Since the beginning of the COVID-19 pandemic, many companies have been struggling with work stoppages. In November 2020, about 2,000,000 employees across Germany were still on short-time work (in German “Kurzarbeit”).

But what happens when the employee refuses to change working conditions and the employer has no other option than to introduce short-time work? Many employers initially introduced short-time work on a temporary basis last year and are now experiencing that employees are no longer as cooperative with regard to extending the agreement as they were at the beginning of the pandemic. The Stuttgart Labor Court had to decide on the practice-relevant question of whether termination without notice for the unilateral introduction of short-time work can be justified.

Unilateral order possible in exceptional cases

The introduction of short-time work requires a legal basis. In practice, the introduction is often based on provisions in collective bargaining agreements, works agreements or employment contracts.

If none of the above options are available to the employer, he must rely on reaching a consensual agreement with the employee. This is not always successful, however, as short-time work usually means a considerable loss of pay for employees the benefits provided by the Employment Agency cannot mitigate completely. There are also disadvantages in terms of pension insurance and tax progression.

If the employee refuses to agree, the employer often has no alternative but to terminate the employment relationship without notice to introduce short-time work. Then, the existing employment relationship is terminated with the offer to continue it seamlessly with the application of the supplementary agreement on short-time work. The legality of such an approach has not yet been decided by the highest courts. However, the Stuttgart Labor Court is of the opinion that the previously generally applicable principle that a reduction in pay by means of a notice of termination with notice of a change in working hours is only possible in the event of imminent insolvency cannot be applied to a notice of termination with notice of a change in working hours for the purpose of introducing short-time work. In addition to remuneration, short-time work also reduces the employee's obligation to perform and is by its definition not intended to be permanent.

Prerequisites according to the Stuttgart Labor Court

In its decision, the Stuttgart Labor Court formulates clear requirements for the effectiveness of a termination without notice for the purpose of introducing short-time work. The maintenance of proportionality is linked to the following conditions:

  • The employer must have exhausted all means to introduce short-time work; in particular, an attempt must have been made to find a mutually agreeable solution with the employee.
  • The employee must meet the personal requirements for receiving short-time allowance under §§ 95, 96 Social Code III.
  • An appropriate lead time for the introduction of short-time work (in the case of more than three weeks) must have been observed.
  • The short-time work must be limited in time.
  • A further notice period regarding the exact temporal scope of the reduction in working hours supports the proportionality of the measure. 

Rejection of the notice of termination due to a change in working hours

If the employer issues a change notice to introduce short-time work, it must be specific enough, in particular specifying the period and scope of the reduction in work. Other factors, such as thresholds for mass layoff notices or existing special protection against dismissal, may have to be taken into account. As with any change notice, the employee has the option of accepting or rejecting the offer to change working conditions or accepting it subject to the proviso that the change is socially justified. In the event of rejection or acceptance subject to reservation, the reasonableness and proportionality of the change offer must be reviewed by the labor courts.

Conclusion

The ruling of the Stuttgart Labor Court allows the employer to respond to exceptional circumstances with exceptional measures. This is correct and necessary. But the pandemic will pass, which is why the employer's unilateral option of using an extraordinary notice of termination to introduce short-time work will not remain a common remedy. Whether the extraordinary change notice can be used in the same way for short-time work in other “normal" circumstances is not certain. Companies without corresponding collective bargaining agreements and without a works council are therefore advised to include suitable clauses in their employment contracts. In the event of future crises, they can then react flexibly and quickly. 

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