Thijs Dalmolen, 2 July 2024

Attribution & co-entrepreneurship: the role of the Works Council in international concerns

Within international concerns, employee participation can be complex. Because decision-making is often more layered, the influence of a Dutch director on the decision of the foreign manamgent is sometimes limited. However, that doesn’t mean that the Dutch Works Council has no role at all.

For the most part, the Dutch Works Councils Act (WCA) assumes a singular situation, whereby the entrepreneur who maintains an enterprise must consult the Works Council in the case of important decisions. Besides the possibility of setting up a COR, GOR or GemOR, the WCA offers companies the option of setting up an employee participation structure that benefits employee participation within the company. Within international concerns, however, in many cases this will not suffice to give the (Dutch) Works Council an important role.

Territoriality

The WCA has territorial effect, which means that the WCA must only be applied by companies established within the Dutch national borders. Therefore, when an enterprise in the Netherlands is maintained by an entrepreneur abroad, the WCA applies. This means that the WCA must also be complied with when a concern is partly established in the Netherlands. This will be difficult to apply in many cases, especially when a decision is taken by a foreign concern management. The reverse does not fall under the scope of the WCA: when a Dutch entrepreneur maintains a company abroad, that entrepreneur does not have to take into account the provisions of the Dutch WCA.

Although the WCA has so far not been adapted to international concern situations, case law has developed a number of principles that ensure that the Dutch Works Council still has to be consulted when the decision is taken at a higher, foreign level.

Attribution

With the principle of attribution, the decision of the concern management is attributed to the company where the Works Council is established. This may imply that the Dutch company must ask its Works Council for an opinion in order to implement a decision of the foreign concern management. This is the case when the higher-level decision (1) directly affects the company for which the Works Council was established and (2) the WCA-director is involved in the decision-making.

Direct intervention means that the decision would be subject to consultation if the WCA-director himself had taken the decision. The foreigen company’s decision to reorganise and what leads to social consequences at the Dutch subsidiary is a good example. There is involvement with the WCA-director when the director of the subsidiary also has a position within the foreign parent, which makes him actually involved in the decision-making.

Co-entrepreneurship

However, based on the attribution principle, the Dutch Works Council cannot stop or hold back the decision of the higher manament. As mentioned, the consultation right extends only to the cooperation of the Dutch lower management with the decision of the concern management.

To complement this, case law has developed the principle of co-entrepreneurship as well. Based on this principle, the management of the concern should be seen as WCA management, which gives the Works Council a direct consultation right and could possibly also litigate against (decisions of) the concern management.

Co-entrepreneurship exists when (1) the decision directly affects the undertaking where the Works Council is established and (2) the concern management exercises such systematic influence that it is considered to co-maintain the undertaking.

The second requirement is particularly important and is also the essential difference compared to the principle of attribution. The parent must co-determine decisions. This is the case when the concern management owns a substantial part of the shares, for example, or when the concern management actually takes all important key decisions. If the scope for the WCA-director to take decisions independently is limited, then this is a strong indication to argue for co-entrepreneurship.

In practice

Although these two principles have been developed in case law, the same case law shows that these two principles are applied with restraint. Moreover, there is a chance that when a foreign concern management realises to be in a situation where co-entrepreneurship or attribution can be important, this will often be too late.The role of the Dutch Works Council will then still remain limited. For the Dutch WCA director, however, there is a responsibility to properly organise co-determination within the company. It is therefore important for the Dutch entrepreneur to bring the WCA to the attention of the foreign concern management.

Questions?