During a reorganization, an employer cannot, in principle, decide for themselves which employee is eligible for dismissal: selection on the basis of quality is not possible. This is because employers are bound by the reflection principle. When applying the reflection principle, employees with comparable (“interchangeable”) positions are classified into age groups. Within each age group, it is determined who was hired most recently, and they are the first to be considered for dismissal. However, when an employer decides to eliminate a position entirely (i.e., all employees in a particular position become redundant) and creates a new (or several) position(s) instead, the employer does have the option of selecting employees based on quality. The redundant employees can apply for the new position(s) and the employer can select which employee(s) it considers suitable for the new position(s), based on objective criteria. This way of reorganizing is called the ‘musical chairs method.’ The advantage of this is that the employer is not, in principle, bound by the reflection principle and can therefore select on quality. However, strict conditions are attached to this method. The UWV (the Dutch Employee Insurance Agency) examines whether the new positions differ enough from the redundant positions. If the positions are too similar and therefore interchangeable, the reflection principle applies and the UWV can refuse to grant the dismissal permit. This was an issue in a recent ruling by the Amsterdam Court of Appeal, in which an employer assumed there were distinct positions but the court found this not to be the case. In this blog, we outline several guidelines indicating whether a new position is interchangeable or not.
What was going on here?
Primus is a global company engaged in the production and sale of edible paper (Wafer paper). At the end of 2020, Primus wants to reorganize due to a poor financial situation, a reduction in work, and technological changes. Primus decides to produce a new product with higher quality than the previous products. According to Primus, it is necessary to abolish the existing Preparation Employee and Production Employee B positions in the Preparation department. In their place, the new positions Operator A and Operator B are created. According to Primus, the positions are not interchangeable because the new product is of higher quality, and more is expected from the staff. Moreover, they have increased the educational requirements for the positions. To support this claim, Primus refers to a study conducted by AWVN (General Employers’ Association), which found that the positions are not interchangeable.
Primus asks the UWV if the employees in the abolished positions can be dismissed, but the UWV does not grant a dismissal permit. Primus then goes to court. The judge approves the dismissal applications, contrary to the UWV’s decision. Subsequently, one of the employees appeals. This employee believes that there are interchangeable positions and, therefore, the reflection principle should have been applied by Primus.
Judgment of the court
The court ruled that the positions are, indeed, interchangeable and does not agree with Primus’s reasoning. According to the court, when assessing interchangeability, one should not only look at the job description but also at the actual work carried out. The court states that the activities have remained virtually the same. Moreover, according to the court, the higher requirements for education, knowledge, and/or experience are not genuinely necessary for performing the new position. The AWVN’s study is insufficient, according to the court, to prove that the positions where not interchangeable. After all, the study only focused on the job description, including clarification and a tour of the factory. The court also considers it in its judgment that Primus has not shown that there was a salary difference, while this is an important indication for the non-interchangeability of positions.
If new jobs are created, employers must ensure that these positions are genuinely different from the positions to be made redundant; both on paper and in actual performance. Merely adjusting the position requirements is not enough; the work carried out should also show that any increased position requirements are genuinely necessary for the new position.
Please note that in addition to the strict test of interchangeability, the following points should be considered when using the musical chairs method.
If ‘old’ tasks return (in part) in the new position(s) and there are several suitable employees for the new position(s), the employer is not free to determine who it considers most suitable for the position. In this case, the reflection principle must be applied in reverse among the employees the employer deems suitable. Based on objective criteria (specific job requirements / competencies), it should be possible to justify why one employee is not considered suitable and another is.
If you have questions about how to make a musical chairs reorganization a success, contact one of our reorganization experts.