In Germany, an employer must comply with certain consultation obligations when dismissing an employee. Failure to do so may result in the dismissal being held null and void by a labour court or the court awarding compensation to the affected employees.

The works council and dismissals

Prior to giving notice of termination, an employer must inform and consult any existing works council. The employer must provide the works council with the following information:

  • Details of the employees who are to be dismissed (including their name, place of work, position, remuneration, age, family status, job tenure, maintenance obligations, any severe disability, and any special protection against dismissal),
  • the type of intended termination (i.e. termination with notice or termination without notice or termination with a phasing-out period for social reasons),
  • the notice period or the phasing-out period for social reasons,
  • the termination date, and
  • the reasons for the termination.

If the employer fails to consult the works council prior to giving notice of termination in due time or does not pass all necessary information to the works council, the dismissal is void.

The Works Council and Economic matters

In business units employing more than 20 people, the works council has the right to information and rights to determine terms with the employer with regard to major changes in the conduct of the business unit. Such a major change can include a reduction in production or the shutdown of a business unit or a major part of the unit, or a drastic reduction of staff (at least 10 per cent, depending on the size of the business unit) .

When a change in the conduct of the business unit occurs, the employer is required to inform the works council in good time 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 the “reconcilement of interests” (meaning the process by which the proposed change is to be carried out); and second a “social compensation plan” (relating to the type and scope of compensation payable to the employee). If the negotiations towards such agreements fail, the works council can only force the conclusion of a social compensation plan.

If an employer breaches the obligation to consult he may be liable for compensation to the affected employees.

Notification of mass redundancies

Where there is a mass redundancy the employers must notify the Agency for Employment prior to giving notice of dismissal. A mass redundancy exists where an employer is proposing to dismiss within 30 calendar days:

  • more than 5 employees in establishments with regularly more than 20 and fewer than 60 employees,
  • 10 per cent of the regularly employed employees or more than 25 employees in establishments with at least 60 and fewer than 500 employees, and
  • at least 30 employees in establishments with regularly at least 500 employees.

Where an employer intends to make such dismissals, he must inform the works council in writing and in a timely manner of:

  • the reasons for the dismissals,
  • the number and occupational group of the employees to be dismissed,
  • the number and occupational group of the employees regularly employed,
  • the period of time over which these dismissals are to take place,
  • the intended criteria for the selection of the employees to be dismissed, and
  • the criteria for calculating any severance payments.

The employer must send the Agency for Employment a copy of the information given to the works council and include the works council´s comments regarding the dismissals.   Where the works council has not given its comments, the notification shall be effective if the employer can demonstrate that the works council was given the information at least two weeks previously and describes the status of the discussions. The notification to the Agency for Employment must also give:

  • the employer´s name,
  • the seat and nature of the establishment,
  • the reasons for the planned dismissals,
  • the number and occupational group of employees to be dismissed and of those regularly employed,
  • the period of time over which the dismissals are to take place, and
  • the intended criteria for the selection of the employees to be dismissed.

Any dismissal in the context of a mass dismissal will be invalid if it is given without prior notification to the Agency for Employment.

Although the meaning of the word “establishment” is the subject of on-going litigation in the European Court of Justice, the German Federal Labour Court has a narrow understanding of the meaning of “establishment” which requires the existence of unified leadership. It therefore remains to be seen what impact, if any, the European decision will have on the German understanding of “establishment”.

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