Non-Solicitation Provisions: Go Narrow or Risk Unenforceability

 

Employers need to protect their customer base.  Employees need to retain control and autonomy over their lives.  The potential conflict between basic tenets of the employer-employee relationship are readily apparent in Donaldson Travel Inc v Murphy,  2016 ONCA 649 [Donaldson Travel].   In that recent decision, Ontario Court of Appeal emphasizes the difference between non-solicit and non-compete clauses in employment agreements, and remind us that courts prefer not to interfere with an individual’s ability to earn a living any more than is reasonably necessary.

While post-termination non-competition clauses that restrict individuals from working in the same industry as their former employer may be enforced by Canadian courts in some cases, they are considered prima facie unenforceable for restraint of trade. By comparison, if sufficiently limited in scope, post-termination non-solicitation clauses are generally perceived as more reasonable. They allow individuals to continue working in the same industry, as long as they do not actively contact their former employer’s customers for business opportunities, or soliciting their former employer’s workers away from their employment for a reasonable period of time.

In Donaldson Travel, the employer tried – unsuccessfully – to expand the scope of a post-termination non-solicitation clause to prevent a former employee from accepting any business from Donaldson’s customers.  The non-solicitation clause in question included the following prohibition:

“[The employee] agrees that in the event of termination or resignation that she will not solicit or accept business from any corporate accounts or customers that are serviced by [the employer], directly, or indirectly.” (emphasis added).

A motions judge found the prohibition on accepting business to be unreasonable and unenforceable, and struck the clause down in its entirety.  Considering the clause to be akin to a non-competition clause, the Ontario Court of Appeal agreed with the motions judge’s finding, stating:

“We see no basis on which to interfere with the motion judge’s finding. Further, given that the restrictive covenant is a non-competition clause (as opposed to a non-solicitation clause) and also because it contains no temporal limitation, there is no basis on which to interfere with the motion judge’s conclusion that the clause is unreasonable and therefore unenforceable.

In general, to stand a reasonable chance of enforceability, non-solicitation clauses should be clearly and narrowly drafted to prohibit former employees from soliciting customers they serviced directly for a post-termination period that is reasonable in the circumstances.   If the clause is unclear or overreaches in any way, it is very likely to be struck down in its entirety.

Written with the assistance of Shreya Tekriwal, articling student.

A New Era in Franchising Compliance is Here

The Federal Government’s Protecting Vulnerable Workers Bill received the Royal Assent on 14 September 2017. With the exception of the provisions in relation to responsible franchisors (which commence on 27 October 2017), the Fair Work Amendment (Protection of Vulnerable Workers) Act 2017 (Cth) (Act) commenced on Friday 15 September 2017.

We recommend that franchisors take appropriate steps to protect their businesses. In this article, we examine what the amendments mean for franchisors and provide recommendations for a carefully considered approach to assist franchisors in complying with the new laws while continuing to foster a collaborative relationship between them and their franchisees.

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Monitoring of employees’ emails: Bărbulescu v. Romania

This post was co-written by Sabrina English, Trainee Solicitor, Norton Rose Fulbright LLP, London

A recent decision of the Grand Chamber of the European Court of Human Rights has held that an employer had infringed an employee’s rights under Article 8 of the European Convention on Human Rights (the Convention) when it dismissed him for sending private messages via a work messaging system. This decision overturns the earlier decisions of the Fourth Section of the European Court of Human Rights and the domestic Romanian Courts (discussed in an earlier post) which had both ruled that there had been no violation of Article 8.

Whilst the employer had made it clear that the use of the company’s computers was forbidden for personal purposes, it was not made clear to the employee that his communications would be monitored. Mr Bărbulescu was asked by his employer to create an account on an instant messaging service in order to respond to customer queries. It transpired that he had used this service to send messages of a personal and sometimes intimate nature to his fiancée and brother, and his employment was terminated. He brought a claim under Article 8 of the Convention based on a breach of his right to respect for his private life and correspondence, which the court upheld in the most recent ruling. In doing so, the court has appeared to acknowledge that employees have some level of expectation of privacy regarding private communications made on a work device; “an employer’s instructions cannot reduce private social life in the workplace to zero. Respect for private life and for the privacy of correspondence continues to exist, even if these may be restricted in so far as necessary.”

