In the event of notifiable mass redundancies, the employer is obligated to consult the works council. The consultation procedure is a requirement that has to be satisfied so the termination notices issued in the context of mass redundancies become effective; it thus is of substantial practical significance. Consulting the works council includes notifying, informing and advising the works council and must be distinguished from the notification of collective redundancies subsequently submitted to the Labor Agency. Both procedures exist independently of one another.
I. The Consultation Procedure
In the event notifiable mass redundancies, the employer is obligated to appropriately inform the works council in a timely manner, to notify the works council in writing and to discuss the possibilities of how to avoid or limit redundancies and mitigate their consequences. The aim and purpose of this is that, during the consultation procedure, the works council can offer suggestions to avoid or limit collective redundancies or mitigate their consequences.
1. Notification of the Works Council
Notification must take place in good time, meaning as soon as a strategic or economic decision has been taken based on which the employer has decided to plan collective redundancies. It is not required that the employer already provides all necessary information at this point. It is sufficient if the information is completed in the course of the procedure (European Court of Justice [ECJ] ruling of 10 September 2009 – case no. C-44/08 – Akavan Erityisalojen Keskusliitto).
Under German law, a distinction is made between the provision of information and notification. The provision of information allows the works council, upon request, to obtain information regarding the upcoming collective redundancies that goes beyond the information to be provided on the basis of the notification obligation. If a reconciliation of interests agreement must or is to be negotiated, the works council has to be informed of the planned collective redundancies before the reconciliation of interests agreement is concluded.
It is mandatory to provide the works council with the following documents in writing:
● Reasons for the planned redundancies
● Number and vocational groups of employees to be made redundant and of employees normally employed
● Period over which the redundancies are to be effected
● Criteria proposed for the selection of employees to be made redundant
● Method for calculating any redundancy payments
Practical advice: It generally suffices to meet the text form requirements, i.e. the documents can be sent by fax or e-mail (Federal Labor Court ruling of 22 September 2016 – 2 AZR 276/16). Nevertheless, the works council should receive the necessary information (also) in statutory written form, i.e. the original documents should be signed by the company representatives. Moreover, handing over the documents should be documented. This will help the employer in the context of the notification to the labor authorities to convincingly demonstrate that it informed the works council at least two weeks before submitting the notification if the works council does not make a final statement.
After the works council has received the documents, it will have two weeks to make a statement. If a reconciliation of interests agreement is negotiated, the parties may decide that the agreement provides for a final statement to be made by the works council. The information made available to the works council in writing must simultaneously be sent to the Labor Agency in writing. This, however, does not replace the actual notification of collective redundancies, but is still a part of the consultation procedure that must be carried out.
Practical advice: The highest courts have recently ruled that in the event of collective redundancies, meaning already with regard to the consultation procedure and of course also later with regard to the notification of collective redundancies, those employees enjoying special protection against dismissal and who cannot be dismissed until official consent has been obtained are also to be included if the termination of their employment forms part of the company’s concept to implement the collective redundancies and/or if an application for the permissibility of the declaration of termination has been filed with the competent regional authority within the 30-day period. In particular, this concerns the termination of employment of individuals with severely disabled or equivalent status, employees on nursing care leave or employees on maternity and/or parental leave. The definition of the term “redundancy” was extended by a judgment of the Federal Constitutional Court (Federal Constitutional Court ruling of 8 June 2016 – 1 BvR 3634/13) that decided that an employee on paternity leave would be discriminated against based on her gender if she was not granted protection in the event of collective redundancies, because waiting for the official consent to the termination of her employment had led to the fact that the termination notice was not issued before the expiration of the 30-day period. In such cases, the 30-day period is considered to have been complied with if the request for the competent authority’s consent to the termination of employment was filed within this period.
2. Consultation with the Works Council
Furthermore, the employer and the works council must discuss how redundancies can be avoided and their consequences mitigated.
This can involve social accompanying measures, such as severance payments, retraining or the transfer of employees to an interim employment company, but also the provision of other employment opportunities, reduction of working hours or salary cuts. Consultation is more than a hearing and must be expressly offered by the employer. The purpose of the consultation obligation can be achieved only if the parties in the business establishment conduct the negotiations based on a serious willingness to come to an agreement. Consultations can already commence before the works council has been notified in full; it is, however, important that the works council (still) has the possibility to influence matters until it has received all of the information. Consequently, it is not possible to complete consultations before the works council has been notified in full. In the event the employer provides all of the necessary information in the course of the consultation, it must be deemed concluded if the consultation was at least conducted based on the information that has been provided in full.
Practical advice: The consultation obligation is usually deemed satisfied if the employer concludes a reconciliation of interests agreement in the event of a substantial alteration to the establishment. In this case, the works council must, however, be able to clearly recognize that the consultations also serve to satisfy the employer’s consultation obligation resulting from the Act on Protection Against Unfair Dismissal. The employer is thus well advised to also expressly initiate consultation in terms of the Act on Protection Against Unfair Dismissal at the same time the negotiations concerning a reconciliation of interests agreement are commenced.
3. Completion of the Consultation Procedure
The consultation procedure must be completed before the decision to make employees redundant is made and before the notification of collective redundancies is submitted. The notification of collective redundancies must include a statement by the works council and cannot be submitted until the consultation procedure is completed. Consultation is deemed completed if
● the works council has presented a final statement and its content is sufficient to meet the requirements,
● a reconciliation of interests agreement including a list of names is concluded,
● a reconciliation of interests agreement not including a list of names is concluded that includes a sufficient and final statement by the works council.
