Responses by Sebastian Müller Deputy CEO of Die Führungskräfte, the German confederation of managers
Is there a requirement for employers to legally justify redundancies and if so, what reasons do they need to provide?
The Employment Protection Act dictates that an ordinary notice of termination must be socially justified. Essentially, this means that any employer must have personal, behavioral or operational reasons for the termination of employment. In order to qualify for the Employment Protection Act, an employee needs to have been working in the particular company for at least six months. In addition, this company needs to have more than 10 employees. If someone is terminated by extraordinary notice of termination the employer needs to provide more justification by showing an important reason why continued employment until the end of the notice period is not acceptable.
What is the statutory minimum notice period for redundancies (if any)?
With regards to an ordinary notice of termination, this period depends on the seniority. The minimum notice period comes to four weeks for a length of service of less than two years and it rises up to 7 months after 20 years in the company. In a case of extraordinary notice of termination employment terminates immediately. This notice is to be given to the employee within two weeks after becoming aware of the significant facts. In case the first six months of employment are classified as test-employment it can be terminated without any reason within a two-weeks’ period.
What is the statutory minimum calculation for redundancy payments (if any)?
There is no legal entitlement for redundancy payments in Germany. However, for the past few years the Employment Protection Act has stated that employees have the right to claim for compensation if the termination notice specifies strong operational reasons and the employee is provided an opportunity for redundancy payments and furthermore the employee allows the right to elapse. The redundancy payments are in this case calculated by reference to half a months’ salary per year of employment with the company.
According to law, what are the main steps that employers must take during a redundancy process?
An employer must provide notice to the employee representatives (Betriebsrat for staff membersor Sprecherausschuss for leading personal) – according to their existence – and provide information about the decision and specify the reasons for termination. Furthermore, it has to be considered whether a less drastic measure can be used, such as redeployment of employees in another division or – in case of multiple places of business - to another arm of the company.
Any redundancy notice must be served in writing – verbal dismissals are not effective under law. As well as operational reasons, an employer is also obliged to consider social factors when selecting particular employees, such as age, length of service or obligation to support dependents.
What are the consequences for employers who fail to comply with redundancy laws? What kind of compensation can employees claim, and is the amount capped?
If there is no important reason or the termination is not socially justified it is invalid and employment continues seamlessly. Practically, however, an employer will try to draft a termination agreement with an employee. Thus, the parties can arrange compensation.
In case the employee brings an action against unfair dismissal to a Labour Court he has to be compensated for the salary he would have drawn in the meantime.
Statutory minimums aside, what is the standard practice for making redundancies and calculating payments at banks in Germany?
Officially, there are no special differences between banking and other sectors. It is possible that collective and company agreements exist which provide redundancy payments. As far as executives are involved individual termination agreements are very common. This certainly results from their advanced position with the employer and the effort to hand a termination as discretely as possible. It is crucial to know the habits and standard practices within the company – although nobody talks about that confidential topic openly. As managers’ federation with legal services DFK provides also these kind of information for its members.