This ruling does not represent a huge shift in traditional thinking in this area of employment law, but does however highlight the importance of employers having a clear policy regarding the use and monitoring of the internet and emails. These policies must be communicated to employees at the start of their employment, and it should be ensured that they are kept up to date to reflect changes in modern communications and technology. In particular, both employees and employers need to be aware of how they use both personal and work devices.  The court gave guidance as to the factors which should be taken into account, many of which are included in the guidance by the UK Information Commissioner.  For example, staff should be encouraged to mark email messages as private or personal, when appropriate, so that, when monitoring use of the email system, employers will avoid opening personal emails unless there is a very good reason to do so.

The court is clear that an employer can take measures to monitor employees’ communications, but that these measures must be accompanied by adequate and sufficient safeguards against abuse, which should be set out clearly to employees in advance.

 

 

Federally Regulated Employers Prohibited From Discriminating Based on Gender Identity

The changes contained in Bill C-16, An Act to amend the Canadian Human Rights Act and the Criminal Code officially came into force on June 19, 2017.

Introduced in May 2016, Bill C – 16 amends the Canadian Human Rights Act by adding “gender identity or expression” as a prohibited ground of discrimination.  This means that federally – regulated employers (including, for example, employers in the airline, inter-provincial railway and trucking, banking and telecommunications industries) cannot refuse to employ or continue to employ an individual because of their gender identity or expression. It also means that employers, in the course of providing employment, must not discriminate against employees on these bases.

Bill C – 16’s changes bring Canada in line with the provinces and territories, which all have legislation in place that prohibits discrimination based on “gender expression” or “gender identity”.

While the Canadian Human Rights Act does not define “Gender identity or expression”, provincial approaches offer insight into the meaning of the terms. As an example, in Ontario, “gender identity” is defined by the Ontario Human Rights Commission  (OHRC) as “each person’s internal and individual experience of gender. It is their sense of being a woman, a man, both, neither, or anywhere along the gender spectrum. A person’s gender identity may be the same as or different from their birth-assigned sex.”  Similarly, the OHRC defines “gender expression” as being “how a person publicly presents their gender. This can include behaviour and outward appearance such as dress, hair, make-up, body language and voice. A person’s chosen name and pronoun are also common ways of expressing gender.”

Although it is too early to know exactly what Bill C – 16’s amendments will require of federally regulated employers, the OHRC’s Policy on preventing discrimination because of gender identity and gender expression  provides insight into some of the obligations that may be imposed on federally and provincially regulated employers. For example, employers may be required to:

  • Accommodate employees who are ‘transitioning’ from one gender to another
  • Use employees’ preferred pronouns
  • Allow transgender individuals to use their preferred washroom
  • Avoid implementing dress codes that require employees to dress in a way contrary to their gender identity
  • Avoid collecting data on an individual’s gender without a valid reason

For a more detailed discussion of gender identity and expression in the Ontario workplace, please see our three part series:

Part 1

Part 2

Part 3

Written with the assistance of Samuel Keen, articling student. 

 

$1.7 million in damages for victim of workplace bullying

The Queensland Supreme Court last month awarded $1,703,530 in damages against an employer, whose Chief Executive Officer’s “unjustified blaming, humiliation, belittling, isolation, undermining and contemptuous disregard” of the plaintiff employee resulted in serious psychiatric injury. The employer was found vicariously liable for the CEO’s actions and to have breached its own duty of care.

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Corporate Governance Reform – Pay ratios and Employee Representation

The UK Government has published proposals for corporate governance reforms to enhance the public’s trust in business. In particular, the reforms consider the publication of pay ratios between bosses and workers and new measures to ensure that the employee’s voice is heard in the boardroom.

The first section of the report looks at the plans for reform in relation to executive pay, after persistent concerns in the investment community and wider society over very high levels of executive remuneration at UK quoted companies. Whilst there were various proposals put forward by the government in November last year, one of the key areas involved the publication of pay ratios’ by quoted companies.  Those opposed to the publication of pay ratios were concerned that they can lead to misleading comparisons between companies in different sectors and also potentially incentivise companies to offshore or outsource lower paid employees to provide a better balanced pay ratio.  The Government has, however, confirmed that it will introduce legislation to require quoted companies to report annually in their remuneration report, the ratio of CEO pay to the average pay of their UK workforce, along with a narrative explaining changes to that ratio from year to year and how the ratio relates to pay conditions across the wider workforce.  This increases the reporting requirements on UK companies who have already had the new Gender Pay Gap Reporting Regulations introduced in May this year.  As with that requirement, the narrative accompanying any publication of pay ratios will be key, as well as the internal and external communications to avoid damaging the company’s reputation from any misleading comparisons between different industry sectors.  It will be interesting to see if the increased reporting obligations will have the result of “pushing down” executive pay or whether it will result in increased competition between companies to retain their key executives.

