When a company is declared bankrupt in the Netherlands, the impact on employees is often significant. The Wet Overgang van Onderneming in Faillissement (Wovof) is a proposed bill and called in English the Dutch Act on the Transfer of Undertakings in Bankruptcy.
The Wovof is proposed to strengthen employee protection during restarts following bankruptcy and to create safeguards against misuse of bankruptcy as a way to start dismissal procedures.
The proposed bill Wovof ensures stronger continuity of employment and makes it more difficult to use bankruptcy procedures to avoid existing employee rights.
This bill has not yet come into effect, and is pending approval by the Dutch First and Second Chamber.
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Stronger Safeguards Employees in Bankruptcy
The Dutch government has introduced the Transfer of Undertakings in Bankruptcy bill (Wovof) to strengthen employee protection during restarts following bankruptcy and to create safeguards against misuse of bankruptcy.
Under the proposed legislation, a restart of the company will generally require the inclusion of most employees. This ensures stronger continuity of employment and makes it more difficult to use bankruptcy procedures to avoid existing employee rights.
Importantly, the restart itself may no longer serve as a justification to deny employees a new employment contract. Currently, acquiring parties in a restart may select which employees to retain in the company and under what employment conditions. The bill removes this discretion, introducing mandatory employee transfer obligations.
In addition, the bill grants the Works Council Netherlands a formal right to issue an advice on the proposed transfer. This strengthens employee participation in decisions that directly affect their future.
Wovof Bill: Transfer of Undertaking in Bankruptcy
The Wovof bill [Wet overgang van onderneming in faillissement] aligns Dutch legislation more closely with the European principles on employee protection, while introducing bankruptcy-specific safeguards. At the same time, it balances the interests of continuity for the business with fair treatment of employees.
Employers considering acquisitions from bankruptcy must therefore carefully assess workforce integration strategies in advance, not only from a financial perspective but also in light of the new statutory obligations and employee participation rights.
From a compliance point of view, employers and acquiring parties should prepare by reviewing due diligence procedures in insolvency acquisitions, updating HR hiring, and restructuring playbooks, and aligning selection practices with the statutory dismissal framework.
Objective Selection Criteria Employees in Bankruptcy
There will remain situations where not all employees can be retained. This could be due to declining customer demand, relocation, or automation. In such cases, the bill requires that selection be based on objective and transparent criteria, in line with dismissal procedures outside bankruptcy.
The trustee supervising the bankruptcy will assess whether the selection process has been carried out objectively and lawfully.
Expiry of Non-Competition Clauses
The proposed bill Wovof also provides that non-competition clauses in employment contracts will automatically lapse if an employment contract is not continued after bankruptcy.
This change in the proposed bill allows employees who are not offered a new employment contract to immediately seek work elsewhere. Under the current legal framework, such clauses often remain enforceable, which can unduly restrict employees’ opportunities.
Exception for Small Businesses
The proposed bill Wovof has an exception for small companies with less than 20 employees, which have been declared bankrupt with the aim of liquidating their assets.
These small businesses can choose not to apply the Wovof. In that case, however, transparency obligations will apply and they must submit a statement with information about:
- the number of employees to whom an employment contract is offered.
- the applicable terms and conditions of employment.
- the way in which the selection of workers is carried out.
- the way in which employees are informed about the recruitment selection process.
Bankruptcy Procedure Netherlands
If a company is no longer able to reach payment arrangements with its creditors, the company must petition the Dutch court.
Upon notification, the court may declare the company bankrupt. In such case, the court will appoint a curator (trustee), who is vested with the authority to manage the company’s assets and make all financial and operational decisions on behalf of the bankrupt estate.
Termination of Employment in the Netherlands
Employers may only terminate employment contracts if they meet one of several criteria set out under Dutch labour law. These criteria are gross misconduct, economic grounds (bankruptcy), redundancy due to restructuring, long-term illness or disability, end of a fixed-term employment contract and breach of contractual terms and conditions.
The Wovof bill has not yet come into effect, and is pending approval by the Dutch First and Second Chamber.
More Information
- Employment Law Changes Netherlands 2025.
- FAQs on Dutch Labour Law – Essential Answers Employment Law.
- Strategic International Human Resource Management (SIHRM).
