the Works Council and negotiating terms of employment

All employees in the Netherlands have some form of terms of employment. But who decides and negotiates about these terms of employment? The Works Council also has a role to play in the negotiations of the terms of employment.
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Works Councils have the right to consent to several legally defined subjects dealing with terms of employment. Works Councils are increasingly involved in the negotiation of almost all terms of employment. However, there are still many companies that have a collective labour agreement. These collective agreements are the result of negotiations between employers and trade unions.

When does the Works Council play a role? And what exactly is that role? We will explain that in this article. First, we explain what terms of employment are, where they are laid down and who is negotiating about them. Next, we define the role of the Works Council and in which situations that role applies. We conclude with some tips for the Works Council.

what are terms of employment?

Terms of employment: a collective name for the agreements between the employee and the employer. The employee gives the employer ‘employment’ and the employer gives certain things in return, such as salary. In other words, we are talking about the ‘conditions’ or ’terms’ for which an employee comes to work.

Terms of employment are agreements on salary, holidays, education facilities, etc. The term ’terms of employment’ does not appear in the law. But we have agreed with each other what they are and who is negotiating about and deciding on them.

primary and secondary terms of employment ↓

Primary terms of employment often means the most important terms of employment: the basis of the employee’s contract. These include items such as salary, holiday allowance, profit benefits, the employee’s position and hours of work. The primary terms of employment are about ‘money’.

Secondary terms of employment, or benefits, usually means things such as leave arrangement, pension scheme, lease car usage, education facilities, laptop, smartphone, etc.

Sometimes we talk about tertiary terms of employment: things that are difficult to express in monetary value. These include company outings or parties, use of the company cafeteria, etc.

where are the terms of employment recorded?

The agreements about the terms of employment are laid down in several documents:

the Dutch Civil Code
the ‘CAO’ (collective labour agreement)
the terms of employment arrangement (AVR)
the staff manual or staff regulations
the employee’s individual employment contract

There is a ranking: the agreements in the Dutch Civil Code take precedence; next, the collective agreement or the AVR, then the staff regulations and finally the individual employment contract. For example, in a collective agreement, it is usually not allowed to agree on less (e.g. fewer vacation days) than is provided for by law. Similarly, the staff regulations should not compromise on ‘less’ than the collective agreement. Improved agreements are (usually) allowed.

the Civil Code ↓

The employee’s rights are initially governed by various laws, such as book 7 of the Civil Code, title 10 (Dutch) (labour law) and the Minimum Wage Act (Dutch). These are issues such as the minimum wage and statutory holidays.

the 'CAO' (collective labour agreement) ↓

The agreements about the terms of employment that are laid down in the collective labour agreement have been made between employers (representatives) and the trade unions. They negotiate these terms of employment together. About 85% of jobs in the Netherlands are covered by a collective agreement.

There are two types of collective agreements: the industry agreement and the enterprise agreement.

The industry agreement contains the agreements on terms of employment made between employer organisations for the relevant industry and the trade unions. Examples are the collective agreement for the hospitality industry or that for the metal processing industry. If a collective agreement is reached between the parties, they may ask the Minister for Social Affairs and Employment (SZW) to make these agreements (the outcome of the negotiations) generally binding for all businesses in the industry.

In an enterprise CAO, the agreements are between the management of a specific organisation and the trade unions. This is the same type of agreement on terms of employment as a collective industry agreement, but the collective agreement is only valid for that one organisation. Examples are the collective agreements of IKEA or Enexis (energy provider).

The employer is required to apply the CAO if:

the employer has agreed to an enterprise CAO
the employer is a member of an employer association involved in an industry collective
the business activities are covered by the collective industry agreement that has been made binding by the Minister of SZW
this is laid down in the employment contract

terms of employment arrangement (AVR) ↓

The terms of employment within an organisation can also be agreed to in a terms of employment arrangement (AVR). Such an AVR then applies to all employees or a group of employees in the organisation.

