German Federal Labour Court: The planned change of direction of the Sixth Senate

In its decision of December 14, 2023 in case 6 AZR 157/22 (B), the Sixth Senate of the German Federal Labour Court, which is responsible for insolvency matters, announced that it would depart from existing case law pursuant to which a dismissal in the context of a collective redundancy pursuant to Section 17 (1) of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG) is held to be invalid where a notification pursuant to Section 17 (1), (3) KSchG is missing or incorrect at the time of its declaration. However, deviating from this case law would contradict the established case law of the Second Senate of Germany’s Federal Labor Court, which holds that all notifiable dismissals are invalid in the event of errors in the mass dismissal notification procedure.

As a result, the Sixth Senate in the above-mentioned proceedings asked the Second Senate whether it would adhere to its legal opinion and so stayed the proceedings until the question was answered. The legal question also concerned other proceedings 6 AZR 155/21 (B) and 6 AZR 121/22 (B), which were therefore also stayed.

Background:

  • Where an employer intends to reduce the number of staff above the thresholds set out in Section 17 (1) KSchG and dismiss a corresponding number of employees within 30 calendar days, it is obliged to comply with obligations set out in the legislation, such as informing the works council in accordance with Section 17 (2) KSchG (the consultation procedure) and notifying the competent employment agency of the intended redundancies in accordance with Section 17 (1), (3) KSchG (mass redundancy notification).
  • Implementing these requirements has repeatedly proved to be error-prone and risky for employers. This is particularly important as, according to established case law of the Federal Labor Court, errors in the consultation procedure or in the mass redundancy notification will generally result in the dismissals being held invalid. There are exceptions essentially only where the error in the consultation procedure originates from the works council or errors in the collective redundancy notification relate to information which is not mandatory (Section 17 (3) sentence 5 KSchG).
  • In May 2023, the Sixth Senate of the Federal Labor Court expressed doubts about this system of sanctions developed by case law. In general, sanctions for violations of laws within the meaning of Section 134 of the German Civil Code (Bürgerliches Gesetzbuch – BGB) must satisfy various principles. For example, a sanction shall primarily have a deterrent effect and offer effective legal protection (effet utile). In addition, it must not fall short of measures that the law provides for comparable situations (principle of equivalence). Finally, a sanction must be proportionate, i.e. in particular necessary to achieve its purpose. This is not the case if the severity of an infringement and its legal consequences are not of equal weight.
  • Based on these principles, the Sixth Senate of the Federal Labour Court had doubts as to whether the sanctions in such a dispute was in line with the system of mass redundancy protection as conveyed by the Mass Redundancy Directive (MERL) or whether it was disproportionate, (decision of May 2023 – 6 AZR 157/22 (A) as well as within the proceedings 6 AZR 482/21, 6 AZR 115/22 and 6 AZR 121/22). Those proceedings involved errors in the redundancy notification procedure (not consultation procedure) and were (partially) stayed until the decision of the European Court of Justice (ECJ) in case C-134/22.
  • On July 13, 2023, the ECJ gave its ruling, clarifying that the provision of Art. 2 (3) subpara. 2 MERL (in Germany: Section 17 (3) sentence 1 KSchG) was not intended to provide individual protection for employees affected by collective redundancies. The transmission of information to the competent authority provided for in this provision was for information and preparatory purposes only.

At that time, it remained unclear whether the ECJ’s decision could be considered to have any further significance regarding the scope of individual/collective protection or the scope of protection to be guaranteed by national law. The Sixth Senate of the Federal Labor Court answered this question for itself in December 2023 by announcing its intention to deviate from the previous position, but asked the Second Senate whether it would uphold its previous interpretation of the law. The Second Senate has “answered” quite quickly, but the content was different than expected.

European Court of Justice: Uncertainty of the Second Senate and request for preliminary ruling

On February 1, 2024 (2 AS 22/23), the Second Senate of the German Federal Labour Court took the opportunity to ask the ECJ to answer questions on the interpretation of the Collective Redundancies Directive and to suspend the inquiry proceedings of the Sixth Senate until a decision had been reached.

In its decision of February 1, 2024, the Second Senate set out the following:

  • Agreeing with the Sixth Senate, the Second Senate considers it possible that a dismissal being declared void where there has been a failure in the notification of mass dismissal pursuant to Section 134 BGB constitutes a disproportionate legal consequence. However, it could not itself determine whether or not Art. 4 MERL requires the “irrevocable” invalidity of the termination in such a case – hence its request for a preliminary ruling under Art. 267 TFEU.
  • In the opinion of the Second Senate, a distinction is required between situations where the employer completely refrained from issuing the required mass dismissal notification and those where it incorrectly issued such a notification.
  • The Second Senate assumes that the employment of an employee dismissed in the course of a mass dismissal can only be terminated once ban on dismissals pursuant to Section 18 KSchG has expired. This provision stipulates that notifiable dismissals do not become effective until one month after receipt of the notification. The ECJ must therefore decide whether an (error-free) mass dismissal notification is required to trigger the start of this dismissal ban. In addition, the Second Senate seeks clarity as to whether the ban on dismissals can be ended retroactively by a subsequent correct notification of mass dismissal.
  • The Second Senate is also of the opinion that only the competent employment agency should be able to review whether a mass dismissal notification has been correctly submitted by the employer and so determine the end of the dismissal ban that applies in the specific case. An employee should not be able to contest any such determination and it should also be considered binding by the labor courts.

Conclusion

So once again it’s a case of “wait and see” – this time for a decision from the ECJ. Hope remains, however, that the ECJ will be able to provide final and comprehensive clarity on the issue of German mass dismissals.