Mass dismissal / Massenentlassung
May 28, 2021
Legal hurdles for mass dismissals
If there are several dismissals in a company, it must always be checked whether the employer is subject to special notification obligations. Possibly a so-called mass dismissal has occurred, in which special obligations exist before the notices of dismissal are issued. Mass dismissals are subject to a statutory duty to notify the employment agency pursuant to section 17 (1), (3) of the Protection of Unfair Dismissal Act (KSchG). The reason for the obligation to notify is to give the authorities the chance to mitigate potential social and economic consequences, i.e. to counteract a flood of new unemployed. First of all, it must be determined whether a duty to notify exists at all.
How many employees must be affected for the existence of a mass dismissal
The limits for a mass dismissal are regulated in section 17 (1) KSchG. A mass dismissal is defined as anyone who, within 30 calendar days, in a company with more than 20 but less than 60 employees, wants to make 5 dismissals, or with more than 60 but less than 500 employees, wants to make 10% of the regular workforce or more than 25 dismissals, or with more than 500 employees, wants to make at least 30 dismissals.
- 20 <employees< 60 from 5 employees
- 60 <employees< 500 from 10% of the regular workforce or more
- than 25 employees
- Employees <500 as of 30 employees
Dismissals due to a change of employment are taken into account, irrespective of whether the employee rejects or accepts the offer made. Dismissals by the employee himself/herself and dismissals on the basis of a termination agreement are also taken into account, provided that both were initiated by the employer himself/herself. Dismissals without notice for good cause under section 626 I BGB and dismissals due to a fixed-term employment relationship are not taken into account under section 17 (4) KSchG. There is no obligation to notify for small businesses, public enterprises with sovereign tasks (section 23 II KSchG) and seasonal businesses (section 22 KschG).
Concept of enterprise
In order to decide whether there is a duty to notify, it is necessary to clarify what constitutes a " company " in the sense of the law. This term is not identical with the term "employer" or "enterprise". The concept of an establishment has developed since the 1998 Mass Dismissals Directive (98/59/EC) through subsequent case law of the European Court of Justice (ECJ) (Case C-80/14). According to this, a company is the unit to which the employees concerned belong in order to fulfil their obligations. It must be a clearly distinguishable unit of a certain permanence and stability. It must be designed to carry out specific tasks and must have a body of employees and appropriate operating resources and organisational structures for this purpose. The workers must operate out of this unit and the unit may dispose of them. However, the management of the unit don’t need to be the responsible decision-makers on collective dismissals.
Designing an effective collective dismissal
Informing the works council
If a duty to notify arises, according to section 17 (3) sentence 3 KSchG the works council must be informed of the dismissals in a letter at least two weeks before a mass dismissal notice is given. Of course, this only applies if there is a works council. The letter to the works council must
- state the reasons for the planned dismissal
- the number of employees to be dismissed,
- their occupational groups,
- the number of workers normally employed and their occupational groups,
- the period of time and the criteria for the dismissals
- and a calculation of the possible severance pay.
A copy of this notification must be sent to the employment agency at the same time (section 17 (3) sentence 1 KSchG). If the works council has been informed in accordance with the regulations, it must be consulted on the planned dismissals (section 17 (2) KSchG). Consultations should take place to discuss ways of avoiding or limiting redundancies as well as mitigating their consequences. Thus, the employer must at least give the works council a chance to negotiate, but an agreement does not have to be reached. The works council usually has two weeks after receiving the notice to make a statement (section 17 (3) sentence 3 KSchG). After two weeks, the employer can file a complaint even without a statement (§ 17 (3) sentence 3 KSchG). Since a statement must also be attached to the complaint later, careful documentation of the consultation process is recommended. If there is no works council, this obligation does not apply and the employer can directly file a complaint with the employment agency.
The notification to the local employment agency must then be made in writing (if necessary, including the works council's statement). A form from the Federal Employment Agency website can be used for this purpose. It must contain the same information as the information to the works council, i.e. the reasons for the planned redundancies, the number of workers to be dismissed, their occupational groups, the number of workers normally employed and their occupational groups, the period as well as the criteria for the dismissals and a calculation of any severance pay. With the consent of the works council, the notice shall also provide information on the gender, age, occupation and nationality of the workers who are dismissed. If the works council has not made a statement or if consultations have not been completed, the notice is deemed effective if the employer can prove under section 17 (3) sentence 3 KSchG that the works council was correctly informed in writing at least two weeks before the notice was made and can prove the current state of consultations. After the notification has been made, a copy of it must also be sent to the works council.
What are the consequences of dismissals in the event of a breach of the duty of notification and failure to inform the works council?
If the notification has been effectively received by the employment agency, a one-month blocking period according to section 18 (1) KSchG begins with its receipt. Notices of termination only become effective upon expiry of this period and approval by the employment agency. However, notices of termination may be given before the expiry of the period. At the employer's request, the employment agency can also extend or shorten the blocking period. If there is no notification in accordance with the requirements of the KSchG, i.e. the works council was not informed, not completely informed, not informed at least two weeks before the notification was made in accordance with section 17 (3) sentence 3 KSchG, or if the mass dismissal notification is incomplete, any dismissals given shall be invalid.
When must the employer file the mass dismissal notice?
It is fundamental that the employer informs the competent employment agency before issuing notices of dismissal. According to the ECJ (C-188/03) the time for dismissal under the KSchG is not the time when the employee leaves the company, but the time when the notice of termination is given. According to general understanding, however, notice periods and blocking periods run in parallel. Once the notification has been effectively received by the employment agency, the employer can then give notice of termination and thus start the contractual notice period. It is therefore not necessary to wait until the expiry of the one-month blocking period (section 18 (1) KSchG). If, for example, the employees to be dismissed have a contractual notice period of 3 months, and the employer wants to arrange for them to leave the enterprise on 30 November of a year, the notice should at best have been received at the end of August. The employer can then give notice immediately at the end of August and arrange for the employee to leave the company on 30 November. If there is a works council, it should be informed a few weeks before the notice is given in order to leave enough time for the legally required consultation according to section 17 (2) KSchG. However, the works council must have been informed at least 2 weeks before the notification, i.e. in this case by mid-August at the latest.
What must be the content of the mass dismissal notification?
The notification must be sent to the employment agency in writing and, under section 17 (3) sentence 4 KSchG, must contain the following information:
- Name of the employer
- Domicile of the employer
- Type of enterprise
- the reasons for the planned dismissal
- the number of employees to be dismissed,
- their occupational categories,
- the number of workers normally employed and their occupational categories,
- the period and criteria for the dismissals
- and a calculation of any severance pay.
And with the agreement of the works council
What to do if there is a suspected breach of the duty to notify?
If the employer has violated the KSchG in the context of mass dismissal, the employee does not have to accept his dismissal. Pursuant to section 4 KSchG, he or she may file an action for protection against dismissal with the competent labour court within 3 weeks of receiving the notice of dismissal.