The local labor courts of Munich and Berlin very recently questioned the firm legal regime on reference letters which was established by the Federal Labor Court over years. If the Federal Labor Court as highest employment court in Germany would follow their arguments and change its jurisdiction, it would be a fundamental paradigm shift:

Reference Letters in Germany – Overview

In German speaking countries, reference letters are of utmost importance for employees when applying for a new job. Under German law, an employee even has an enforceable claim for a reference letter against his employer upon termination of employment, and the law imposes on employers to draft such letter correctly, unambiguously and benevolently for the future career of the employee.

Typical content of a reference letter is the term of employment, the employee’s function, tasks and responsibilities, his or hers abilities, knowledge, creativity, intelligence and qualification, social attitude and the reason for employee’s termination. The reference letter’s language is highly sophisticated. The employer must provide a mark/rating of the employee’s performance and the employer’s satisfaction. In that respect, formal language describing the mark/rating given to the employee was established over several years. The best rating is “excellent (…always to our utmost satisfaction...)”, followed by the second best rating “good (always to our full satisfaction...)” and the third best rating “satisfactory (...to our full satisfaction...). There is also language existing for the ratings “adequate” and “poor.”

Finally, although such is not explicitly provided for in German law, it is expected that a reference letter closes with a so-called “regret and thanks formula” according to which the employer regrets the employee leaving employment, thanks the employee for his or her services and wishes him or her all the best for his or her future career.

Current Practice–and the Jurisdiction of the Federal Labor Court

If an employee leaves employment, the reference letter and, in particular, its content is rather seldom an issue disputed between the parties. Mostly, employers rate the employee’s performance as “good” or even “very good,” and also insert regret and thanks language into the reference. This is due to the fact that the overall majority of reference letters rate employees accordingly. Companies searching new hires, in turn, generally invite only candidates for an interview having good or very good reference letters with regret and thank language in their job application portfolio. In other words: Candidates rated only “satisfactory,” or having a reference letter in which the regret and thanks of the employer is missing, have in fact only limited chances in the job market.

In cases of disputes regarding the rating of the employee in a reference letter, or if the employer refuses to express his regret and thanks in the reference, the reality is different: The firm jurisdiction of the Federal Labor Court provides for two dogmata:

  1. The Federal Labor Court states that German law provides that the “regular” rating of an employee in a reference letter should be grade three—satisfactory. If an employee believes he or she deserves a better rating, he or she has the full burden of proof to “good” or “excellent” and must provide proof and arguments justifying the better rating above “satisfactory” (e.g. judgment dated October 14, 2013, case No 9 AZR 12/03). Such argumentation is in fact hardly possible for an employee, as the rating of an employee has a subjective element.
  2. The highest German labor court is firm that German law does not give an employee a right to receive a reference letter closing with the employer’s regret that the employee is leaving employment, and, further, that the employer is not obliged to wish the employee all the best for his or her future (e.g. judgment dated December 11, 2012, case No 9 AZR 227/11).

Against this background, employees are in a weak position regarding reference letters. In the case of disputes, they run the risk of ending up with a reference letter potentially detrimental for their future career.

The Decisions of the Local Labor Courts in Munich and Berlin

The firm jurisdiction of the Federal Labor Court was very recently questioned by two labor courts:

According to the Berlin labor court, an employee has a right to receive a reference letter providing for regret and thanks from his of her employer if the employer has rated the employee’s performance as “good” or “excellent” (judgment dated March 22, 2012, case No 23 Ca 8191/11). According to the court, “good” or “excellent” reference letters missing such final words are in fact without any value or benefit to the employee and detrimental for his or her future career, as they are common in and expected by the market.

According to the Munich labor court, an employee rated only with grade three—satisfactory—has not the burden of proof if he or she wants to achieve a better rating (judgment dated October 26, 2012, case No 28 Ca 18230/11). Rather, the employee must show proof and convince the court that the employee was not to be rated with “good” or even “excellent.” The court refers to a representative study of the University of Erlangen-Nuremberg according to which approximately 87 percent of German reference letters provide for the grade “good” or “excellent.” Given these factual circumstances, the court states that it cannot be reasonable expected from an employee to bear the burden of proof that he or she was unlawfully allocated to the group of the 13 percent of employees being rated only “satisfactory” or worse.

Comment

Both of the judgments of the labor courts of Munich and Berlin are subject to appeal to the competent Regional Labor Courts and, if these will follow the first instance, to further appeal to the Federal Labor Court. Therefore, the two judgments’ arguments could be re-considered by the higher courts. It remains to be seen whether they would then uphold the current firm jurisdiction based on written

law—or whether the jurisdiction will change according to the Munich and Berlin judgments which are both based on the facts and current practice in Germany.

If the current firm jurisdiction on reference letters would change, this would have an impact on the employers’ position in settlement negotiations: Currently, employers knowing their legal position on the content of reference letters are well advised to use them as a tool in negotiations for the mutual termination of employment. An offer of a “good” or “excellent” reference letter with a regret and thanks formula often leads to lower severance requests of the employee. If the jurisdiction changes, such offer would be less convincing, as the employees would then have a factual right to an at least “good” rating, and to proper regret and thanks language in the reference letter.