Labour Court of Cologne, 14.11.2019, Case No. 8 Ca 4564/19
When a company is facing economic difficulties, it may lead to the outsourcing of certain departments. This often occurs when a company merges with or is acquired by another. In such cases, mass layoffs may follow, raising the question of how the remaining jobs will be allocated. The Dismissal Protection Act (KSchG) contains regulations that determine when a dismissal is considered invalid. According to § 1 I KSchG, a dismissal must not be socially unjustified. From the company’s perspective, the ideal outcome would be to retain only the most productive employees. However, social justification primarily considers criteria such as length of service, age, degree of disability, and dependents, rather than performance (see § 1 III KSchG). Companies thus face a conflict between wanting to retain high-performing employees and being obligated to continue employing those who are socially vulnerable. However, top performers often do not belong to the most socially vulnerable group. As a result, many top performers would have to be dismissed in a social selection process. To address this, the legislature has introduced a provision in § 1 III 2 KSchG that allows key performers to be excluded from the social selection process. Nonetheless, questions remain regarding the criteria for such exclusions.
In the following ruling, the Cologne Labour Court clarified that a social selection process cannot be completely omitted and that decisions cannot be based solely on performance. Furthermore, any planned reallocation of tasks must precede a business-related dismissal. A company cannot issue a dismissal first and plan later. The decision to dismiss must be based on a task reallocation that makes the employee’s role redundant, thereby justifying the dismissal.
Facts of the case:
The employer dismissed the employee for business-related reasons.
In this case, the parties are disputing the validity of a business-related dismissal. The plaintiff is an employee, and the defendant is the employer.
The plaintiff had been employed by the defendant in Cologne since 1990. In January 2019, the employer announced that the company would be acquired by another company, resulting in most jobs in Cologne being cut. Most employment contracts were set to be terminated by 31.12.19, with only a small number of employees being retained. Negotiations were conducted with the Works Council regarding a reconciliation of interests and the drafting of a social plan. These negotiations concluded successfully in May 2019.
A social plan and reconciliation of interests were negotiated with the Works Council.
The reconciliation of interests specified which parts of the business would remain open. It was determined that employment opportunities in other business areas would cease and that dismissals could be issued from a specific date. It also outlined the criteria for selecting employees for dismissal, including length of service, age, degree of disability, and dependents. The agreement also allowed for certain employees to be excluded from the social selection process under § 1 III 2 KSchG.
The participation rights of the works councils were also regulated. However, the local (Cologne) Works Council did not sign the reconciliation of interests, and the agreement did not include a list of names as required by § 1 IV KSchG.
In June 2019, the defendant informed the Works Council and employees about the planned dismissals. Additionally, the defendant initiated a consultation process with the General Works Council and the local Works Council. However, since the local Works Council could only meet on 28.06.19, the defendant suspended the process, claiming it had already concluded negotiations with the General Works Council. Nevertheless, on 19.06.2019, the local Works Council was formally consulted and given a list of employees to be dismissed and those to be retained. It was also noted that no social selection process had taken place between the employees selected for dismissal and those retained. The retained employees were chosen based on their special skills and qualifications. The plaintiff was among those dismissed.
The Works Council objected to the dismissal due to missed deadlines.
The local Works Council objected to the plaintiff’s dismissal, arguing that the three-week deadline between informing the Works Council and issuing the dismissal, as outlined in the reconciliation of interests, had not been met. It also argued that there were opportunities for the plaintiff’s continued employment.
In June 2019, the defendant notified the Federal Employment Agency of the mass layoffs due to the closure of the Cologne site, claiming the consultation process had been completed.
The plaintiff subsequently filed a dismissal protection lawsuit regarding the dismissal received on 27.06.2019.
The plaintiff argued that the dismissal was invalid due to being issued prematurely. The three-week period from informing the Works Council and the employees had not been adhered to. Additionally, the notification of mass layoffs to the Employment Agency was invalid, as the consultation process with the Works Council had not been completed, violating § 17 III 3 KSchG.
The plaintiff further argued that there was no valid business-related reason for the dismissal, as the need for her role would not cease on 31.12.19. At the very least, there were other positions within the company where she could be employed.
