The consequential effect of the Subdistrict Courts Formula is a
controversial topic. Should the Subdistrict Courts Formula be
applied or not in the case of manifestly unfair dismissal? And - if
it should be applied at all - fully or just a little? The Court of
Appeal of Amsterdam, the Court of Appeal of Den Bosch and the Court
of Appeal of Leeuwarden join the battle against the Court of Appeal
of The Hague.
The XYZ Formula in Manifestly Unreasonably Dismissal: a (Little) Bit of the Old Stuff?
A discussion of rulings of the Court of Appeal of Amsterdam,
Court of Appeal of Den Bosch and Court of Appeal of Leeuwarden 7
July 2009, LJN: BJ1644; LJN: BJ164; LJN: BJ1710; LJN: BJ1713; LJN:
BJ1716; LJN: BJ1688.
The Consequential Effect of the Subdistrict Courts
Formula
An employment agreement may end either by termination or by
rescission. If the Subdistrict Court rescinds the employment
agreement, the Subdistrict Courts Formula is used to determine the
compensation. If notice of termination is given of the employment
agreement, the employee may claim damages in a legal action, for
example in connection with the consequences the termination has for
the employee. In the event that the Court considers the termination
to be manifestly unreasonable, the Court has to award compensation.
A question that has long been contemplated is whether this
compensation should also be calculated on the basis of the
Subdistrict Courts Formula. On 14 October 2008 the Court of Appeal
of The Hague ruled that in the event of a manifestly unreasonable
dismissal, a compensation of - in brief - the Subdistrict Courts
Formula x 0.7 should be taken as a starting point. On 7 July 2009,
the Court of Appeal of Amsterdam, the Court of Appeal of Den Bosch
and the Court of Appeal of Leeuwarden rendered judgments containing
a 'new' formula to estimate the compensation in cases of
manifestly unreasonable dismissal.
The 'New' XYZ
Formula in Cases of Manifestly Unreasonable Dismissal
The level of the compensation which the Court sets in the case
of manifestly unreasonable dismissal will from now on be determined
by the following formula: X (number of 'weighted' years of
service) x Y (last earned monthly salary) x Z (adjustment factor).
The X factor - the number of weighted years of service - comes down
to the following: each year of service worked until the age of 40
counts as 1; each year of service worked by employees aged between
40 and 50 counts as 1.5; each year of service worked from the time
when the employee has reached the age of 50 counts as 2. The Y
factor - the last earned gross salary - is equivalent to the B in
the Subdistrict Courts Formula. In the Z factor all circumstances
of the case are taken into account. The judgments of the Courts of
Appeal mention a great number of potentially relevant
circumstances, such as the options of finding other (suitable)
employment, the financial consequences for the employee and the
measures taken (earlier) by the employer, and financial
compensation. However, the starting point is, according to the
Courts of Appeal, that Z is in principle not higher than 0.5. This
may be different in special cases.
Tips
- The three Courts of Appeal have explicitly introduced a
two-steps doctrine. First, the question is asked whether the
termination was manifestly unreasonable in the first place.
Only after this question has been answered affirmatively, the
question as to compensation - the XYZ formula, that is - is
addressed. When answering the first question, all circumstances
of the case are taken into account.
- As far as it concerns 'weighted' years of service,
the X from the XYZ formula is equal to the A from the
Subdistrict Courts Formula that applied before 1 January 2009.
For the Y from the XYZ formula a link can be sought with the B
from the (current) Subdistrict Courts Formula.
- It is expected that the Supreme Court will express an
opinion this year still about the consequential effect of the
Subdistrict Courts Formula on the procedure for manifestly
unreasonable dismissal. Until this happens, these Courts of
Appeal will most likely use the XYZ formula, while the Court of
Appeal of The Hague will use its formula from the Subdistrict
Courts Formula times 0.7.
Publication date
:
16 July 2009