Update Employment Law October 2022
Admissibility of the legal process in the labor courts – existence of an employment relationship after dismissal of a managing director – claims for continued payment of remuneration
If a former managing director asserts a claim for continued payment of remuneration because of illness following dismissal in the event of a disputed (re-)establishment of an employment relationship and there is no contractual provision for such a claim, so that it can be based solely on Section 3 (1) EFZG, this part of the action constitutes a so-called sic-non case in which legal recourse to the labor courts is justified solely on the basis of the plaintiff's double-relevant legal opinion that he was an employee during the disputed period.
Facts of the case
On the occasion of an immediate appeal against a decision of the Wuppertal Labor Court, the Düsseldorf Regional Labor Court had to decide whether, the admissibility in the labor courts is possible in the case of claims for continued payment of remuneration by a shareholder who has been dismissed.
The plaintiff initially worked for the defendant as a sales manager on the basis of an employment contract. During this employment contract, the parties agreed that the plaintiff should henceforth work as a managing director at the defendant. After the plaintiff had worked for the defendant as managing director for approximately one year, the plaintiff received a letter from the defendant in which the defendant informed him that the plaintiff had to return to work as sales manager with immediate effect, which the plaintiff subsequently did. At the same time, the defendant terminated the managing director's employment contract, even not with immediate effect but with effect from the end of the year. The plaintiff then returned to work for the defendant as a sales manager, while at the same time the managing director employment contract continued to run due to the lack of immediate termination.
The legal dispute then arose when the plaintiff was subsequently incapacitated for work and claimed continued payment of remuneration from the defendant for this period. Because the defendant did not pay, the plaintiff brought an action before the Wuppertal Labor Court. The plaintiff also asserted claims for damages due to the withholding of a company car for another period and claims for vacation compensation in the Wuppertal Labor Court.
The plaintiff took the view that the labor court had jurisdiction because he had already been recalled as managing director and rehired as sales manager before the onset of the incapacity to work due to illness, so that the claim to continued payment of remuneration arose from the employment relationship as sales manager and not from the period as managing director. This was a so-called sic-non case, in which the mere assertion of being an employee justified the jurisdiction of the labor courts.
The defendant, on the other hand, took the opposite view that admissibility in the Wuppertal Labor Court was already not open and that the plaintiff should rather have brought an action before the Wuppertal Regional Court. The defendant was of the opinion that the employment relationship as sales manager no longer existed because the plaintiff worked for the defendant as a managing director and thus not within the scope of an employment relationship. The employment relationship as sales manager had also not been re-established.
The Wuppertal Labor Court then ruled that there is no admissibility in the Wuppertal Labor Court and referred the case to the Wuppertal Regional Court. The plaintiff filed an immediate appeal against this with the Düsseldorf Regional Labor Court.
The Düsseldorf Regional Labor Court amended the referral order of the Wuppertal Labor Court and declared that recourse to the labor courts was permissible.
In the opinion of the Düsseldorf Regional Labor Court, the Wuppertal Labor Court had jurisdiction pursuant to §§ 2 (1) no. 3 a), 5 (1) sentence 1 ArbGG because there was a civil-law dispute between the plaintiff as employee and the defendant as employer arising from an employment relationship. The plaintiff returned to work as a sales manager after receiving the defendant's letter in his then function as managing director.
In the opinion of the Düsseldorf Higher Labor Court, a so-called sic-non case also existed with regard to the claim for continued payment of remuneration. A so-called sic-non case means if the action can only be justified if the legal relationship at issue is to be classified as an employment relationship.
In addition to the so-called sic-non case, there is also the so-called "aut-aut case" and the "et-et case".
An "aut-aut case" means if the asserted claim can be based either on a claim under employment law or on a general claim under civil law, although both bases of claim cannot exist at the same time. In this case, the court must already examine within the scope of admissibility whether the basis for the claim under labor law exists and thus whether recourse to the labor courts is open. An "et-et case" means if the asserted claim can be based on both a labor-law and a civil-law basis for the claim. This is the case, for example, in the event of termination without notice pursuant to Section 626 of the German Civil Code (Bürgerliches Gesetzbuch - BGB), which can be issued either under a service or employment contract. Here, too, the court must clarify the relevant basis for the claim as part of the admissibility review.
In a sic-non case such as the one at hand, it is sufficient, in the opinion of the Düsseldorf Higher Labor Court, for the labor courts to assume jurisdiction if the plaintiff alleges a so-called "doubly relevant fact". In this case, the plaintiff's opinion that an employment relationship existed and that he was entitled to continued payment of remuneration from this employment relationship was doubly relevant. The double relevance results from the fact that this assertion is relevant for both the admissibility and the merits. It was relevant for admissibility because the existence of an employment relationship is a prerequisite for admissibility in a lawsuit before the labor courts. It was relevant to the merits because the plaintiff could only be entitled to continued payment of remuneration as an employee. In the opinion of the Düsseldorf Higher Labor Court, these requirements were met with regard to the claim for continued payment of wages.
With regard to the claims asserted by the plaintiff for damages due to the withholding of a company car and the claim for vacation compensation, the Düsseldorf Labor Court also considered the labor courts to have jurisdiction in these cases.
In the opinion of the Düsseldorf Higher Labor Court, these claims were not a so-called sic-non case because the claim for damages could not arise exclusively from an employment relationship but also from the obligation under the managing director service agreement pursuant to Section 280 (1) of the German Civil Code (Bürgerliches Gesetzbuch - BGB) and the claim for vacation compensation pursuant to Section 7 (4) of the German Vacation Act (Bundesurlaubsgesetz - BUrlG) could also result from a managing director service agreement on the basis of an interpretation in line with the Directive.
However, in the opinion of the Düsseldorf Higher Labor Court, the admissibility in the labor courts was given because the claim for damages and the claim for compensation for vacation could also result from the newly established employment relationship as sales manager. In the opinion of the Düsseldorf Higher Labor Court, this employment relationship was revived by the plaintiff's dismissal as a shareholder, so that it could form the basis for the claims asserted by the plaintiff.
The decision of the Düsseldorf Higher Labor Court shows that the question of admissible legal action can also be of fundamental importance for the parties. This applies in particular to the question of whether an action should be brought in the labor courts or before the local or regional court.
Differences between the various courts result, for example, from the fact that, unlike in the case of actions before the district courts, there is no requirement to be represented by a lawyer in the first instance in the case of actions in the labor courts. Also, unlike in proceedings before the district or regional courts, the parties in proceedings in the labor courts generally bear their own attorney's fees if they engage a lawyer. The winning party cannot therefore claim its attorney's fees from the losing party in proceedings in the labor courts in the first instance.