Other proposals have also been made in relation to ensuring that remuneration committees and companies address significant shareholder dissent on executive pay, such as establishing a public register of listed companies encountering shareholder opposition of 20% or more to executive pay and giving remuneration committees a broader responsibility for overseeing pay and incentives across the company. In addition, the Government will not abolish Long Term Incentive Plans, but will require quoted companies to provide a clearer explanation in their remuneration policies of the range of potential outcomes from complex, share based incentive schemes, encouraging a more flexible and tailored approach to linking executive remuneration to long term company performance.  The Government also proposes that the minimum holding period for share based remuneration should be increased from three to five years.

One of the other areas covered in the Government response is in relation to strengthening the employee, customer, and wider stakeholder voice. Section 172 of the Companies Act 2006 already requires the directors of a company to have regard to these wider interests in pursing the success of the company, but many respondents felt that this aspect of the current legal framework could be improved. The UK does not have employee representation at board level in the same way as some other jurisdictions and  the Government does not propose to enforce any one particular method of increasing employee and other stakeholder representation, preferring instead to require companies to adopt on a “comply or explain” basis, one of three employee engagement mechanisms.  These include:  appointing a designated non-executive director; adopting a formal employee advisory council; or appointing a director from the workforce.  Whilst this particular suggestion would currently apply to listed companies only, the Government intends to introduce secondary legislation to require all companies of significant size to explain how their directors comply with the requirements of section 172.

The Taylor review of Modern Working Practices published in July highlights the importance of having an effective worker voice in making people feel better about their work. It also sets out some proposals in relation to encouraging the “worker voice” in the workplace, such as examining the effectiveness of the Information and Consultation Regulations 2005 in improving employee engagement in the workplace.  In addition, it suggests that the Government should work with certain organisations to promote the development of better employee engagement, especially in sectors with significant levels of casual employment. The Government has indicated that it will consider these suggestions and respond to the whole report later in the year.

With the proposals regarding pay ratios intended to come into effect in June next year and a draft statutory instrument setting out further details to be published later this year, companies should start to consider how such information will be collected,  how they will publish that information and what communications are required to avoid damaging the company’s reputation.

I’m sick of this!  But not of that:   Can you fire an employee for working another job while on sick leave?

An employee may be disciplined (including fired) for fraudulent sick leave, but does this include an employee working another job while on sick leave?  Possibly, though employers should exercise caution before pulling the trigger.

In United Food & Commercial Workers, Local 1518 (Sidhu Grievance) v. Sobeys West. Inc., [2016] B.C.C.A.A.A. No. 148 [“Sidhu”], the grievor, a full-time senior cashier in a grocery store, requested vacation leave so that she could operate her new restaurant business.  The employer denied her request.  The grievor  then took sick leave and submitted a medical note citing an inability to work “due to medical reasons”.  She later submitted a second note at the employer’s request stating that she “had symptoms of asthma which had been aggravated by anxiety”.  The employer terminated the grievor’s employment for just cause after it confirmed that the grievor had worked at her new restaurant while on sick leave for the employer.  At the time of her termination, the grievor was known to be a “good employee” with 20 years of service and no disciplinary record.

The grievor grieved the termination decision and maintained at arbitration that her work at the restaurant was very limited and that she was genuinely ill from working for her employer.

The employer maintained that the grievor was dishonest, including in its investigation into concerns that her sick leave was fraudulent, and relied upon the fact that the grievor had not produced medical information to explain why she was too sick to work for the employer but not too sick to work at her own restaurant.

The grievance was allowed in a 114-page award.

In allowing the grievance, the arbitrator noted the following:

  • The evidence did not establish that the grievor was “faking illness” or had participated in a premeditated course of dishonest conduct starting with a plan to take unjustified sick leave.
  • The evidence did establish, however, that the grievor had exercised poor judgment in working at her restaurant while being unfit for work for her employer. This was a breach of her duty of honesty and fidelity to her employer in several ways, including:  when she ignored her employer’s request for additional medical information to explain why she could work at her restaurant but not work with her employer; when she denied knowledge of this request; when she said a steward had advised her that she could ignore the employer’s request; and when she failed to provide her employer’s request to her doctor.