For a large part, the employer can determine the AVR, but on the subjects mentioned in the Works Councils Act, the Works Council still has the right to consent.

Often, the Works Councils and employers draw up an agreement (company agreement) that establishes that the Works Council has the right to consent to the entire AVR.

staff regulations ↓

The regulations in the staff regulations (also known as the staff manual) are often agreed between the employer and the Works Council. It is a collection of secondary terms of employment and rules of conduct. These also include instructions, internal complaints, safety regulations, regulations on absenteeism, clothing regulations, etc. It is very convenient to have all these agreements documented in one location.

A staff regulation is very easy for the employer. They can change certain agreements for all (or many) employees at once. However, the agreements cannot conflict with the agreements of the collective agreement.

The Works Council has the right to consent to certain elements of the staff regulations, as defined in the Works Councils Act. One example is art. 27 WOR (Dutch), paragraph 1b regarding “a work and rest time arrangement or a holiday arrangement”. There are more articles like this in the Works Council Act (WOR) that provide the Works Council with the rights and obligations to help and protect the employee.

terms of employment agreement or staff regulations ↓

Some organisations have both a terms of employment arrangement and staff regulations. In other organisations, both schemes have been merged into one document. It is up to the employer and the Works Council to determine what they prefer and what they can agree upon. It is ultimately up to the employer to decide (initially).

individual employment agreement (contract) ↓

What is stated in the individual employment agreement (the contract) is at least what is stated in the collective labour agreement and/or the staff regulations, plus any additional agreements the employee has made with the employer.

The individual employment contract usually also includes the collective agreement applicable to employees and employers, and whether there is a staff regulation that contains additional agreements. Furthermore, matters can also be agreed individually, on top of and in addition to the collective agreement and the staff regulations, in the employment contract.

In some cases, the CAO does not apply to certain people within the organisation, while the organisation itself falls within the collective agreement. For example, because the relevant collective agreement states that it applies to a particular pay grade. Employees above that pay grade can therefore have other agreements in their employment contract.

Every employee has the right to negotiate their terms of employment, regardless of whether there is a collective agreement, an AVR or a staff regulation in place. They can always negotiate better conditions. It is just a matter of whether the employer wants to play ball in such a negotiation.

who negotiates about which terms of employment?

The collective agreement between employers/employer associations and the trade unions is set out in the collective agreement. They negotiate about this.

In recent years, however, it has become increasingly common for Works Councils to negotiate primary terms of employment and to have these agreements laid down in a terms of employment arrangement (AVR). Sometimes, the Works Council is a negotiation partner because there are provisions in the collective agreement that give the Works Council a certain amount of influence or consent about (certain) parts. The employer is increasingly negotiating with the Works Council, because there is no collective agreement or because the employer does not want to deal with the trade union due to the declining role of the trade unions and the customisation that the Works Council can offer.

However, the Works Council is not responsible for the primary terms of employment. The Works Council Act (WOR) leaves this task to the trade unions. The WOR does leave room to agree on primary terms of employment with the Works Council.

The individual employment contract contains the agreements between the employee and the employer. They negotiate the terms of employment that are included in that contract.

can the Works Council negotiate on behalf of the employees?

The Works Council has a right to consent to specific terms of employment that are laid down in the Works Council Act. The employer can also negotiate with the Works Council about other terms of employment. However, this means that the employer and the Works Council must comply with the agreements in the collective agreement.

Especially when there is no collective agreement, or when the collective agreement leaves a lot of room for other terms of employment, it is useful for the employer to lay down general agreements on the terms of employment. This prevents the employer from applying all kinds of different terms of employment. If the employer agrees with the Works Council, there is also more support in the organisation.

The Works Council has the right to consent (or not), and to negotiate about the terms of employment as laid down in (the right of consent of) the Works Councils Act.

This explains why the Works Council is often asked to be a representative. The Works Council is a legally elected representative of the employees. A Works Council is mandatory for organisations of 50 employees or more. It might seem as if the Works Council is taking over the role of the trade unions, but that is not quite the case.