In the event the works council does not make a statement or its statement is insufficient, the employer may nonetheless submit the notification of collective redundancies, if the employer convincingly demonstrates that it notified the works council at least two weeks before submitting the notification and, at the same time, outlines the status of the consultation. The employer can thus avoid that the planned redundancies are significantly delay. This may be considered, for example, if the parties in the establishment simply do not come to an agreement despite serious negotiating efforts or if the works council refuses to join the negotiations.
When the works council has presented its statement or when two weeks have passed (or, alternatively, when the reconciliation of interests agreement has been signed), the actual notification must be submitted to the competent Labor Agency before the employees receive the termination notices. In this respect, the following compulsory information must be provided in statutory written form, meaning the original document including the signatures of the employee representatives:
● Name of the employer
● Domicile and type of business
● Reasons for the planned redundancies
● Number and vocational group of the employees to be made redundant and of the employees normally employed
● Period in which the redundancies are to be effected
Practical advice: It is advisable to already complete the forms provided by the Labor Agency in advance and to send the documents together with a cover letter to the works council/central works council. At the same time, this cover letter addressed to the works council/central works council is to be sent to the competent Labor Agency for Employment/the competent Labor Agencies for their information. In the event the entire establishment is restructured, the notification of collective redundancies should be sent to the Labor Agency at the company’s domicile; if, however, there is an Labor Agency in the district in which the redundancies are to be effected that is more familiar with the facts, this agency should also be informed at the same time
III. New Forms for the Notification
The Federal Labor Agency has placed new forms for the notification of collective redundancies online. The annex “vocational groups” attached to the previous form has been eliminated completely. The new form contains a table under 3.1 instead. The vocational class (five-digit DEÜV number), the job code under which the employees are registered with the social security system and under which they are classified in the notification of collective redundancies, the number of the individuals belonging to these vocational classes (thus DEÜV number) normally employed at the establishment and the number of these employees to be made redundant, plus the date of the notice of termination and the notice period are to be provided in this table.
The new form differs in terminology from the statutory requirements. For instance, instead of “redundancies”, the term “terminations” is now used. In the explanatory notes at the side of the page, the Agency explains that the term “termination” is also supposed to include separation agreements as well as terminations of contracts. This is not really consistent, because a separation agreement is not the same as a termination. There is also no reference to the fact that a resignation (termination of contract) by an employee induced by his or her employer is deemed a redundancy and this information must be provided in the notification of collective redundancies as well.
On the new form, the Agency also requires a five-digit DEÜV number (vocational class). According to the annex previously attached to the Agency form, vocational groups were understood to be the respective three-digit DEÜV numbers on the form “Annex Vocational Groups.” The first three digits of the now required five-digit DEÜV number represent the vocational group number previously used. This means that the Agency now requests additional information. The fourth digit of the DEÜV number distinguishes supervisory and executive staff from specialist staff. The fifth digit of the DEÜV number designates the level of requirements for the occupation concerned. The effort required is thus significantly increased, because there are not only 144 vocational groups, but also approximately 2,000 vocational classes.
Moreover, not only the date on which notice of termination was given is supposed to be provided, but also the length of the notice period. The statute does not require either of these details. According to the statute, only the period in which the redundancies are to be effected has to be stated.
Based on this deviation of the new form from the statutory provisions, employers will, in the future, face the problem of having to decide to either comply with the statutory provisions and not fully complete the new form or to adhere to the requirements set by the new form and put in the extra time and effort, which is not required by the statute to this extent.
Practical advice: In the future, employers will have to adhere to the requirements set by the new form, which involves considerable time and effort. These requirements, however, exceed the statutory provisions. Therefore, employers who comply with the requirements set by the new forms for the notification of collective redundancies do not run the risk of having disregarded statutory provisions.
The termination is invalid if, at the time the employee receives the termination notice, the consultation procedure has not been carried out or has not been carried out properly and has thus not been completed.
Other ways of terminating the employment are regarded as equivalent to redundancies if they were initiated by the employer. This also includes separation agreements and, in particular, the case that the employee does not agree to the material changes to the provisions of his or her employment agreement suggested by the employer and consequently requests that a separation agreement be concluded (European Court of Justice ruling of 11 November 2015 – C-422/14). In the event of collective redundancies, the employee cannot do without the protection not even by concluding a separation agreement (Federal Labor Court ruling of 11 March 1999 – 2 AZR 461/98). Consequently, separation agreements that were not preceded by a valid notification of collective redundancies are also invalid. According to the “Junk” court ruling of the European Court of Justice, the term “redundancy” within the meaning of the Directive 98/59/EG on collective redundancies is to be interpreted to the effect that the legally binding declaration of the employer constitutes the event that is to be considered the redundancy (European Court of Justice ruling of 27 January 2005 – Rs. C-188/03).
With regard to the notification procedure, it is assumed that errors only have an effect on the termination if they are causal for the termination. It has, however, not been clarified in the highest instances whether this also applies to the consultation procedure. This is certainly supported by the fact that both procedures similarly aim at preventing collective redundancies.
By Dr. Gerlind Wisskirchen, CMS Germany
Compliments of CMS Tax . Law, a member of the EACC