works Councils Act. However, the manner of decision-making and the stakeholders involved at a one-man business differ from those at a listed public limited liability company. Unlike one-man businesses and partnerships, private and public limited liability companies have shareholders, for instance, who have special powers as the owners of the company. In intragroup relations the general meeting of shareholders consists of a parent company that has central control over the group policy. In that case the management boards of the subsidiaries implement most of the group policy.

Since co-determination is in keeping with the balance of control, the manner in which the group policy affects the subsidiary’s enterprise also has an impact on co-determination. Specific circumstances, such as insolvency or a merger, may also change the balance of control, which has repercussions on the works council’s position. In this dissertation I have investigated in what situations the manner in which the balance of control is organised puts pressure on the “co-determination follows decision-making” principle. The situations that I have investigated are companies limited by shares, mergers and acquisitions, group relations, international (group) relations and insolvency. I have investigated in that regard to what extent those situations restrict co-determination and in what manner that is compensated by e.g. specific co-determination powers in other Acts or solutions in case law. I have also addressed alternatives available to staff representatives and have made recommendations for changes in the co-determination powers. My main conclusions are presented below.