The trade unions have the right to make agreements on behalf of the employees who are members of that trade union. The Works Council has a different position. It may represent the employees, but the agreements made by the Works Council with the employer are not, in principle, binding for the employees.

If the employer adjusts the terms of employment of all employees after agreement with the Works Council has been reached, the law says that the employer is unilaterally changing the terms of employment since there has been no consultation with the individual employee and the individual employee has not given the Works Council a mandate to negotiate on their behalf.

In this situation, an employee may not agree and not accept the change. The Civil Code (Article 7:613) (Dutch) and legal rulings (Dutch) give the employee all rights to do so.

enabling the Works Council to negotiate: two conditions

The Works Council can negotiate on behalf of the employees about the terms of employment in the staff regulations or the terms of employment arrangement (AVR). To achieve that, the Works Council and the employer must meet two conditions:

there must be consultation between the Works Council and the employees
the Works Council and the employer must draw up an enterprise agreement

condition 1: consultation between the Works Council and the employees

The Works Council ensures a fair and careful discussion with employees, asking them for permission (mandate) to negotiate on their behalf.

The arrangements made by the Works Council with the employees must clearly define how the employees are involved in the negotiations on the terms of employment. For example, through consultation, polls or voting on goals, starting points, intermediate and final results.

The agreements should also show that the Works Council is doing everything to best represent the opinions and interests of the employees. The employees must have confidence in this.

condition 2: the enterprise agreement

The Works Council and the employer shall establish an agreement (enterprise agreement) that confirms that the Works Council will be given more powers, such as the right to consent to the AVR or the staff regulations. Such an agreement also includes agreement on the procedures of the negotiations and how to deal with conflicts. The Works Council and the employer sign the covenant with agreements.

the employee may refuse

An employee may disagree with the outcome of the Works Council’s negotiations. They can refuse to accept the outcome, and keep their own terms of employment. This usually means that the employee’s terms of employment will be ‘frozen’ and will not change anymore. The employee can then enter into negotiations with the employer about their terms of employment. The question is whether the employer wants this to happen. They might prefer to leave the terms of employment ‘frozen’.

Ultimately, this could lead to a lawsuit whereby the employer and/or employee wants to win. It is essential that the Works Council consents to new terms of employment. This is an indication that the change in the terms of employment is reasonable and necessary. This means that the employee is always at a disadvantage if the matter is taken to court.

the Works Council negotiating collective terms of employment: tips

Are you, as a Works Council, in the position to negotiate about all terms of employment? If so, here are some practical tips.

TIP 1: provide knowledge

As a Works Council, be sure to gather knowledge in the form of training or coaching in the following areas:

employment conditions in the broadest sense
understanding negotiation strategies
negotiation skills
smart and strategic communication

TIP 2: provide good consultation with the employees

Involve the colleagues for whom you are negotiating.

provide sounding board groups in all parts of the organisation
distribute interim newsletters on the state of play
hold surveys to identify opinions and wishes
create support
share outcomes
announce what you want to achieve, what your goals are
inform employees about draft agreements

TIP 3: use experts

A Works Council can ask experts to help in all fields. These can be employees of the organisation with specific knowledge and/or skills, or external experts who are hired by the Works Council. Management is required to pay the (reasonable) costs of an external party. Consider the following:

investigation: to have reports from the Director investigated
negotiation: to help you during the negotiations
determining the position: ensuring that the Works Council does not get caught between the interests of the employees and the interests of the organisation
head of delegation: to communicate well and in a business-like manner, without misunderstandings
project director: to coordinate the negotiations for all parties en parts of the project

This article was written by Sander Vrugt van Keulen and verified for legal accuracy by Karen Maessen, LLM at De Voort Advocaten | Mediators.

Note: Please note that we are a Dutch organisation and that all our information is originally composed in Dutch. For the benefit of our English-speaking customers we have translated some of our online information. We are still in the process of translating even more of our information. It could therefore be that you will come across Dutch pages on CT2.nl. Please contact us if you would like more information.