Premature dismissal as a stumbling block: protection against dismissal for former managing directors

LAG Hesse, judgment of 28.2.2025 - 14 SLa 578/24 (appeal admitted under file no. 2 AZR 89/25)

Managing directors are generally not subject to the Dismissal Protection Act (KSchG), meaning that it is much easier to dismiss managing directors than employees. However, there are a few pitfalls that can lead to (former) managing directors also being able to claim protection against dismissal.

The Hesse Higher Labor Court (LAG) ruled on one of these cases - premature dismissal - in its judgment of February 28, 2025 (case no. 14 SLa 578/24). The decision clarifies that an employee previously appointed as managing director is entitled to general protection against dismissal if their position on the board had already been effectively terminated at the time the dismissal was received.

Facts of the case

The plaintiff was initially employed by the defendant as a managing director. In February 2023, he was dismissed as managing director with immediate effect by shareholder resolution and subsequently no longer performed any managing director duties. After his dismissal, he was placed directly under the new managing director in the organizational chart as "Special Project Manager".

After the defendant was unable to find employment for the plaintiff in accordance with the contract following the dismissal, it terminated the employment relationship in June 2023 with notice to December 31, 2023. The plaintiff filed an action for unfair dismissal against this.

The Darmstadt Labor Court (AG) dismissed the claim. The AG was of the opinion that the plaintiff could not invoke the general protection against dismissal due to his former position as managing director pursuant to Section 14 (1) No. 1 KSchG. As long as the dismissal related to the contractual relationship that was the basis of the activity as managing director, it was irrelevant whether the position as a board member still existed at the time of the dismissal.

Decision of the LAG Hessen

The LAG Hessen overturned the decision of the AG and ruled in favor of the plaintiff.

The exception to protection against dismissal pursuant to Section 14 (1) no. 1 KSchG serves to exclude persons from protection against dismissal who exercise an employer function. Consequently, the Dismissal Protection Act only does not apply for as long as the person is actually appointed as a representative of an executive body. With the loss of the position as a representative of an executive body, the employee leaves the "employer camp" and once again enjoys full protection against dismissal. The only  relevant point in time for the assessment of the position as an executive body within the meaning of Section 14 para. 1 no. 1 KSchG is the time of receipt of the notice of termination.  

Because the plaintiff in the present case had already been dismissed as managing director at the time of the dismissal, he was again subject to the general protection against dismissal. As the defendant had not presented any social reasons for the dismissal, the dismissal was socially unjustified pursuant to Section 1 (2) KSchG and therefore invalid.

The Hesse Higher Labor Court has allowed the appeal on behalf of the defendant. The proceedings are pending before the Federal Labor Court under case no. 2 AZR 89/25.

Practical note

A forward-looking and prudent approach is essential in connection with the termination of managing director employment relationships. Formal errors in the implementation of the termination can lead to managing directors being able to claim protection against dismissal after all.

Classic stumbling blocks are dormant employment relationships or excessive "handover phases" after dismissal and during the current notice period.

The decision of the Hesse Higher Labor Court now makes it clear once again that caution is also required when it comes to the order of dismissal and termination. Employers should prepare the dismissal of managing directors carefully. The notice of termination should be issued at the same time as the dismissal. Otherwise, the former managing director will then be considered a "normal" employee - with full protection against dismissal.