In spite of the breaches of duty by the employee, the Arbitrator concluded the employment relationship could be rehabilitated, particularly in light of the grievor’s long service and positive performance record.

The arbitrator then substituted the termination with a four-month disciplinary suspension.

In doing so, the arbitrator provided the following prescriptions for employers:

  • The presumptive rule is that dishonesty (including dishonesty in an investigation) invites termination for just cause, but arbitrators still have the discretion to impose a lesser form of discipline.
  • Employers are entitled to reasonably sufficient medical information from employees, and employers. When faced with situations such as in Sidhu, employers are specifically entitled to ask why an employee is able to perform work for others (or perform other activities) but not work for the employer.
  • If an employee provides medical information that substantiates a sick leave and also explains why other work or activities can still be performed during that leave, then an employer is unlikely to establish fraud on that point alone.
  • The employer’s investigation into potential employee misconduct (including reasonable requests for medical information) will continue to be critical to sick leave management.

Employees who resign to avoid the consequences of disciplinary action

Employees who commit misconduct and are issued with a notification of disciplinary enquiry, commonly tender their resignation in an attempt to avoid the consequences of disciplinary action and the stigma attached to a dismissal if found guilty.

In order to fully understand whether such resignation deprives an employer of the right to pursue the disciplinary process, it is important to understand the facts and fallacies of resignation. It is also important to differentiate between instances of resignation with an intention to serve out a notice period versus resignation with immediate effect.

Resignation is a unilateral act by an employee indicative of their intention to end the employment relationship. Resignation does not require the acceptance of an employer and, once communicated, cannot be withdrawn unless an employer consents to the withdrawal.

Resignation on notice

Most contracts of employment contain a termination clause allowing either party to end the contract of employment provided they tender the stipulated notice period or waive their entitlement to the salary for the notice period.

If a contract of employment is silent on the notice period, then the party electing to terminate the contract is required to give notice as specified in section 37 of the Basic Conditions of Employment Act, 1997. The notice period varies and is dependent on the employee’s period of service so that it is:

·        one week, if the employee has been employed for six months or less;

·        two weeks if the employee has been employed for more than six months  but less than one year; or

·        four weeks, if the employee has been employed for more than one year or is a farm worker or domestic worker employed for more than six months.

Employees often do not appreciate that their resignation (other than immediate resignation) only comes into effect at the expiry of the notice period. During the notice period, the employment relationship, and in this instance the employer’s right to pursue disciplinary action against the employee, remains in effect until the expiry of the notice period. The employer is therefore entitled to proceed with disciplinary action before the expiry of a notice period.

If the employee has been properly notified of the disciplinary enquiry date, and fails to appear at the disciplinary enquiry, an employer is entitled to construe the employee’s absence as a waiver of the employee’s right to be present and put forth a defence. The disciplinary enquiry can then proceed in the absence of the employee.

Should an employee be found guilty, the termination of the employment relationship will be reflected as a dismissal and not resignation.

Resignation with immediate effect

In differentiating between resignation on notice and resignation with immediate effect, it is important to consider the Labour Court case of Mtati v KPMG Services (Pty) Ltd [2017] JOL 37427 (LC). The employee tendered two resignation letters to her employer. The first was resignation on notice on becoming aware that her employer was investigating allegations of misconduct against her. The second resignation letter was resignation with immediate effect.

Despite the second resignation letter, the employer continued with the disciplinary enquiry. The employee challenged the employer’s authority to discipline her in light of her second resignation letter. The disciplinary enquiry chairperson ruled that she could proceed with the disciplinary, found the employee guilty and recommended dismissal.

The Court drew a distinction between resignation on notice and resignation with immediate effect, and the consequence on an employer’s authority to discipline an employee.

In the first instance, of a termination on notice, an employer is entitled to take disciplinary action against the employee during the notice period, as the employment relationship and all its rights and obligations are still in existence.

But, where an employee tenders their resignation with immediate effect, the employer immediately loses jurisdiction to discipline an employee as the resignation has taken effect immediately and there is no longer an employment relationship.

The Court accordingly found that the employee’s immediate resignation terminated the employment relationship and the chairperson’s decision was null and void.

