Collective redundancies dismissal no longer void in the event of incorrect notification

Recently, the Sixth Senate of the Federal Labor Court (BAG) questioned whether mistakes in collective redundancy proceedings actually lead to the voidness of dismissals, as was previously the case. Find out below what the order for reference is about and what effects are to be expected. In any case, the all-clear cannot yet be given for mistakes in collective redundancy proceedings.

BAG, order for reference dated 14 December 2023 - 6 AZR 157/22 (B)

On the procedure for collective redundancies

In the case of collective redundancies, employers have had to comply with extensive requirements under the Dismissal Protection Act (KSchG). If they make mistakes in doing so, this can lead to the dismissal being void. In the consultation procedure (Section 17 paragraph 2 KSchG), for example, the employer must first inform the works council of the planned collective redundancy and discuss with it how dismissals can be avoided. In the notification procedure (Section 17 paragraph 1 and 3 KSchG), the employer has numerous obligations towards the employment agency in accordance with paragraph 3 sentences 2 and 3 regarding details of the planned redundancy.

Previous case law: breach of procedure leads to voidness of dismissals

Section 17 paragraph 3 sentences 2 and 3 KSchG was previously considered by the BAG to be a prohibition law. Violations were often sanctioned with the voidness of the dismissals in accordance with Section 134 BGB: Above all, the duty to notify served the individual protection of employees (and not just the labour market policy purpose of giving the employment agency advance warning of collective redundancies). The individual protection arises from the European Collective Redundancies Directive (ECRD), on which Section 17 KSchG is based. The strict legal consequence is necessary due to the requirement for effective implementation of EU directives (“effet utile”). This view is criticized in the legal literature for quite some time. However, it has long been the case law of the BAG and therefore represents a major risk for employers who are forced to make collective redundancies.

Preliminary ruling proceedings at the ECJ and order for reference to the Second Senate of the BAG

However, on 13 July 2023, the European Court of Justice (ECJ) stated and ruled that at least Art. 2 paragraph 3 subparagraph 2 ECRD (which Section 17 paragraph 3 sentence 1 KSchG implements) does not grant individual protection for employees (C-134/22). Unfortunately, the ECJ did not clearly state whether this also applies to the notification requirement pursuant to the abovementioned sentences 2 and 3 of paragraph 3.

Therefore, on 14 December 2023, the Sixth Senate of the BAG has now suspended three proceedings on collective redundancies and, in one of the proceedings (6 AZR 157/22 (B)), asked the Second Senate of the BAG whether it will uphold its previous interpretation of the law. In this order for reference, the Sixth Senate has already announced its intention to deviate from the previous sanction system and has addressed several points of criticism of the previous case law: It now also is of the opinion that the notification procedure does not have a prohibitive character, as individual protection is merely a reflex, but not the purpose of the notification obligation. In fact, according to the recent opinion of the Sixth Senate, the notification procedure only regulates the administrative-procedural process (the “how”) of collective redundancies. The effectiveness of the respective dismissal (the “whether”) is independent of this. Neither does it follow from the German KSchG nor the European ECRD that a breach of the notification procedure must lead to the ineffectiveness of the dismissals. An interpretation to this effect by the labour courts is neither proportionate nor possible.

Consequence: Possible change in case law

The all-clear cannot yet be given. Final decisions form the BAG should be awaited first.

With the possible change in case law, the strict sanction system for the notification procedure would be softened. In addition, previous inconsistencies in the event of different mistakes in the entire notification procedure (Section 17 paragraph1 and 3 KSchG) could be harmonised. This change would create legal certainty for employers, who previously had to reckon with the risk that all dismissals of a collective redundancy would be void in the event of any mistakes in the notification procedure.

According to the order for reference, no change is intended for the consequence of voidness in the event of mistakes in the consultation procedure (Section 17 paragraph 2 KSchG). In this respect, the Sixth Senate maintains its view that this paragraph continues to have a prohibitive character, as it serves the individual protection of employees and therefore the consequence of voidness is proportionate.

Should the Second Senate, like the Sixth Senate, abandon its previous case law, dismissals would in any case no longer be void due to mistakes in the notification procedure. If, on the other hand, the Second Senate continues to adhere to its opinion, the Grand Senate of the Federal Labour Court, consisting of professional judges from all ten senates as well as lay judges, would have to be called upon. In this case, the welcome change in case law would be uncertain. It therefore remains to be seen. Collective redundancy procedures should therefore be carried out correctly until further notice due to the risk of sanctions.