Dispute resolution – restructuring – staff reduction
By Christine Libor, FPS
Restructuring not only causes nonproductive disturbances among staff, it can also be expensive due to lawsuits raised by affected employees. Therefore it is important to plan strategically at an early stage. Skilful use of the legal measures at hand can ultimately avoid many disputes.
If there is a works council in the company, it is mandatory that the employer informs them at an early stage and under certain statutory conditions negotiates a reconciliation of interests and a social-compensation plan. This is a labour-management contract, in which the measures for restructuring are determined and the financial compensation for those employees who are affected by the changes are laid out. If this is not done, employees may lodge damage claims and the works council could even stop the restructuring by means of a court order.
The works council is entitled to consult a lawyer at the employer’s expense. Quite often, the relevant workers union presses to be involved in the negotiations, but the support of a non-legal labour union representative or of any labour union representative besides a lawyer can only be claimed by the works council if there are more than 300 employees in the company. If not, employers can decide on a case by case basis whether they consider it to be reasonable to involve the labour union.
A strategically important instrument in handling staff cutbacks is an agreement on a name list. For this purpose, in the reconciliation of interests, not only the jobs which shall be cut back are listed, but also (usually in an attachment) the names of the employees who shall be made redundant. The works council is not obliged to agree to such a name list and therefore usually requests additional payments for the employees affected in exchange for their support. On the other hand, this list has the important legal advantage that termination notices which are declared on grounds of a name list can be reviewed by a Labour Court only to a very restricted extent. Without this list, every single termination notice would require a very complex statement of reasons why the job has been cut back and why exactly this employee must be laid off. It has to be taken into account that most employees tend to sue against their redundancy. This leads to a considerable extra costs, expenditure of time and, last but not least, disruption in the company, because in the case of a return of the employee originally laid off, another employee would have to expect a termination notice. If the termination notice is declared on the grounds of a name list, the court will review the statement of reasoning only with regard to gross mistakes. This crucially turns things in favour of the employer. In practice, this leads to a situation with much fewer lawsuits and leads more often to positive outcomes in remaining trials.
Christine LiborFPS, Dusseldorf, Germany
T: +49 211 30 20 15 29
FPS is one of the largest fully independent German law firms with offices in Berlin, Dusseldorf, Frankfurt am Main and Hamburg. FPS currently employs over 120 lawyers and notaries. One of the firm’s core areas of expertise is national and international litigation as well as dispute resolution.
Christine Libor is a Partner at FPS in Dusseldorf. Her areas of expertise cover the entire range of labour law and media law, including litigation and dispute resolution. She regularly advises companies in change processes, focusing on economic and amicable solutions, and also representing clients in necessary lawsuits.
Published: Spring 2017 l Photo: Colourbox.de - Pressmaster