Recourse for employer

Following the Mtati decision, whilst resignation with immediate effect defeats an employer’s right to discipline an employee, the employer still has recourse in that the employee in tendering their immediate resignation may have acted in breach of their contract of employment and this entitles the employer to a civil claim for breach of contract against the employee.

More often than not, employees resign to avoid disciplinary action in the face of serious allegations of misconduct like theft, unauthorised possession of company property or fraud. In such instances, an employer may elect to pursue a criminal case against the employee.

Disgruntled employees, who tender their resignation to avoid disciplinary action, often refer constructive dismissal disputes to their respective bargaining councils or the Commission for Conciliation, Mediation and Arbitration (CCMA). It is commendable to note that our Courts endeavour to identify true instances of constructive dismissals and do not readily reinstate or grant compensation to employees who resign with an ulterior motive.

In the case of Mvamelo vs AMG Engineering (2003) 11 BALR 1294, an employee was informed that he was to face a disciplinary hearing for theft. He then resigned and later claimed he had been constructively dismissed.  It was held that the employee failed to make out a case of constructive dismissal and that he resigned to avoid disciplinary action being taken against him.

In the Labour Appeal Court case of Kynoch Fertilizers Limited v Webster [1998] 1 BLLR 27 (LAC) the Court found that the resignation of an employee who had resigned and whose resignation was accepted by an employer amounted to a settlement between them. Therefore, any rights that may have accrued to the employee by virtue of a dismissal are negated by the settlement and it was therefore not open to the employee, to then seek relief by way of reinstatement or compensation for a constructive dismissal after having elected to resign.

This article was written by Danielle Ebrahim-Naseem, Associate, Norton Rose Fulbright South Africa Inc

Holiday pay – Regular voluntary overtime should be included

A recent decision of the Employment Appeal Tribunal has held that employees who regularly work voluntary overtime beyond their contracted hours may now have those payments taken into account in calculating holiday pay.

Article 7 of the Working Time Directive (2003/88/EC) (WTD) provides that workers have the right to at least four weeks’ paid annual leave.   This is implemented in the UK by Regulation 13 of the Working Time Regulations 1998 (WTR).  Over the past few years we have seen a number of cases considering what payments should be included in the calculation of holiday pay. These cases have held that an employer should look at what amounts to “normal remuneration”. This is remuneration which is “intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment”. As a result cases have considered that commission, compulsory overtime and certain allowances should all be included.  The question has remained as to how voluntary overtime should be treated.

In the latest case of Dudley Metropolitan Borough Council v Willetts (and others) the Employment Appeals Tribunal (EAT) upheld the decision of the Employment Tribunal and held that voluntary overtime worked for a sufficient period of time on a regular basis should be included in the first four weeks’ paid holiday. (For our blog post on the Employment Tribunal decision see Calculating holiday pay- should voluntary overtime be included?

A group of 56 employees employed by the Council claimed that they had not received the correct rate of statutory holiday pay. They worked a set number of hours per week which counted as their normal working hours. In addition, they volunteered to perform additional duties which their contracts of employment did not require them to carry out. They also participated in on-call rotas for which they were paid a standby allowance, plus call-out payments if they were called upon to do work while on call. Employees could drop on and off the rotas to suit themselves, and so the work was done “almost entirely at the whim of the employee”, with the Council having no right to force the employee to take on the additional work.  However, these voluntary payments were excluded from their holiday pay and the workers argued that this was contrary to the WTR.

The EAT upheld the earlier decision and drew on the previous ECJ decisions. It concluded that the overtime pay and allowances should be included in most of the claimants’ statutory holiday pay for the Regulation 13 leave. They were paid in such a manner, and with sufficient regularity, to be considered part of normal remuneration. Although they were not expressly included in the contract of employment, the specific agreement or arrangement for voluntary overtime would not exist in the absence of a contract of employment. Once the claimants commenced working a shift of voluntary overtime or a period of standby duty or callout, they were performing tasks required of them under their contracts of employment even if there was also a separate agreement or arrangement.

Further, the EAT pointed out that one of the principles of the WTD is that a worker should not be deterred from taking annual leave and any reduction in salary is presumed to act as a deterrent. To exclude voluntary overtime carried the risk that employers could set artificially low levels of basic hours and categorise the remaining working time as “voluntary overtime” that does not count for holiday pay purposes.

The case only concerns pay for the four weeks’ leave under regulation 13 of the WTR (which implements the WTD), not pay for the additional 1.6 weeks’ leave under regulation 13A, which is a purely UK measure, or additional contractual leave.

