Restructuring and mass redundancies - one source of error less?

In view of the numerous restructurings on which we are currently advising and following hopeful signals from Erfurt on the subject of collective redundancy notifications (and the associated sources of error), this article is dedicated to the current developments in collective redundancies and the glimmer of hope on the horizon.

Although the statutory requirements for a collective redundancy notification pursuant to Section 17 KSchG appear to be straightforward at first glance, the individual requirements are significantly characterised by extensive and constantly changing (sprawling) case law; not least against the background that Sections 17 et seq. KSchG originate from the European Collective Redundancies Directive and must therefore be measured against European standards, whereas the Federal Labour Court (BAG) has so far gone significantly further than required by European law.

Nullity of the termination?

If the requirements and thresholds for a collective redundancy were met and a mass redundancy notice was required, the failure to provide a proper mass redundancy notice and to comply with all the formalities developed (sometimes questionably) by case law previously led to the invalidity of terminations.

Parts of the Federal Labour Court are now openly opposing this trend and calling for a – welcome – correction of an unnecessary formal-legal interpretation of the KSchG (from BAG, decision of 1 February 2024 – 2 AS 22/23):

"The Second Senate of the Federal Labour Court has previously assumed that a dismissal declared without the necessary prior collective redundancy notification is null and void (ineffective) and therefore cannot terminate the employment relationship. In contrast, the Sixth Senate would like to take the view in future that the absence or incorrectness of a collective redundancy notice required by Union or national law has no legal influence on the decision to terminate an employment relationship. Rather, both the absence of a collective redundancy notification and its incorrectness should remain completely without consequences. It is up to the German legislator to standardise a "sanction" for errors in the notification procedure for collective redundancies. This may not be in the area of labour law, but must lie solely in the area of employment promotion law (BAG 14 December 2023 – 6 AZR 157/22)".

This brings to light a dispute between the second and sixth senates, which, after the Federal Labour Court referred the issue to the CJEU, is to be decided by the CJEU (BAG, decision of 1 February 2024 – 2 AS 22/23).

The BAG (in particular the sixth senate) therefore intends to abandon the previous case law according to which a dismissal declared in the context of a collective redundancy without prior notice pursuant to Section 17 sec. 1 KSchG is null and void pursuant to Section 134 BGB. This is expressly to be welcomed by companies, as the protective purpose of the collective redundancy notice has practically nothing to do with the individual employment relationship.

Questions for the CJEU

Specifically, the CJEU is now being asked to answer the following questions in accordance with Art. 267 TFEU:

  1. Is Article 4 sec. 1 of Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies to be interpreted as meaning that a dismissal in the context of a notifiable collective redundancy does not terminate the employment relationship of an employee concerned until the period of prohibition on dismissal has expired? If the first question is answered in the affirmative:
  2. Does the expiry of the prohibition on dismissal not only require a collective redundancy notification, but must it also satisfy the requirements of Art. 3 I para. 4 MERL?
  3. Can an employer who has made notifiable dismissals without (properly) notifiying mass redundancies make such a notification with the consequence that, after the expiry of the prohibition on dismissals, the employment relationships of the employees concerned may be terminated by the previously notified dismissals? If the first and second questions are answered in the affirmative:
  4. Is it compatible with Article 6 MERL for national law to leave it to the competent authority to determine, in a manner which is incontestable for the employee and binding on the labour courts, when the prohibition on dismissal expires in a specific case, or must the employee necessarily have access to judicial proceedings to review the correctness of the authority's determination?

Implications for practice

Although the desired final clarity will have to wait for the answer to this request to the CJEU, the trend reversal indicated by the Federal Labour Court is already making waves in labour court practice. The literature largely welcomes the implicit direction, and a number of labour court judges are already indicating, at least in the context of conciliation hearings, that purely formal attacks against mass dismissal notices may no longer lead to success for the plaintiff employees.

Although well-advised employers should continue to observe all the formalities of a collective redundancy notification, it is noticeable that at least one sword of employee representatives is becoming blunter in the context of settlement negotiations. In view of the tendencies of the BAG in the context of the updated case law on default of acceptance and the welcome line of the LAG Düsseldorf, which does not recognise any fundamental claim for damages in the context of (even belated) data protection information, it appears that some of the rampant behaviour of the past is currently being carefully reversed.

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