Update on Mass Dismissals

No clarification in sight: detour via ECJ – Employers in Germany be aware!

Two Senates at the German Federal Labor Court/BAG are in disagreement. On February 1, 2024, the 2nd Senate referred a matter to the ECJ requesting an answer to four questions on the interpretation of the EU Directive of July 20, 1998 (Directive 98/59/EC), which forms the basis of the German regulation on collective redundancies (Sections 17 et seq. Wrongful Dismissal Act/KSchG). For employers, this means that until the ECJ has ruled on the referral (decision of 01.02.2024 – 2 AS 22/23 (A)), there is still legal uncertainty as to whether dismissals are null and void due to a lack of or inadequate notification of collective redundancies at the Employment Agency. While the 6th Senate wanted to clarify this internally (decision of 14.12.2023 – 6 AZR 157/22 (A), the case rests now with the ECJ. Companies will not be getting the simplification of the complex notification procedure they hoped for any time soon.

Apart from questions of interpretation of the 1998 EU Directive concerning the final date of termination, the core issue is the following: Can employers rectify an invalid notice of dismissal, or a termination issued without a collective redundancy notice by subsequently rendering notices and thus terminating employment relationships through previously declared dismissals?

To be clear, the necessary consultation procedure with the Works Council in the context of planned mass redundancies is not up for debate: the 6th Senate has expressly emphasized that errors in the consultation procedure will result in the nullity of the dismissal. This is undisputed, as it is the task of the Works Council to prevent or limit mass redundancies.

It is not getting any easier or clearer for employers in Germany. If many of the peculiarities of employment law are already difficult to navigate – especially for foreign companies – extreme caution and care must be exercised in connection with major restructurings and even more so in the event of a significant reduction in personnel. Companies are becoming increasingly disgruntled.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with Rimon, P.C. or its affiliates. Prior results referred to in these materials do not guarantee or suggest a similar result in other matters.

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