Global restructuring – planning redundancies in Germany

Out-Law News | 01 Dec 2020 | 11:24 am |

Lara Willems tells HRNews how redundancy laws and procedures operate in Germany

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  • Transcript

    What does German employment law require of employers when it comes to making redundancies? It is an important question if you're a business with a presence in Germany where, just like the rest of Europe, mass redundancy exercises are commonplace as businesses restructure in an effort to survive the pandemic. We have been tracking Germany closely in recent months, seeing how different sectors are responding, and we notice the steel industry is back in the news again. Deutsche Welle reports that steel giant Thyssenkrupp is planning 5,000 more job cuts on top of the 6,000 last year, bring the total number to 11,000, of which almost 7,000 are in Germany. The FT covers this story too, and reports that the company is refusing to rule out forced redundancies – forcing through redundancies is considered a provocative move in Germany when a business is heavily unionised, which this is. But one way or another, a lot more job cuts on the way for sure. So let’s return to that question of what German employment law require of employers when it comes to making redundancies. To help with that, Lara Willems who joined me by phone from the Munich office: 

    Lara Willems: “In Germany if an international business with a presence in Germany is planning a restructuring measure, there are basically two important thresholds under German law which employers should keep in mind. So the first important threshold refers to individual employment law and is 10. Under German law, if an employee employs more than 10 full time equivalents, the Termination Protection Act applies under German law. This means if you have an employer who works for you more than 6 months, you need to provide a reason to terminate him. So this also means if you have less than 10 full time equivalents, you don't need a reason and you can just terminate all employees at any time as long as you respect the notice periods and formal criteria. In this context it's probably good to know, and this is something typically German, we need an original wet signature on the notice letter, so this is sometimes surprising for employers from other countries. On the other hand, if you have more than 10 full time equivalents, you need to provide a reason and such reason can, for example, be a redundancy situation. So you need to show that the position will no longer exist and there's something special, the so-called social selection. This means if you want to terminate not all employees, but only some employees of a group, you need to show, as an employer, that you choose the right people. So you need to compare the social criteria. This means the age, the seniority, the family obligations and disabilities of the employees. So this basically means if you want to terminate an employee you cannot terminate a 50 year old employee who has children and has been working for you for a long time, but if you want to keep the 25 year old colleague who has maybe no children and just recently joined, so this is the social selection which will be relevant in a redundancy situation under German law. The second important threshold under German law refers to collective law. So this will be only relevant if the business in Germany has a works council and the relevant number is 20. So this means if the company has more than 20 employees in total, and if there is a works council, any redundancy situation or restructuring measure will typically lead to a so-called change in operations and this will then lead to works council rights. So a typical situation would be a shutdown, but also relocation can trigger these rights and any other measure which may lead to disadvantages for the employees. In this situation the employer needs to inform the works council and also needs to consult with the works council. This basically means for the employer that he needs to allow for additional time and also needs to take an account additional money because under German law there is, in general, no entitlement for employees who will be made redundant to receive a severance payment, but in practice employers often pay these payments to make sure that the cases will be settled and, if a works council is involved, the employer is obliged to negotiate with the works council. This will include a social plan and this social plan will also include severance payments, typically.”

    Redundancy procedure is just one of a number of articles and guides written by Lara and her German colleagues. You can find all of them on the Outlaw website.