The case has been remitted back to the Tribunal to determine whether or not, on the facts for each individual case, the claimants are due outstanding holiday pay. The tribunal must consider the working pattern of each individual, what they normally did and when at work and what they would have earned if they did not take annual leave. Overtime which is rare or unusual will not count for these purposes, while overtime which is usual and regular may do so.

Employers should therefore take steps to review their overtime policies to consider whether payments are made with sufficient regularity to amount to normal remuneration and should therefore be factored into holiday pay. Employers will also need to consider how this should be dealt with in the payroll as a practical issue.  In terms of back dated claims, employers should note that an interval of more than three months between underpayments will “break the chain” of an unlawful series of deductions and prevent a claim by an employee for underpayment of holiday pay from reaching back prior to that break.

It seems that many employers up to now have adopted a “wait and see” approach to holiday pay. However, following this ruling and with a possible increased likelihood of claims following the abolition of employment tribunal fees, employers should address this issue sooner rather than later.

What is the latest on employees’ rights in the event of redundancy in Germany?

In business, the restructuring of a company (such as by the closure of an individual business unit or a necessary reduction in the number of staff) may result in an employee’s redundancy. However, dismissing an employee by reason of redundancy has strict prerequisites under German law.

The main requirements which must be observed under German law for a dismissal based on redundancy are as follows:

  • In business units with more than ten employees (more than five if hired before 31 December 2003), and if an employee has been at the company for more than six months, a specific justification for any dismissal is required. Redundancy qualifies as a sufficient justification in this sense. Smaller businesses do not require a similar justification for dismissals subject to the dismissal not being discriminatory; a dismissal is possible without any specific reason and only a minimum of social consideration is required.
  • A dismissal based on redundancy is possible only if the position of the affected employee no longer exists for operational reasons (e.g. restructuring) and if it is not possible to offer the employee any suitable alternative employment within the whole company. German case law is very detailed in this regard and courts traditionally take a rather supportive stance towards employees.
  • A management decision regarding the envisaged measure must be taken, which should always be documented to provide proof.
  • Prior to the dismissal the employer must perform a so-called “social selection”. During this process the employer has to select the employee with the strongest social background for dismissal by considering certain criteria (length of service in the company, age, family maintenance obligations, any severe disability) of comparable employees and may terminate the employment only of the employee who requires least “social protection” (i.e. who has no family, is young, healthy etc.).

Further, any applicable special protection against dismissal (i.e. pregnant women, employees on maternity/parental leave, severely disabled persons, and members of the works council) as well as co-determination rights of the works council must be observed. In particular, the works council, if there is one, needs to be informed prior to any dismissal and be allowed one week to revert with any comments or objections.

In business units with more than 20 employees, the works council has additional information and consultation rights with regard to major changes in the conduct of the business unit. A shutdown or a drastic reduction of staff (at least 10%, depending on the size of the business unit) also qualifies for such change in the conduct of the business unit. When a change in the conduct of the business unit occurs, the employer is required to inform the works council of the change well in advance and to consult with the works council about the proposed action to be taken. The aim of such consultation is to reach agreement on two issues: First, answers to the questions “if”, “how” and “when” in relation to the proposed change are to be set out in writing under a so-called “reconciliation of interests”. Secondly, issues related to the type and scope of compensation for any – in particular financial – disadvantages to the employees related to the change are to be set out under a “social plan”.

In cases of mass redundancy (which is determined considering the relevant headcount and the employees to be laid off within a specific period of time) the employer must inform the local labour agency regarding the planned dismissals in advance and – again – consult with the works council. If the employer fails to do so, the notice of dismissal is invalid. Labour Courts have recently been very strict on meeting the requirements as set out and interpreted in several cases by the European Court of Justice.

If notice of termination is given (irrespective of the size of the business), the employee may file a suit at a labour court within three weeks after receipt of the termination notice, asking the court to review the validity of the dismissal. Experience shows that most affected employees make use of this option. In Germany, officially the court can only award re-instatement of the employee where there has been an invalid termination and German law does not provide for specific compensation in cases of dismissal for redundancy. However, in practice most cases are eventually settled in consideration of a severance payment. Alternatively, to avoid dismissal and the following lengthy and cost-consuming court proceeding, the parties may terminate an employment relationship (usually in exchange for compensation) at any time by mutual consent.

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