Before giving notice of termination, employers must formally notify the respective Employment Agency (Agentur für Arbeit) of a mass dismissal if the number of notices of dismissal reaches the thresholds stipulated in section 17 (1) of the Dismissal Protection Act (Kündigungsschutzgesetz). The original regulatory purpose of the mass dismissal notification was to pursue labor-market policy objectives: the notification was a tool intended to enable the local Employment Agency to take early action to avoid or alleviate burdens on the labor market. Lately, however, the focus has been on protection of individual employees: Taking the Mass Redundancy Directive (Directive 98/59/EC) into account, a breach of the formal process to notify now leads to the termination of employment becoming invalid.

Date of the Mass Dismissal Notification

But when does the mass dismissal notification have to be filed? Taking the wording and the purpose of the law into account, according to the earlier case-law of the BAG, it was not the announcement of the dismissal, but the intended actual termination of the employee’s contract that was the decisive point in time for the mass dismissal notification. The reason for this: §17 of the Law on Employment Protection refers not to »notices of termination« (Kündigungen) but to »redundancies« (Entlassungen). Employers therefore generally only reported to the Federal Employment Agency after the notice of termination has been given. However, the BAG abandoned this case law as a result of the »Junk« decision of the ECJ (judgment dated January 27, 2005 – C-188/03). On the basis of an interpretation in conformity with the Directive, »redundancy« is to be understood as the pronouncement of termination. It therefore corresponded to the unanimous opinion that a mass dismissal notification should take place before the notice of termination was given.

And the LAG? Mass Dismissal Notifications Prior to Signing the Notice of Termination!

On the other hand, the LAG Baden-Württemberg in its judgement of August 21, 2018 (Ref.: 12 Sa 17/18) focused not on the announcement of the termination, but on the signing of the termination letter. According to the LAG, the notice of termination was given when the notice of termination was signed. The employee’s receipt of the notice of termination was not relevant. The LAG based its opinion on the wording of §17 (3) of the Dismissal Protection Act, according to which the mass dismissal notification must contain information on the »planned redundancies.« The mass dismissal notification should therefore be created at a time when notices of termination are being planned, but not yet decided. The notification must therefore reach the Employment Agency before the employer has made the decision to terminate and signed the letter of termination. By signing the termination letter, the employer’s underlying decision to terminate the employee’s contract – already taken – is manifest. Since it was not established in the underlying legal dispute whether the employer had signed the termination letter only after submitting the mass dismissal notification, the LAG considered the termination to be invalid as per §134 of the German Civil Code (Bürgerliches Gesetzbuch) in conjunction with §17 (1) of the Dismissal Protection Act.

Evaluation

The LAG’s decision is – to say the least – unconvincing. It cannot be accepted, either for legal or factual reasons. The assumption by the LAG that the dismissal decision may only be made after the mass dismissal notification has been submitted is already incomprehensible. There is no evidence in law for such an assumption. In particular, this assumption cannot be based on the obligation to provide information on »planned redundancies« pursuant to §17 (3) of the Dismissal Protection Act. The assumption is also remote from everyday life, since an employer has already made its decision to terminate the employment in advance – at the latest with the conclusion of any necessary reconciliation of interests with the works council.

A comparison with §102 (1)(3) of the Works Constitution Act (Betriebsverfassungsgesetz) also speaks against the LAG’s argument. Accordingly, any notice of termination given without consultation of the works council is invalid. The BAG has consistently held that a final decision by the employer to terminate a worker’s contract before the end of the hearing procedure is permissible. The only decisive factor is that the employer has not yet fulfilled its intention to terminate the employee before the consultation procedure has been concluded. According to the case-law of the BAG, the decisive factor here is whether the letter of termination is still within the employer’s sphere of influence. Accordingly, it is the date on which the notice of termination was given which matters, not the date on which it was received.

In addition, the LAG must also be regarded as being somewhat detached from day-to-day realities. Particularly in the case of major restructuring projects, work is usually carried out under enormous time pressure. Employees can usually only be terminated en masse at the end of the month. Employers must therefore be allowed to sign letters of termination beforehand as a mere preparatory act.

Outlook

The LAG has – and this is the pleasing thing about the ruling – allowed the revision to the Federal Employment Court (BAG) because of the fundamental importance of the case. It therefore remains to be hoped that the BAG will annul the decision of the LAG in the appeal proceedings already pending and clarify that prior signing of the termination letters is permissible.

Until the pending decision of the BAG, however, residual risks remain, despite the unconvincing statements of the LAG. Where possible, for reasons of legal certainty, notices of termination should be signed and dated only after submission of the mass dismissal notification to the Employment Agency.

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