Redundancy in Germany - prerequisites for terminations & redundancy pay

Employees can only be terminated for certain socially justified reasons if they are under protection against dismissals (§ 1 KSchG). In principle, a reduction of the workforce is a justified reason. However, in order for redundancies to be lawful, employers must comply with the following three prerequisites.

1. Operational requirements for reduction in workforce

A decision taken by the company must result in a future, permanent reduction in the need for labour in the company. Such decisions are manifested for example in

• mergers, outsourcing or closure of departments, branches or companies,
• reorganization, restriction or relocation of production,
• increases in work density of employees or
• redefinition of job descriptions for existing workplaces.

Justification for reduction

Reasons for such decisions may lie in economic developments (decline in orders or turnover, shortage of raw materials or energy, loss of financing), technical progress or political changes. However, whether the decision is economically sensible or not is irrelevant. Nevertheless, employers must be able to provide sufficient justification.

"Economic difficulties" is insufficient

A blanket justification based on economic difficulties is not sufficient in this context. In light of the current situation, it should also be stressed that economic difficulties caused by Corona is insufficient justification for redundancy. The employer must be able explain why this decision leads or will lead to a change in staffing levels.

2. No possibility of continued employment

Even if operational requirements lead to a reduction in the need for labour, terminations for operational reasons may not be admissible if they are not "urgent". A dismissal is not urgent if you can be employed

• on another vacant position in the same establishment, or
• in another establishment within the company.

Comparable positions

For continued employment to be possible, comparable positions must be vacant at the time of the dismissal or be expected to become vacant until the end of the notice period. Jobs are considered comparable if the employer is able to transfer the employee to the job on the basis of the employment contract even without consent. If modification of the employment contract is required for continued employment, on the other hand, there is no vacant position.

In case there are no vacant comparable positions, there may also be a possibility of continued employment if reasonable retraining or changes in working conditions would allow continued employment and the employee has given his/her consent.

3. Proper selection of employees

When jobs are being cut, it does not automatically mean that all employees holding the positions in questions will have to leave the jobs and that others will be spared. If, for example, a department or branch is closed, employees from other departments or branches may need to be considered as well. Which employees have to be taken into consideration for layoffs depends on the comparability of the other employees.

Comparable employees

All employees who are able to perform a different but equivalent job to those being cut due to their current work and qualifications and who could also be transferred to any position in question due to contractual authority are to be considered comparable. A short training period is not sufficient to justify a lack of comparability.

Selection based on social criteria

If the comparability of employees results in more candidates for terminations than jobs to be cut, employers must make a selection based on social criteria (Sozialauswahl). For this purpose, the employer must especially give sufficient consideration to the following aspects when selecting between the employees concerned.

• seniority
• age
• obligations to pay alimony
• severe disabilities

At the employee's request, the employer must state the reasons which led to the choice made.

Employees to be excluded from the selection

Not all employees may be included in the selection process if their continued employment is in the justified interests of the company. However, the interests pursued with the exclusion must be weighed against the level of protection. The reasons for the exclusion of the employee must be all the more important the lower the employee's need for protection based on the social criteria. Potential reasons for the justified interest of the company include in particular

• Special knowledge: qualifications, language skills, expertise from many years of professional experience,

• Special skills: professional qualifications, flexibility, leadership skills, sensitivity to important customers or problem solving,

• Extraordinary performance in comparison with colleagues: fast or effective work, good work results, low scrap or reject rate in production or

• Ensuring a balanced personnel structure: age structure, the gender ratio or the ratio of foreign to domestic employees.

Further requirements for lawful terminations

In addition to sufficient justification for redundancies, employers must comply with further requirements for lawful terminations. These include in particular

1. termination notices must comply with formal standards: appropriate notice period, sufficient justification, and written form,

2. if applicable, compliance with the special protection against dismissal for certain groups of employees: people in voluntary military service, pregnant women up to 4 months after giving birth, employees on parental leave, parents on part-time work within the first 14 months of the child's life, severely disabled persons, employees on nursing leave or temporarily unable to work due to an acute nursing situation, and works council members.

» Check if your termination was lawful.Subject your termination to a free initial examination!

Many redundancies do not meet the requirements and are therefore unlawful. If you believe your termination is unlawful, you can challenge it to either receive severance pay or continue employment. To challenge your dismissal, you must file an action for protection against dismissal with the labour court within 3 weeks of receiving the notice. If you fail to do so, even a dismissal that is not justified will take effect.

» So act quickly and find our your prospect for taking action against your dismissal. Subject your termination to an initial examination quickly & for free!

Under certain circumstances, you may even be entitled to severance pay without a dismissal protection lawsuit. For you to have such a legal claim, your employer must have terminated you for operational reasons and indicated your entitlement to redundancy pay in the notice.

Caution with severance pay offers

Acceptance of the severance pay offer can be regarded as an amicable termination. This can lead to disadvantages later on, for example when claiming unemployment benefit. It is therefore better to seek professional advice on how to best approach your termination.