When it comes to internal investigations, multinational companies need to reconcile the sometimes conflicting legal requirements of various jurisdictions. Under German law, conflicts typically arise where a foreign law governing, for example, anti-corruption (e.g., the US Foreign Corrupt Practices Act) requires taking a particular action, such as terminating an employee who has been found guilty of compliance-related misconduct.
Multinational companies usually have a great interest in meeting the demands of relevant foreign authorities and taking action to avoid hefty fines and other sanctions. However, just because a foreign law may require an employer to take disciplinary action against an employee may not justify disciplinary action under German law. This is because of a different definition of what constitutes a material breach of duty, and because of the fairly strict procedural requirements for disciplining employees under German law. Especially where companies want to avoid long notice periods and terminate employment for cause, actions need to be planned carefully.
Under German law, a dismissal for cause is only valid if the employee has severely violated his or her working duties or if the very suspicion of severe misconduct has destroyed the relationship of trust between the company and the employee. In most cases of compliance-related discipline, it is advisable to use both the proven misconduct and the mere suspicion as the basis for termination of employment.
Where the company wants to dismiss an employee based on suspicion, it is required to duly investigate the case and allow the employee to disprove the suspicion. To do so, the employee needs to know what is at stake. It is therefore not sufficient to conduct a normal interview with the employee during the course of an investigation. Rather, the company needs to raise all of its reasons for suspicion and state explicitly that it is considering disciplinary action. However, if the company thinks that being too open about a disciplinary action or about the overall context of an investigation at an early stage may harm the success of such investigation, it may want to consider issuing the dismissal based only on proven misconduct.
Prior warning letter required?
Additionally, a dismissal for cause is seen as the last resort when it comes to taking disciplinary action. Accordingly, labor courts have held that such a dismissal is only justified if it is deemed unreasonable for the company to issue a warning letter instead of a dismissal. A warning letter may be required if, for example, awareness of compliance issues has not been raised by the company in the past or if this was a one-time misconduct of an employee who had previously been employed for many years without any wrongdoing.
One of the most common reasons dismissals for cause have been found invalid is bad timing. The employer only has two weeks after having obtained full knowledge about the facts of a case to issue the dismissal notice for cause. As it is considered necessary to consult with an employee prior to his or her dismissal based on suspicion, the two-week period typically only commences after the consultation with the employee has duly been performed. However, where companies take too much time to investigate the specific allegations with regard to the employee, a labor court may determine that the two-week period has commenced earlier. As most investigations do not focus on one employee specifically but are usually conducted in a wider context, it is often difficult to adhere to the two-week deadline without disclosing relevant information for the entire investigation too early.
The observance of the two-week period becomes increasingly difficult where—apart from the affected employee—other institutions need to be involved in the process. For example, companies with a works council need to inform the works council three days prior to serving the employee with an intended dismissal for cause. The information provided to the works council needs to state all reasons that shall be used to justify a dismissal in the event of future labor court proceedings. The three-day period to inform the works council needs to expire prior to the two-week period for serving the dismissal (i.e., on the 13th day at the latest!), unless the works council has issued a final statement before that. Moreover, certain groups of employees, such as disabled people or pregnant women, enjoy special protection against dismissal that requires prior consent by the respective public authority. Though the approval process can take several weeks, the company needs to apply for the consent of the public authority within the two-week period.
Essentially, all of the aforementioned steps require careful planning by those responsible within a company's HR or compliance department. As the requirement to inform third parties involves some paperwork (particularly in the case of the works council or public authorities), it is highly recommended to consult with a legal advisor as early as possible in order to set up a realistic timeline for each step.