On 26 February 2016 (docket number: 1 Sa 358/15) the Higher Labour Court (Landesarbeitsgericht, LAG) Rhineland-Palatinate decided that an employer may terminate the employment relationship with an employee who breached company compliance rules provided the employee was served with a warning for a similar violation before.

In the present case the court found that the employee violated a company compliance regulation by not reporting attempted bribery by a third party to his employer. However, the court ruled that the termination notice for cause with immediate effect served by the employer was not valid and effective for formal reasons. The employer did not observe the statutory two week exclusionary period during which the dismissal must be served after the employer obtained positive knowledge of the underlying facts. The court also decided that that the ordinary termination with notice which the employer also served as a precautionary measure was not valid and effective because the employee had not been served with a warning for a similar violation before.

In principle, severe breaches of a compliance regulations can justify an immediate dismissal for cause, particularly if the violation consists of a criminal offence like bribery. However, the employer must serve the termination notice for cause within a strict statutory two week exclusionary period after he obtained knowledge of the underlying facts. During this strict period also the works council must have been properly heard on the intended termination. If employers consider a conduct based termination with notice they usually must have served the employee with a warning for a similar violation before in order for the termination with notice to be valid and effective. The prior warning requirement may only be dispensed with in exceptional circumstances if the employee’s violation is so severe that he could not reasonably expect the employer to accept his conduct and if the employee thereby destroyed the employment trust relationship. It should be noted that general remarks in compliance policies that violations may have disciplinary consequences which may result in a termination of the employment relationship do not suffice to eliminate the prior warning requirement. Consequently, employers are well advised to diligently and with the appropriate timing prepare employment terminations based on compliance violations.