Effectiveness of a termination agreement - requirement of fair procedure in negotiations during incapacity for work
Update Employment Law November 2021
Higher Labour Court Hesse judgement of 11 June 2021 – file no 10 Sa 1221/20
The plaintiff worked for the defendant for several years as a project engineer. After an admonition and two warnings were issued to the plaintiff, the parties entered into negotiations on the conclusion of a termination agreement. A draft termination agreement was sent to the plaintiff and he was given a reflection period of a few days. Within this reflection period, the plaintiff sought legal assistance. The plaintiff agreed to the draft within the time limit and the agreement was signed by both parties in mid-January 2018. In court, the plaintiff claimed that the termination agreement was invalid. At the relevant time of negotiation, he had been incapacitated due to mental health problems and had been at least partially incapacitated as a result of medication. The plaintiff also invoked the requirement of fair negotiation.
Decision of the Higher Labour Court of Hesse
As a result, the Higher Labor Court did not follow the plaintiff's argumentation. In particular, in the opinion of the Higher Labor Court of Hesse, there was no violation of the requirement of fair negotiation.
- Federal Labour Court, judgement of 7 February 2019 – file no 6 AZR 75/18: Until the Federal Labour Court´s decision of 7 February 2019, the requirement of fair negotiation was addressed by the Federal Labour Court in isolated cases, but there was no case in the Federal Labour Court's case law in which the requirement of fair negotiation was relevant to the decision or was even seriously considered as a standard of review.
The Federal Labour Court was faced with the following "extreme case": The employer visited the employee at home and presented her with the termination agreement. Thereafter, the employment relationship was terminated on the same day without payment of a severance payment. The employee claimed that she had been ill in bed that day when the employer rang the doorbell. Her son had opened the door and woken her up. She had signed the contract under the influence of painkillers.
In its decision of 7 February 2019, the Federal Labour Court stated that, as a secondary obligation arising from the employment relationship (s 241 para 2 Federal Code Act), a minimum degree of fairness must be observed in the run-up to the conclusion of a termination agreement. The Federal Labour Court has elaborated groups of cases which, although not conclusive, are nevertheless intended to be formative as to when a violation of the requirement of fair negotiation is above all to be considered. In the opinion of the Federal Labour Court, a negotiation situation is to be assessed as unfair if a psychological pressure situation is created or exploited which makes a free and considered decision by the contractual partner considerably more difficult or even impossible. This can be done by creating particularly unpleasant framework conditions which are considerably distracting or even arouse the instinct to flee. It is also conceivable to exploit an objectively recognisable physical or psychological weakness or insufficient language skills. The use of an element of surprise can also impair the contractual partner's freedom of decision (taking him by surprise).
However, in the opinion of the Federal Labour Court, a legally disapprovable restriction of the freedom of decision does not exist on its own because the employee is neither granted a period of reflection nor a right of rescission or revocation. An announcement of the submission of a termination agreement is also not required.
- The case at hand: The Higher Labour Court of Hesse emphasized that the difference to the landmark decision of the Federal Labour Court lay in the fact that the employer did not unexpectedly appear at the employee's home in order to conduct negotiations on the conclusion of a termination agreement. Therefore, there was no particular element of surprise. The negotiations on the conclusion of a termination agreement went on for several weeks from approximately November 2017 to January 2018. It was evident from the submitted email correspondence that the plaintiff was able to influence the content of the negotiations at any time and did so. The plaintiff even sought legal assistance. For an extension of time, the plaintiff should have pointed out his alleged inability to work.
In the legal literature, the decision of the Federal Labour Court of 7 February 2019 is criticised as a "panacea in the fight against unwelcome termination agreements". The clear legal interpretation of s 123 para 1, s 138 para 1 Federal Code Act, according to which contracts concluded under pressure are only voidable or ineffective if this pressure constitutes an unlawful threat or is so serious that it offends common decency, can be undermined under certain circumstances by the requirement of fair negotiation. The legal literature sees a particular danger in courts "lightly dismissing" termination agreements by reference to unfair bargaining because courts can avoid the vexing questions of whether a threat was made and whether it was unlawful.
The ruling of the Higher Labour Court of Heese at least partially restricts the far-reaching scope of the requirement of fair negotiation. On the basis of this case law, employers are advised to conduct discussions on termination agreements within the company and to ensure that the employee can also influence the contract negotiations. If the employee seeks legal advice from a lawyer, the risk of a breach of the requirement to negotiate unfairly is also minimised.