Compensation by Employer of Costs Incurred by Works Council
A discussion of the judgment of the Court of The Hague, 27
January 2010, JAR 2010/86
Compensation of Costs of
the Works Council
In order to ensure that the Works Council (or Committee) can
indeed make use of all rights and powers conferred on it in the
Dutch Work Councils Act (Wet op de ondernemingsraden,
"WOR"), Section 22 of the WOR has a provision for the costs
incurred by the Works Council. Under this Section all costs the
Works Council makes that are reasonably necessary for the
fulfillment of the Works Council's task must be borne by the
employer. For example, such costs can be travel costs, costs of
secretariat and meeting costs. But the costs for consulting a third
party, including an expert or an attorney, are also covered by this
provision. However, it is obliged to inform the employer of the
amount of the costs to be made in advance.
Background of
this Case
The proceedings before the Court of The Hague were brought by a
law firm that had carried out work for two Works Councils. The
employer had only paid part of the attorney's fees, and the law
firm claimed payment of the outstanding amount in these
proceedings.
With reference to Section 22 of the WOR, the employer disputed
that he owed any more money to the law firm. He argued that the
amount charged by the law firm was excessive, so that the costs
could not be regarded as reasonably necessary for the fulfillment
of the Works Council's task. In addition, the law firm had not
given any (proper) quote of the estimated costs in advance,
although the employer had repeatedly requested
one.
Opinion of the Court
The Court supported the opinion of the employer that the law
firm had breached Section 22 of the WOR by failing to provide a
(proper) estimate of the expected costs in advance at the
employer's request. According to the Court, the purport of Section
22 is precisely that the employer must be able to estimate in
advance both the necessity of incurring the costs and the
reasonableness of the amount thereof. The idea behind this is that
the employer who thinks that the estimated costs cannot be regarded
as reasonably necessary may still apply to the joint sectoral
committee for intermediary services and advice and possibly
afterwards to the Subdistrict Court even before the costs have
actually been made. In fact, the director of the enterprise has a
limited right of approval in advance and an expert or attorney
engaged by the Works Council cannot rely on it that he/she has been
given a 'blank check'.
The Court considered, however, that the above did not mean that
all the bills sent by the law firm could remain unpaid. The purport
of Section 22 of the WOR is not that the costs of engaging an
expert - as far as these costs are reasonable - cannot be charged
to the employer at all; in the opinion of the Court the employer
should compensate those costs that were reasonably necessary given
the circumstances and with hindsight, and the amount of which can
also be considered reasonable. Therefore, the employer should still
pay a - strongly moderated - amount to the law
firm.
Tips:
- The employer is obliged to pay those costs that the Works
Council or Committee must reasonably incur in order to fulfill
its task.
- The employer may request an estimate of the cost before the
costs are made. The employer may make use of the disputes
committee provided for in Section 36 of the WOR if he is of the
view that the costs to be made are not reasonably necessary for
the fulfillment of the tasks of the Works Council or Committee,
or if he considers these costs to be excessive.
- It follows from this ruling that the Works Council (or a
third party engaged by it) cannot trust that a 'blank check'
was issued if no explicit agreements have been made in advance
about the costs to be incurred.
- At the same time, the absence of explicit agreements does
not alter the fact that the employer does have to pay those
costs that were reasonably necessary given the circumstances,
and with hindsight. In practice this means that the Court may
moderate the amount that was charged.