Effective notification of mass dismissals requires indication of the social selection criteria

If, as part of the mass dismissal notification procedure under Section 17 KSchG (Protection Against Unfair Dismissal Act), an employer fails to inform the Employment Office sufficiently concerning the envisaged criteria for the selection of the employees to be dismissed, the notification will be considered incorrect and will result in ineffectiveness of any termination based thereon.

The claimant was employed as General Warehouse Manager with a company against which insolvency proceedings were opened. Following a long search, the insolvency administrator succeeded in finding a buyer for the insolvent company. However, the latter declared himself unwilling to take over all employees. Rather, a significant share of the insolvent company’s personnel were to be dismissed on the basis of a so-called buyer’s concept.

For the purpose of implementing the terminations for operational reasons as per the buyer’s concept, the insolvency administrator concluded a reconciliation of interests with the responsible Works Council involving a list of names stating the employees to be terminated (see Section 125 InsO (German Insolvency Code). Under the reconciliation of interests, among other things the hierarchy level of General Warehouse Manager and with it the claimant’s job was to be discontinued. Accordingly, the claimant was on the list of names. When implementing the social selection, the insolvency administrator had, in accordance with Section 125 Subsection 2 No. 2 InsO, carried out the social selection among comparable employees in terms of the length of service in the company, age and existing maintenance obligations. When doing so, he had also formed age groups. The dismissals planned overall were undisputedly subject to the requirement of notification under Sections 17 et seq. KSchG. The reconciliation of interests, including the list of names, was enclosed with the notification of mass dismissals made by the insolvency administrator. Nevertheless, the documents submitted to the Employment Office contained no information whatsoever concerning the social selection carried out when drawing up the list of names and, in particular, no reference to the formation of age groups. The claimant challenged his termination through legal action for unfair dismissal and, among other things, invoked the errors in the notification of mass dismissals.

According to the LAG (State Labour Court) Düsseldorf, the notification of mass dismissals indeed turned out to be incorrect in this case, as the indication of the envisaged criteria for the selection of the employees to be dismissed as per Section 17 Subsection 3 Sentence 4 KSchG is part of the so-called compulsory information for the notification and not part of the so-called desired information considered as being dispensable. The fact that the Works Council had undisputedly been extensively informed of the social selection within the scope of the consultation procedure under Section 17 Subsection 2 KSchG, was considered by the LAG to be insignificant. It was not the consultation procedure under Section 17 Subsection 2 KSchG that was under consideration but solely the incorrect informing of the Employment Office as per Section 17 Subsection 3 Sentence 4 KSchG.

In several recent decisions, the BAG (Federal Labour Court) has consolidated its opinion that an incorrect notification of mass dismissals results in the legal ineffectiveness of termination by the employer, served on the basis of the notification (see most recently BAG, judgment dated 21.3.2013, 2 AZR 60/12, NZA 2013, 966); as a result, the LAG agreed with the claimant and ruled that the termination was ineffective.

In the context of this decision, it should again be mentioned at this point that the BAG has recently also made it clear that the correctness of the entire procedure of notification of mass dismissals as per Section 17 KSchG (consultation process with the Works Council and issuing of the actual notification) must also be checked in full by the labour courts in the action for unfair dismissal, even if the Employment Office has not objected to the notification received but confirmed it as being correct.

Conclusion

The decision is not yet final and absolute. Nevertheless, it is based to a major extent on the most recent decisions of the BAG concerning matters of the notification of mass dismissals. In view of the new and strict line adopted by case law, utmost care is now called for when carrying out mass dismissals, not only in terms of the participation rights of the Works Council under Sections 111 et seq. BetrVG (Works Constitution Act) (reconciliation of interests, social plan) and Section 102 BetrVG (hearing before individual terminations), but also in terms of the entire procedure under Section 17 KSchG. Supposedly minor formal errors in the notification procedure can call the effectiveness of all terminations into question and thus have disastrous consequences.