Requirements for collective redundancy notices – Case law update

Back in February, we reported on the latest developments in German case law on collective redundancy notices (New rules for collective redundancies?). Since then, further decisions have been handed down which are of major significance in legal practice. These are presented briefly below.

1. Context: The legal framework

Section 17 of the German Unfair Dismissal Act (Kündigungsschutzgesetz) obliges employers to submit a collective redundancy notice to the Federal Employment Agency if it wishes to dismiss a certain number of employees within 30 calendar days.

The provision in section 17(3) sentence 4 of the German Unfair Dismissal Act stipulates that the employer must provide certain information (“must information”) in the collective redundancy notice to be submitted to the Federal Employment Agency. This information consists of details of the name of the employer as well as the type and registered office of the business unit, the reasons for the planned redundancies, the number and occupational groups of the employees to be made redundant and those regularly employed in the business, the period of time in which the redundancies are to be carried out, as well as the envisaged criteria for selecting the employees to be made redundant.

In addition, section 17(3) sentence 5 of the German Unfair Dismissal Act stipulates that, in consultation with the works council, the collective redundancy notice should contain information on the gender, age, occupation and nationality of the employees to be dismissed (“should information”).

The basis of the German regulations on collective redundancy notices is European Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies (“Collective Redundancy Directive”).

2. Lack of “should information” does not invalidate notice – Ruling by Federal Labour Court on 19 May 2022

On 19 May 2022 (2 AZR 467/21), Germany’s Federal Labour Court issued a welcome ruling on this issue which provides a little more legal certainty for practitioners.

The facts

In February, we reported on the decisions of the lower courts. The subject of the legal dispute was a termination of employment for business reasons, which was issued as part of a collective redundancy scheme. The employer had issued a collective redundancy notice in advance but did not provide the “should information”, i.e. on the gender, age, occupation and nationality of the employees concerned. Both the trial court (Frankfurt Labour Court) and the court of appeal (Hesse Regional Labour Court) concluded the termination in question was invalid because that information was missing. Essentially, it was argued that the Collective Redundancy Directive requires that all relevant information be included in the collective redundancy notice, without differentiating between “must” and “should” information. Information on age, gender, occupation and nationality was said to be relevant in any event in this situation.

Decision of the Federal Labour Court

The employer’s successful appeal was directed at the decision of Hesse Regional Labour Court. So far, only the press release of the Federal Labour Court has been published (Collective redundancy notice - Lack of should information - Federal Labour Court (in German only)). However, it is already clear from that press release that the Federal Labour Court makes a clear distinction between “must” and “should” information when assessing whether a proper collective redundancy notice was issued. According to the Federal Labour Court, a lack of “should” information in the context of a collective redundancy notice does not expressly invalidate a termination issued as part of a collective redundancy scheme. Only this conformed to the legislator’s intention, which expressly differentiated between “must” and “should” information in section 17 of the Unfair Dismissal Act. In the Federal Labour Court’s opinion, the national courts could not disregard this legislative decision by way of an interpretation in conformity with the Directive. Moreover, such an interpretation was not required. According to the case law of the Court of Justice of the European Union, it has already been clarified that the “should” information stipulated in section 17(3) sentence 5 of the German Unfair Dismissal Act is not required under the Collective Redundancy Directive either.

The decision of the Federal Labour Court should be met with approval. The wording of section 17 of the German Unfair Dismissal Act is clear. The requirements for proper collective redundancy notices are already strict and should not be overstretched by requiring additional (“should”) details. Also, employers often do not have the required information at all (or at least not in full). Therefore the Federal Labour Court’s decision is welcome in practice.

3. Incorrect company number does not invalidate notice

It is worth mentioning another decision on collective redundancy notices, which specifies the requirements and consequences of errors more precisely. Specifically, Berlin-Brandenburg Regional Labour Court (judgment of 7 December 2021, 7 Sa 1273/21) had to rule on a case in which the collective redundancy notice was properly submitted but contained an incorrect company number. In contrast to the trial court (Berlin Labour Court), Berlin-Brandenburg Regional Labour Court is of the opinion that stating an incorrect company number does not invalidate the collective redundancy notice.

The facts

The claimant worked for the defendant employer as an order picker. The employer decided to close the warehouse the claimant was employed in and also terminated the claimant’s employment as part of a collective redundancy scheme. In the collective redundancy notice to be submitted to the relevant Federal Employment Agency, the defendant employer stated which company the claimant was employed at. The collective redundancy notice was signed by the two authorised signatories of the defendant using a company stamp indicating the defendant’s company. However, the defendant had made a formal error: the company number every employer has to apply for from the Federal Employment Agency in order to use the social insurance registration procedure (section 18i German Social Code vol. 4) and which must be stated in the form provided by the Federal Employment Agency when submitting collective redundancy notices was not assigned to the defendant, but to its legal predecessor. Accordingly, the Federal Employment Agency issued confirmation of receipt of the collective redundancy notice to the legal predecessor of the defendant, and not to the defendant.

The claimant now argued that the termination of his employment – in addition to other asserted grounds of invalidity – was invalid in any case due to the incorrect collective redundancy notice.

The decisions

In the first instance, the claimant was successful with his arguments. Berlin Labour Court ruled that the collective redundancy notice had not been submitted in the name of the employer, but in the name of another legal entity designated by the company number. Thus, at the time the notice of termination was issued, there was no collective redundancy notice and the termination was accordingly invalid.

The employer’s appeal against this was successful:

In the Regional Labour Court’s opinion, the collective redundancy notice is open to interpretation under sections 133 and 157 of the German Civil Code. The content of a declaration is therefore determined by how the parties should understand it in good faith, taking into account customary practices, with the precise wording to be taken as a basis.

According to the Regional Labour Court, based on these standards, interpreting the notice despite the incorrect company number led to the conclusion that the defendant had issued the collective redundancy notice. This was because the defendant was designated in the company name, had expressly signed the notice of termination and had issued it for the company concerned.

The fact that the notice referred to the legal predecessor did not mean that in the event of differences between the written information and the company number the Federal Employment Agency was exempt from interpreting for itself which company had filed the notice. If the notice contains information on the correct employer as well as on the company concerned and if it is also signed by the correct employer, it is to be attributed to that employer, even if the company number might be wrong.

The fact that the Federal Employment Agency initially wrote to the legal predecessor, because of the wrong company number, was therefore harmless. This is because the Agency’s letter is automatically generated using the company number entered, without this having any effect on the content for the recipient of the collective redundancy notice.

This decision also deserves approval. The collective redundancy notice primarily pursues labour market policy purposes. The obligation to give notice is meant to let the Federal Employment Agency take timely action to increase the chances of redundant workers finding new jobs and avoiding unemployment. If the employer can be identified based on the information in the collective redundancy notice, it would therefore be nonsensical to negate the existence of an otherwise proper collective redundancy notice simply because of an incorrect company number. Besides, the company number is not mandatory information either, according to section 17(3) sentence 4 of the Unfair Dismissal Act.

4. Conclusion and practical advice

Once again, the decisions described make it clear that there are multiple legal issues in connection with (alleged) errors employers can make in issuing a notice and implementing collective redundancies. The two decisions provide further legal clarity and are also welcome in this context.