Employers who are planning a large-scale staff reduction generally have to comply with a number of obligations. On the one hand, the employer must notify the German Federal Employment Agency of a so-called mass dismissal before issuing any terminations in companies with regularly more than 20 employees if the dismissals exceed the thresholds specified in Sec. 17 (1) of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG). If there is a works council in the affected company, the employer must not only observe the participation rights of the works council in accordance with the German works Constitution Act (Sections 111 et seq. Betriebsverfassungsgesetz – BetrVG), but must also consult the works council in accordance with Sec. 17 (2) of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG).
This means that the works council must be informed in writing by the employer of the reasons for the planned dismissals, the number and occupational groups of the employees to be made redundant, as well as the number and occupational groups of the employees regularly employed, the period in which the dismissals are to be made, the criteria envisaged for the selection of the employees to be made redundant and the criteria envisaged for the calculation of any severance payments.
Furthermore, the employer is obliged to forward a copy of the written notification meant for the works council to the Federal Employment Agency at the same time as informing the works council, Sec. 17 (3) of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG). With the provisions of Sec. 17 of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG), the German legislator has implemented the European Directive 98/59/EC (“Collective Redundancies Directive ” MERL).
The previous case law of the Federal Labor Court (Bundesarbeitsgericht – BAG) was rather restrictive when it came to deficiencies in consultation procedures. As a rule, these led to the invalidity of dismissals with regard to employee protection.
The Sixth Senate of the Federal Labor Court (decisions of December 14, 2023, Ref. 6 AZR 155/21 (B), 6 AZR 157/22 (B), 6 AZR 121/22 (B)) has now announced that it is abandoning its previous case law, according to which errors in the mass dismissal notification led to the invalidity of the dismissals. Pending clarification of the question of whether the Second Senate will also follow the changed line of case law, the pending proceedings on this legal issue will be suspended. The Second Senate is still of the opinion that errors in the notification procedure always lead to the invalidity of terminations.
The original proceedings concerned an action for protection against dismissal as a result of the intended closure of an insolvent company. The insolvency administrator appointed by the court assumed the position of employer and duly consulted the works council in accordance with Sec. 17 (2) of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG). However, he failed to provide the employment agency with a corresponding copy of the notification to the works council, resulting in a breach of Sec. 17 (3) of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG). As part of the consultation process, the works council ultimately confirmed that there was no possibility of avoiding the mass dismissals.
As part of the dismissal protection proceedings, the employee claimed that the dismissal was invalid because the employer had failed to provide the employment agency with a copy of the notification of the intended mass dismissal sent to the works council.
The Federal Labor Court did not itself decide the question of whether the lack of notification to the employment agency is to be regarded merely as a procedural provision or as a prohibition law within the meaning of Sec. 134 of the German Civil Code (Bürgerliches Gesetzbuch – BGB), which would lead to the invalidity of the dismissal. Instead, the court referred it to the ECJ. In the opinion of the Federal Labor Court, it depends on the purpose of the transmission obligation pursuant to Art. 2 para. 3 subpara. 2 of the MERL, on which the national provision of Sec. 17 para. 3 of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG) is based.
Transmission of Information Under the MERL Does Not Serve to Protect Individuals
The ECJ (judgment of July 13, 2023 – C-134/22) has ruled that the second subparagraph of Article 2(3) of the Directive does not grant individual protection, but merely serves the intended transmission of information to the competent authority, i.e. for information and preparatory purposes.
The corresponding provision in the MERL is not intended to grant individual protection to employees affected by a collective dismissal procedure. This is justified by the fact that the information is transmitted to the employment agency at a stage at which the employer only intends to make a collective dismissal. By forwarding the information, the agency should be able to assess the tasks falling within its jurisdiction at an early stage and find efficient solutions.
It remains to be seen whether the Second Senate of the Federal Labor Court agrees with the legal opinion of the Sixth Senate. If this is not the case, the Grand Senate will have to decide. If the latter takes the view that a breach of Sec. 17 (3) of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG) does not render the dismissal invalid, this would significantly reduce the risks for employers in the event of mass dismissals, which were considerable in the past due to the high formal requirements.
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