Background

In the event of a dismissal for commercial or financial reasons, an employer is not allowed to select employees according to quality, but has to apply the principle of proportionality. In summary, this principle comes down to a division of the staff into age groups per category of exchangeable positions, after which the staff is downsized while keeping the age structure within the category of exchangeable positions as equal as possible. Within each age group the employee having the shortest employment will be eligible for dismissal.

However, if an entire group of exchangeable positions is made redundant, there is no room for proportionality. This is why employers are increasingly using the so-called ‘musical chairs method’, in which they first cancel an entire category of positions and then create a number of new positions for which the redundant employees are invited to apply. Recently the Subdistrict Court of Eindhoven expressed an opinion on the permissibility of this method.

The Facts

An employer implemented a reorganization while introducing a new position matrix. In this process the position of an employee became redundant. The employer felt that the newly created position was neither exchangeable with the former position of that employee, nor suitable for the employee. The employee then still applied for yet another position, but after a trial period the employer concluded that he was not suitable for that position either. Since no other suitable positions were available, the employer asked the Subdistrict Court to rescind the employment agreement.

Subdistrict Court

First of all, the Subdistrict Court held that the employer could reasonably take the decision to reorganize. Furthermore, the Subdistrict Court held that a reorganization according to the “musical chairs method’, in which a position, category of positions or position matrix is cancelled entirely and the employees who were made redundant may apply for newly created and partly more demanding jobs, is in principle permissible. However, if there are dismissals in this process, it must be possible to test according to objective standards whether the selection to fill the new vacancies has been sufficiently careful and not arbitrary.

In the opinion of the Subdistrict Court it was proven sufficiently that the newly created position was not exchangeable with the redundant position, since the new position required a higher level of education, and a psychological assessment revealed that the employee did not attain the required level. Since the employer also considered the position unsuitable for the employee concerned, the Subdistrict Court rescinded the employment agreement.

Conclusion

Although the courts seem somewhat divided as to the permissibility of ‘musical chairs’, the common denominator seems to be that this method is in principle permissible, on the following conditions:

  • the new positions are not mutually exchangeable with the redundant positions;
  • employees to fill the new positions are selected according to objective standards;
  • there is no arbitrariness.

In other words, musical chairs should not be used in reorganizations as a selection-for-quality method in disguise.

Tips

Employers who wish to use the musical chairs method should ask themselves the following questions:

  • Are the old and the new position mutually exchangeable? Exchangeable positions are positions that are comparable as to job content, knowledge, skills and competences required, and are equivalent as to remuneration. It is only the position that must be looked at here, not the person who holds it. If the positions are mutually exchangeable, the principle of proportionality must be applied.
  • If they are not, it must be examined whether the position is suitable for the employee. In this process it is in principle allowed to make employees apply for the new positions, if the employer can give sound reasons for this.
  • Is the selection procedure careful and free from arbitrariness? It is advisable to engage an external agency in this process, which may submit applicants to an assessment, for example, to arrive at an opinion as objective as possible.
  • Are sufficient other efforts aimed at re-employment being made?