In reorganisation scenarios, German employers must comply with a number of statutory regulations. If a reorganisation involves redundancies and if certain thresholds are exceeded in this respect, special attention must be paid to the regulations aimed at preventing collective redundancies. Any notice of dismissal given in violation of the regulations to prevent collective redundancies contained in Sections 17 and 18 of the Act on Protection Against Unfair Dismissal is invalid.

Consultation procedure

If a business establishment has a works council, the employer must carry out a consultation procedure before implementing collective redundancies (Section 17(2) of the act). This provision transposes EU law into national law. The works council is to be given the opportunity to make constructive suggestions with the aim of avoiding or limiting collective redundancies. In addition, the employer must notify the local employment agency of collective redundancies.

What happens if parties cannot agree?

In practice, frequently no agreement concerning the planned reorganisation can be reached with the works council during the consultation procedure. This leads to great uncertainty on the employer's part and raises the question of whether the measure can be implemented despite failed negotiations, because the employer can submit the necessary notification of collective redundancies to the local employment agency and subsequently give the valid notices of dismissal only after the consultation procedure has been properly carried out.

No obligation to reach agreement

On September 22 2016 the Federal Labour Court clarified (2 AZR 276/16) that an employer may consider the consultation procedure to be completed even if the works council does not make it apparent that it is no longer willing to negotiate on measures to avoid or limit collective redundancies. The court referred to earlier rulings, according to which an employer is not obliged to reach an agreement with the works council.

Serious willingness to reach agreement

The employer must enter into the negotiations with serious willingness to reach an agreement and include and consider any deviating suggestions made by the works council. It is irrelevant whether the employer imposes certain conditions for the limitation or prevention of redundancies.

No basis for continued constructive negotiations

According to the decision, the consultation procedure is deemed to be completed if, as a result of the works council's conduct, the employer can assume that there is no basis for continued constructive negotiations. The parties are not obliged to negotiate for a minimum period. According to the court, the employer is considered to have the authority to assess when the works council's entitlement to consultation can be deemed fulfilled.

Supply of all appropriate details

However, this requires that the works council has previously been supplied with all of the appropriate details regarding the circumstances leading to the redundancies. Only once this has been done will the works council offer constructive suggestions. This includes, in particular, informing the works council in writing, as required by statute, about:

  • the reasons for the planned redundancies;
  • the number and type of professional groups of employees to be dismissed;
  • the employees who are usually employed;
  • the period during which the notices of dismissal are to be given;
  • the envisaged criteria for the selection of the employees to be dismissed; and
  • the envisaged criteria for the calculation of any severance payments.

Employer's burden of demonstration and proof

Special attention should be given in this context to sufficient documentation during the course of negotiations. In this respect, the employer bears the burden of demonstration and proof that a serious attempt was made to consult with the works council.

Comment

The decision demonstrates once again how important it is to prepare carefully for negotiations with employee representatives. This can ensure that a planned reorganisation can be implemented even if employee representatives are unwilling to reach an agreement.

In addition to the consultation procedure to prevent collective redundancies, the regulations contained in the Works Constitution Act must also be heeded when planning a reorganisation. These regulations provide for a duty to attempt to conclude an agreement on a reconciliation of interests and to establish a social compensation plan. The consultations carried out in the attempt to conclude an agreement on a reconciliation of interests can simultaneously serve to fulfil the employee's duty to consult the works council in this respect, but they must be clearly recognisable as such to the works council.

For further information on this topic please contact Björn Otto or Patricia Jares at CMS Hasche Sigle by telephone (+49 221 7716 195) or email (bjoern.otto@cms-hs.com or patricia.jares@cms-hs.com). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.

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