The employer did not conduct a social selection process.
The plaintiff also argued that the employer should have conducted a social selection process among the retained employees and that she should have been retained.
She requested the court to declare that her employment with the defendant had not been terminated by the dismissal on 27.06.2019.
The employer countered that the plaintiff had received the dismissal on 28.06.2019, and thus the three-week deadline had been met. Even if the deadline had not been met, the employer argued that this would not invalidate the dismissal.
Additionally, the employer asserted that the dismissal was due to a business decision to close the plaintiff’s department. Furthermore, the employer argued that there was no need for a social selection process, as all comparable employees had been dismissed. Continued employment beyond 31.12.19 was not possible, as the plaintiff lacked the necessary qualifications. There were no alternative positions available for her.
The employer also argued that the consultation process had been properly completed, as the General Works Council, not the local Works Council, was responsible for the matter.
The employer requested that the lawsuit be dismissed.
Ruling of the Labour Court of Cologne:
The Labour Court of Cologne declared the dismissal invalid due to a lack of social justification.
The Labour Court ruled in favor of the plaintiff and declared the dismissal invalid. It upheld the lawsuit on the grounds that the dismissal was not socially justified under § 1 KSchG.
First, the court determined that the KSchG applied, meaning that the dismissal had to be socially justified.
The court then stated that the requirements for a business-related dismissal had not been met, and a proper social selection process under § 1 III KSchG had not been conducted.
Regarding the requirements for a business-related dismissal, the court noted that outsourcing a department could generally justify such a dismissal. However, it was not the court’s role to assess the business logic of the outsourcing. Nevertheless, the court could examine whether the employer’s decision to outsource actually resulted in the employee’s position becoming redundant. The employer could not simply redistribute the plaintiff’s duties to other employees, thereby increasing their workload. The employer was required to outline which duties the dismissed employee had and how these duties would be redistributed among other employees. This had to be possible at the time of dismissal, as the dismissal was supposed to be based on the business decision.
The court ruled that the dismissal was an unlawful “precautionary dismissal.”
A “precautionary dismissal,” where task redistribution is planned after the dismissal, is not permitted. The employer failed to provide evidence of such planning. Instead, the court concluded that such planning was only to take place in November 2019, meaning no business decision justified the dismissal in June 2019. The dismissal was issued first, and then the business decision was finalized, which violated the law. Therefore, the “precautionary dismissal” was deemed invalid.
The lack of a social selection process also rendered the dismissal invalid.
Furthermore, the dismissal was invalid because the employer failed to conduct a social selection process. The employer should have conducted a social selection process among the retained employees, even if they were only retained for a short period. The selection of who would be retained had to be based on social criteria according to § 1 III KSchG.
This did not happen, as the employer had made decisions based solely on performance and not on social criteria. While the employer could exclude certain key performers from the social selection process under § 1 III 2 KSchG, this was an exception, not the rule. The employer had decided solely based on performance and violated the rule-exception principle. The employer also failed to explain why the retained employees were considered key performers. The general statement that they possessed special skills and knowledge was insufficient. The court rejected the document the employer claimed outlined the selection process, as it was both illegible due to small font and substantively inadequate. The note “special task” did not provide a detailed explanation of the special skills and knowledge required under § 1 III 2 KSchG. Therefore, the court concluded that no proper social selection process had taken place.
The court then considered whether the dismissal could be justified on other grounds. However, the employer had not provided any other valid reasons. The court was not convinced by the employer’s argument that the plaintiff would have been dismissed even if a social selection process had been conducted. Instead, the court suspected that the employer simply wanted to retain the high performers. The court could not see how the retained employees were more socially protected based on their social data.
Thus, no social selection process had taken place according to § 1 III KSchG or the reconciliation of interests.
This led to the conclusion that the dismissal was socially unjustified and, therefore, invalid.
The court also rejected the notion that reduced requirements for social selection under § 1 V KSchG applied, as the reconciliation of interests did not include the required list of names.
The court emphasized that social considerations were mandatory, and the failure to apply them resulted in an evidently invalid dismissal.
As a result, the plaintiff’s dismissal was deemed invalid.
Source: Labour Court of Cologne
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