Update Employment Law October 2023
Calculation of the threshold value for the size of the enterprise in the case of collective redundancies
BAG, decision of 11 May 2023 - 6 AZR 157/22 (A)
When employers implement restructuring measures, this often also involves a reduction in staff. When implementing such measures, employers must in particular also keep in mind the duty of notification under section 17 of the Unfair Dismissals Act (KSchG). This provision requires a duty of notification above a certain company size before dismissals take place. If, despite the size of the enterprise, the Employment Agency was not notified of a mass dismissal, this has so far led to the invalidity of the dismissals according to the established case law of the Federal Labour Court.
In this context, however, there are now indications of a change in case law. The Federal Labour Court recently dealt with the question of whether this system of sanctions, which leads to the invalidity of a dismissal, is in line with the system of mass dismissal protection.
The plaintiff had worked for the employer since 1994. The employer employed a total of 25 employees until September 2020. A works council had not been formed. Preliminary insolvency administration was ordered over the employer's assets. The defendant was appointed provisional insolvency administrator and terminated all existing employment relationships in October 2022. At that time, a total of 22 employees were still employed.
The defendant did not carry out a mass dismissal notification pursuant to section 17(1) of the KSchG. The plaintiff brought an action for protection against dismissal against the notice of termination given to him. The plaintiff was successful with his action at first instance. The Hamburg Labour Court upheld the action on the grounds that the defendant had not sufficiently explained the operational reasons. The defendant's appeal against this was then rejected by the Hamburg Higher Labour Court (LAG Hamburg) on the grounds that the mass dismissal notification pursuant to section 17 (1) of the German Unfair Dismissals Act (KSchG) had not been made. The defendant appealed against the decision of the Hamburg Higher Labour Court to the Federal Labour Court.
The Federal Labour Court stayed the proceedings by analogous application of § 148 ZPO. Instead, a decision of the ECJ on a preliminary ruling (C 134/22) was to be awaited. The Federal Labour Court argued that the dismissal at issue violated section 17 (1) sentence 1 no. 1 of the Protection Against Dismissal Act (KSchG). According to this section, the employer is obliged to notify the Employment Agency before dismissing more than 5 employees within 30 calendar days in companies with usually more than 20 and less than 60 employees. According to the Federal Labour Court's findings, both thresholds were exceeded.
However, it had to be clarified what the purpose of a mass dismissal was. According to the Federal Labour Court, it was unclear under the European Mass Dismissals Directive whether a failure to give notice of a mass dismissal should lead to the invalidity of a dismissal. In this context, the Federal Labour Court now states that the sanctioning that has been applied so far in the case of a missing mass dismissal notification may not be in line with the systematics of the Mass Dismissal Directive. Rather, the conclusion that a missing mass dismissal notification leads to the invalidity of a dismissal could be disproportionate.
In any case, the ECJ held in its decision on the case number (C-134-22) that the employer's obligation to provide the Employment Agency with a copy of the consultation letter is not a protective provision in favour of employees. Among other reasons, the ECJ stated that the employment agency could only obtain an overview with the information from the consultation letter in order to assess the adverse consequences of a mass dismissal. This, however, did not serve the individual protection of the affected employees.
It remains to be seen whether and how the Federal Labour Court will adapt its current case law on mass dismissal notices. It is to be hoped that the Federal Labour Court will refrain from the sanction sequence applied so far.
It should be noted that the ECJ's decision does not constitute a fundamental ruling that errors in the consultation and notification procedure can no longer lead to the invalidity of dismissals.
From the employer's point of view, therefore, it should currently continue to be carefully examined whether the threshold values of Section 17 KSchG have been reached. If this is the case, a corresponding mass dismissal notification should be made to the Employment Agency. The past has shown that there is a considerable risk for employers if they ignore this point. This can lead to fatal consequences, especially in the case of a large number of dismissals, if the dismissals are invalid due to the lack of a mass dismissal notification.