Germany – Dispute Regarding Legal Consequences Of An Incorrect Mass Dismissal Notification.
The Second and Sixth Senates of the Federal Labour Court (Bundesarbeitsgericht – BAG) are unanimously considering abandoning the previous case law of the Federal Labour Court, according to which an incorrect or missing mass dismissal notification pursuant to Section 17 Para. 1 and 3 German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG) leads to the invalidity of the declared termination pursuant to Section 134 German Civil Code (Bürgerliches Gesetzbuch – BGB). However, there is disagreement about the legal consequences of an incorrect or missing mass dismissal notification. Both Senates have referred questions to the European Court of Justice (CJEU) for a preliminary ruling in this regard.
Order of Referral to the Second Senate of the Federal Labour Court and Preliminary Ruling Procedure at the CJEU
In three dismissal protection proceedings, which are being heard in parallel before the Sixth Senate of the Federal Labour Court, the parties to the employment contract are in dispute regarding the termination of their employment relationships through ordinary terminations. In two legal disputes, the employer had failed to provide the employment agency with a copy of the notification to the works council or to explain the status of negotiations with the works council in accordance with Section 17 Para. 3 German Dismissal Protection Act (6 AZR 152/22 (A) and 6 AZR 155/21). In the third legal dispute, no mass dismissal notification was made despite the notification obligation pursuant to Section 17 Para. 1 German Dismissal Protection Act (6 AZR 157/22 (A)).
The Sixth Senate has questioned the Second Senate of the Federal Labor Court as to whether it will uphold its previous legal opinion on the invalidity of a declared termination in the event of a missing or incorrect mass dismissal notification (order for reference dated 14 December 2023 – 6 AZR 157/22 (B); see the article by my colleague Christoph Lutz). The Second Senate intends to no longer adhere to its previous legal opinion and has referred to the CJEU with regard to the legal consequences of an incorrect or missing mass dismissal notification (request for a preliminary ruling dated 1 February 2024 – 2 AS 22/23; see the article by my colleague Benjamin Karcher).
The Sixth Senate has now also referred the matter to the CJEU in a request for a preliminary ruling dated 23 May 2024 (6 AZR 152/22 (A)). In its own request, the Sixth Senate stated that it considers the Second Senate’s request of 1 February 2024 to be inadmissible because the legal dispute on which the proceedings are based is pending before the Sixth Senate. Although the Second and Sixth Senates at least agree that errors in the consultation procedure with the works council pursuant to Section 17 Para. 2 German Dismissal Protection Act (e.g. failure to consult the works council) continue to lead to the invalidity of the termination pursuant to Section 134 German Civil Code. However, the Sixth Senate is of a different opinion on the legal consequences of an incorrect or missing notification of mass dismissal pursuant to Section 17 Para. 1 and 3 German Dismissal Act.
Dispute regarding Legal Consequences
The Second Senate is of the opinion that a distinction must be made between an incorrect and a missing mass dismissal notification.
In the case of a merely incorrect mass dismissal notification, the decision of the employment agency is decisive. According to the principle of official investigation pursuant to Section 20 German Social Code X (Sozialgesetzbuch X – SGB X), the employment agency is obliged to examine the notification and to work towards the completion of incomplete information. However, if the agency determines the expiry of the ban on dismissal pursuant to Section 18 Para. 1 and 2 German Dismissal Protection Act on a specific date, this decision is, in the view of the Second Senate, incontestable for the employee and binding for the labour courts. This would mean that the employee could no longer invoke the incorrectness of the mass dismissal notification in the dismissal protection proceedings.
Is it Possible to Make Up for an Incorrect Mass Dismissal Notification?
In the event of a missing mass dismissal notification, however, the employment relationship should, in the opinion of the Second Senate, only end effectively once the mass dismissal notification has been made. A dismissal subject to notification pursuant to Section 17 Para. 1 German Dismissal Protection Act only becomes effective after the expiry of one month in accordance with Section 18 Para. 1 German Dismissal Protection Act (so-called dismissal ban). The employment agency can also stipulate in accordance with Section 18 Para. 2 German Dismissal Protection Act that the dismissal ban is extended to two months. The Second Senate therefore refers to the fact that in the case of a mass dismissal subject to notification, the employment relationship can only end after the expiry of the dismissal ban pursuant to Section 18 Para. 1 or 2 German Dismissal Protection Act. However, the dismissal ban can only start and thus expire once a mass dismissal notification has been submitted. Only when the mass dismissal notification is made subsequently will the dismissal ban begin. The terminated employment relationship would continue to exist with its previous rights and obligations until the expiry of the dismissal ban. As a result, the employer must continue to pay the agreed remuneration in accordance with Section 615 German Civil Code, even if the employer no longer employs the employee, at least until the dismissal ban begins and then expires.
