Improved protection for employees during liquidation
If a company goes into liquidation, the impact on employees is significant. With the Transfer of Undertakings in Liquidation (Wovof) bill, State Secretary for Legal Protection Struycken and Minister of Social Affairs and Employment Van Hijum aim to strengthen employee protection if a company relaunches following liquidation. The bill also introduces an additional safeguard against abuse of liquidation to bypass employee dismissal protections. Today, the cabinet agreed to submit the bill to the Council of State for advice.
As State Secretary Struycken explains, ‘Employees are currently well protected outside of liquidation, but they lose that protection during liquidation. This legislation helps levels the playing field for employee protection in the event of a relaunch after liquidation.’
Improved employee protection
It will become mandatory to retain most employees in the event of a relaunch. This ensures better protection for employees and introduces an additional safeguard against abuse of the liquidation process. A relaunch in itself may no longer be used as a reason to deny employees an employment contract. Currently, entrepreneurs taking over a liquidated business may pick and choose which employees to retain and decide, in principle, what employment conditions to offer them. The new bill changes that. It also regulates the right of the works council, staff representative body and staff meeting to be consulted about the proposed transfer of the company.
Objective selection
Economic reasons – such as a reduction in the number of customers, business relocation or automation – can still justify retaining fewer employees. In those cases, the bill also offers added protection. If the full workforce is not retained, selection must follow objective criteria. This ensures selection works in a similar way to redundancy on economic grounds outside liquidation. As a result, even the most vulnerable employees – often passed over today – will become eligible for an employment contract. The supervisory judge involved in the liquidation will assess whether the selection has been objective and transparent. This gives the employee protection that mirrors what applies outside liquidation, as much as possible. The new rules will not apply to small businesses with fewer than 20 employees, unless the buyer chooses to adopt them.
Automatic expiry of non-compete clauses
Under the bill, a non-compete clause will automatically cease to apply at the end of employment if an employee has not been offered an employment contract beforehand. This will allow employees who are not rehired to quickly take a new job elsewhere. Currently, a contractual non-compete clause remains in effect after liquidation.