On Friday 2 September, the Council of Ministers approved a draft act that intends to amend the legislative framework on the closure of undertakings in Belgium. This newsletter will briefly touch on the general principles of the act and will then discuss the proposed changes. Please note that the draft act has yet to be filed with and make its way through the Chamber of Representatives. Therefore, the act and its provisions could conceivably still be amended. However, given the fact that the changes are envisaged to enter into force retroactively as of 1 July 2022 and that the National Employment Office (NEO)’s website already mentions the adjusted provisions, it seems likely that the changes will be adopted in their current form, as detailed below.
Closure of undertakings in Belgium: the main principles
If a company were to decide to close (part of) the undertaking, it would need to take into account the specific legislative framework. In this respect, closure of an undertaking takes place when two cumulative conditions are met:
- the main activity of the company – or of a department – has been definitively terminated; and
- the number of employees at the company has dropped below 25% of the number of employees that were employed, on average, during the four quarters preceding the quarter in which the company’s activities were terminated.
It is worth noting that other situations can be equated with a closure of an undertaking, notably the relocation of the place of business, a merger or other reorganisation (if certain conditions are met).
Once it has been established that closure of an undertaking will take place, the employer that employed 20 or more employees during the four quarters preceding the quarter of closing, is legally obliged to:
- provide certain information up front, to the employees and the works council (or, if there is no works council, the union delegation), as well as to several government bodies. Sector-specific information requirements may be applicable;
- pay a specific indemnity to the affected employees: the closure indemnity (‘sluitingsvergoeding’/‘indemnité de fermeture’).
Proposed changes to the legislative framework
Closure indemnity reference periods to be harmonised
In the event of closure of an undertaking or equivalent reorganisation, a closure indemnity may be due. In order for an affected employee to be entitled to a closure indemnity, they need at least 12 months seniority with the company and their employment agreement has to be terminated within a certain reference period. This reference period used to start 12 months (for blue-collar workers) or 18 months (for white-collar workers) before the date of closure (or other qualifying event), ending 12 months after this date. The recently approved draft act aims to harmonise the part of the reference period that precedes the closing date, setting it at 18 months for both blue-collar and white-collar workers.
The previous reference periods will continue to apply for closures up until 30 June 2022. However, the Council of Ministers has requested the Fund for Closure of Undertakings (‘Fonds voor Sluiting van Ondernemingen’/‘Fonds de fermeture d’entreprises’ – hereafter referred to as ‘FCU’) to apply the newly harmonised reference periods for closures as of 1 July 2022.
Changes to FCU’s take-over of employers’ contractual obligations
If the employer does not pay the closure indemnity to the affected employees in a timely manner, the FCU will do so. Moreover, if an employer can no longer fulfil its financial obligations towards its employees in the event of a closure or equivalent reorganisation, the FCU can also intervene, provided certain conditions are met. These financial obligations concern the payment of wages, allowances and benefits, holiday pay for white-collar workers, indemnities in lieu of notice and payments to former employees who are in a system of unemployment benefits with an additional company allowance (‘SWT’/’RCC’).
The FCU’s intervention is, however, limited and – in its current form – the legislative framework provides for both an overall maximum amount of EUR 25,000 per employee, as well as maximum amounts per type of payment:
- for (overdue) wages, allowances and benefits: maximum – EUR 6,750;
- for holiday pay for white-collar workers: maximum – EUR 4,500;
- for indemnities in lieu of notice: maximum – the amount that’s left after subtracting the amounts paid out by the FCU for points 1 and 2 from the overall maximum amount of EUR 25,000;
- for payments to former employees in a system of unemployment benefits with an additional company allowance: maximum – the amount that’s due based on the provisions of Collective Bargaining Agreement no. 17. Note that the above-mentioned overall maximum amount does not apply for these types of payments.
For closures with a legal closing date as of 1 July 2022, the draft act increases the overall maximum amount to EUR 30,500 and eliminates the payment-specific maximum amounts. For closures dated before 1 July 2022, the overall maximum of EUR 25,000, as well as the payment-specific maxima, continue to apply. Moreover, the maximum amount for payments to former employees in a system of unemployment benefits with an additional company allowance will continue to apply for closures as of 1 July 2022 and will continue to not count towards the (increased) overall maximum amount.
Adjustment thresholds to determine employers’ specific compensatory contributions to the FCU
Since 2014, when paying out an indemnity in lieu of notice, employers must pay a special compensatory contribution to the FCU. This contribution takes the form of a percentage of the employee's severance payment. The actual percentage is determined based on the employee’s yearly gross salary. The recently approved draft act increases these different salary thresholds, as laid out in the below table:
No contribution (€) 1% contribution 2% contribution 3% contribution
Current yearly < 44,509 44,509 - 54,509 54,509 - 64,509 > 64,509
Proposed amended < 50,166 50,166 - 61,437 61,437 - 72,707 > 72,707
yearly salary thresholds
For closures with a legal closing date as of 1 July 2022, a number of changes are on the horizon. Although it’s important to point out that the proposed changes still need to make their way through the Chamber of Representatives before they become final – and could therefore conceivably still be amended – the fact that the NEO has already published the new principles on their website means that companies should take note. If you have any questions regarding the changes to the legislative framework on closure of undertakings and their possible implications, don’t hesitate to contact us; we’d love to hear from you.