The Sixth Senate disagrees with this opinion of the Second Senate. In the opinion of the Sixth Senate, a missing mass dismissal notification cannot be made up for. The purpose of the mass dismissal notification is to enable the employment agency to find out what possibilities exist to limit the negative consequences of the termination of the employment relationship before the notice of termination is received. This is no longer possible if the notification is made after the notice of termination has already been received. In addition, the effect of the termination would be delayed indefinitely. Errors in the notification and, as a result, the date of termination of the employment relationship would regularly only be established in court proceedings after a considerable period of time.
Proposal: Extension of the Notice Period as a Sanction
The Sixth Senate is of the opinion that the sanctions for errors in the notification procedure pursuant to Section 17 Para. 1 and 3 German Dismissal Protection Act must be set by the legislator. As the German legislator has not yet set a corresponding sanction, a sanction must be found through case law until the legislator acts. The Sixth Senate proposes a suspension of the notice period for the duration of the dismissal ban pursuant to Section 18 Para. 1 or 2 German Dismissal Protection Act. In the event of incorrect mass dismissal notification, the notice period is to be suspended for one month and in the event of missing notification for two months. The effectiveness of the mass dismissal notification and, as a result, the suspension of the notice period could then be reviewed by the individual employee in the dismissal protection proceedings. In practice, this would mean that employers would have to continue to pay the agreed remuneration for one or two further months in accordance with Section 615 German Civil Code, even if the employer no longer employs the employee.
Judgement of the Sixth Senate of the Federal Labour Court of 23 May 2024, 6 AZR 155/21
In proceedings 6 AZR 155/21, the Sixth Senate ruled on 23 May 2024, despite the two preliminary ruling proceedings pending before the CJEU in the parallel proceedings 6 AZR 152/22 (A) and 6 AZR 157/22 (A), that non-compliance by the employer with the duty to notification pursuant to Section 17 Para. 3 Sentence 1 German Dismissal Protection Act does not lead to the invalidity of the dismissal declared in the context of a mass dismissal. The Sixth Senate argues that it was allowed to decide despite the pending preliminary ruling proceedings of the Second Senate because there was only a need for clarification regarding possible legal consequences of errors in the notification procedure. In the view of the Sixth Senate, however, the duty to notify is part of the consultation procedure, regardless of its systematic location in Section 17 Para. 3 German Dismissal Protection Act. Since the obligation to notify the employment agency pursuant to Section 17 Para. 3 Sentence 1 German Dismissal Protection Act, unlike the obligation to consult with the works council pursuant to Section 17 Para. 2 German Dismissal Protection Act does not constitute a prohibition norm, the violation in the present case does not lead to the invalidity of the dismissal pursuant to Section 134 German Civil Code. The Sixth Senate did not decide what sanction the incorrect mass dismissal notification has in this case. This appears contradictory in view of its own statements in the order for reference of 23 May 2024 (6 AZR 152/22 (A)). In the request for a preliminary ruling, the Sixth Senate suggested that the notice period should be suspended for one month for errors in the notification procedure, as otherwise errors in the notification procedure would have no consequences at all. It is not clear why this should not also apply in the event of a breach of the notification obligation under Section 17 Para. 3 Sentence 1 German Dismissal Protection Act. Even in the event of a breach of the notification obligation, a breach would otherwise have no consequences. Consequently, the Sixth Senate should have waited for a decision by the CJEU in this case as well. The Sixth Senate does not refer to its own order for reference in the parallel proceedings 6 AZR 152/22 (A).
Implications for Practice
A final decision on the legal consequences of an incorrect or missing mass dismissal notification is still awaited. However, it can be stated that there are increasing signs of a change in case law. The Senates of the Federal Labour Court at least seem to agree that an incorrect or missing mass dismissal notification no longer leads to the invalidity of the termination. This is to be welcomed from the employer’s point of view.
Irrespective of the decisions of the CJEU and the two Senates of the Federal Labour Court, an incorrect or missing mass dismissal notification will continue to lead to sanctions for the employer. Therefore, the utmost care and diligence will continue to be required not only in the consultation procedure with the works council pursuant to Section 17 Para. 2 German Dismissal Protection Act, but also in the notification procedure with the employment agency pursuant to Section 17 Para. 1 and 3 German Dismissal Protection Act.
For further information, please contact:
Henry Nicolai, Bird & Bird
henry.nicolai@twobirds.com
