The most important things at a glance:
- In the case of operational termination, the reason for termination lies in urgent operational requirements that necessitate a reduction in staff.
- Before a dismissal for operational reasons can be issued, the employer must examine all possibilities for continued employment.
- A lawsuit against a redundancy dismissal is possible. However, the three-week deadline must be strictly observed.
Note: The term „employee“ below includes all genders (m/f/d) and is used for improved readability..
Role of operational redundancies in practice
Approximately 73% of the terminations that occur in practice are for operational reasons. This makes it all the more important to gain a clearer understanding of the requirements for the validity of a termination for operational reasons and the options that arise from this.
What is a redundancy dismissal?
The termination for operational reasons is regulated in § 1 II KSchG. According to this, termination for operational reasons can occur if urgent operational requirements necessitate a reduction in personnel. Therefore, the urgent operational requirements must directly lead to the elimination of the relevant job.
Operational reasons for termination can be divided into two categories: internal operational reasons and external operational reasons.
Examples of company-internal termination reasons include:
- Restructurings
- Betriebseinstellungen/Betriebsaufgabe
- Rationalization measures
- Outsourcing
- Operational restrictions
Reasons for termination outside of the company include, for example:
- Lack of orders
- Revenue decline/sales difficulties
A termination for operational reasons is permissible when the employer can demonstrate that the employee's position is being eliminated due to urgent operational requirements that make its continued employment impossible.
The starting point for dismissals due to operational requirements is initially the so-called entrepreneurial decision. This is an organizational decision that leads to the elimination of one or more jobs. According to the principle of free entrepreneurial decision-making, the entrepreneurial decision can only be reviewed to a limited extent: Companies must generally be granted economic freedom of decision.
The review of this business decision, which leads to layoffs, is subject to specific conditions.
Prerequisites for dismissal due to operational requirements
According to the case law of the Labor Court, four conditions must be met for a dismissal for operational reasons to be effective. These are detailed below.
1 Urgent operational requirements
First, there must be urgent operational requirements. These operational reasons must lead to job redundancies, and the employer must explain in detail why the entrepreneurial decision or development in the specific case leads to job redundancies.
2 Lack of further employment opportunities
Furthermore, there must be no possibility of continued employment. This is the case when the employee can be continued to be employed in another comparable position within the company. A position is comparable if the employee is capable of performing the tasks required for that position based on their individual qualifications.
This means that the employer must examine in the specific case whether there are vacant positions available in the company. Positions are vacant if they are unfilled at the time of termination or become vacant by the end of the notice period.
In addition, the possibility of continued employment under Section 1(2), sentence 3 of the Dismissal Protection Act can also be assumed if there are no vacant positions., „but the continued employment of the employee is possible after reasonable retraining or further training measures or continued employment of the employee under changed working conditions, and the employee has consented to this.“
3 Social selection error-free / Social selection in case of operational redundancy
Finally, a flawless social selection must have been made. This comes into play when the employer has dismissed only a few employees (and not, for example, the entire operation). The social selection then establishes certain objective criteria according to which the selection of the person to be dismissed is based. The background to this is that the individual employee „cannot help it“ regarding the dismissal due to operational reasons and that this constitutes a particular hardship. For this reason, the selection of employees to be dismissed should be made based on those for whom the dismissal represents the least hardship. For example, a dismissal would hit a father of a family who has been with the company for 20 years harder than a 25-year-old career starter who was recently hired. Only employees who are least in need of social protection may be dismissed.
The criteria to be considered here are, according to § 1 (3) sentence 1 KSchG:
- Length of employment
- Age
- Maintenance obligations
- Disability status of the employee
In practice, point systems are used for weighting these criteria. There isn't a rigid system; rather, the BAG has already recognized various (similar) point systems.
This can, for example, look like this (according to BAG, 09/06/2007 – 2 AZR 387/06)
| Elderly employee | 1 point/year of life |
| Employment in the company | 1 point/year |
| Child support obligation | 2 points/child |
| Spousal support obligation | 4 points |
Based on this system, a total score is then calculated for the employees. Employees with the lowest scores at the end are least in need of social protection. If this becomes apparent based on the criteria, in practice it usually leads to younger employees being laid off.
Exception to Social Selection: Special Provisions for Small Businesses and Temporary Employment
Some special circumstances arise with dismissals for operational reasons in small businesses. This is because the Protection Against Dismissal Act only applies to businesses that employ at least 10 employees. The following rules apply here:
- Part-time employees working <20 hours per week are counted as 0.5.
- Part-time employees with <30 hours per week are compensated at a rate of 0.75
- Trainees are not taken into account
As long as the number of employees does not exceed 10 afterwards, the Protection Against Dismissal Act does not apply, and there is no social selection according to the criteria discussed above. In principle, the employment relationship can then also be effectively terminated by the employer at any time, observing the notice period.
However, there are also certain exceptions here. According to the case law of the BAG, a minimum degree of social consideration must then take place. If the employer does not provide this consideration, the termination can also be contrary to good faith here. This then results from the general clause of § 242 BGB in individual cases.
Special protection against dismissal
Furthermore, it should be noted that some social groups have additional, special protection against dismissal. These are:
- Trainee
- Pregnant
- Mothers
- Parents on parental leave
- Works council members
- Severely disabled
- Internal Data Protection Officer
- City council members
Ineffectiveness of operational dismissal for other reasons
In addition to the requirements for a correct social selection being met, a termination for operational reasons can also fail due to general grounds for invalidity. This is the case, for example, if the works council present in the company was not consulted before the termination was issued, or if the approval of the integration office was not obtained beforehand when terminating a severely disabled employee.
Employer's obligation to notify mass redundancies
Special considerations apply in the event of a so-called mass layoff. This is the case when the employer terminates multiple employees for operational reasons. In such instances, a mass layoff notification to the employment agency may be necessary. If the employer makes mistakes in this regard, the termination for operational reasons may also be invalid.
According to § 17 of the KSchG, the employer is obliged to issue a mass layoff notice if:
- With an operating size of 20-60 employees, more than 5 employees can be terminated for operational reasons.
- In companies with 60 to 500 employees, more than 25 employees or 10% of the regularly employed workforce are laid off for operational reasons
- With a company size of more than 500 employees, more than 30 employees can be made redundant.
Termination due to operational requirements notice period/ options against termination due to operational requirements
As a legal remedy against a termination due to personal reasons, a lawsuit for protection against dismissal is possible. However, it should be noted that this must be filed within 3 weeks of the termination notice being received. Adherence to this deadline is of great importance. Within the scope of the dismissal protection proceedings, the court then determines whether the dismissal was socially unfair and therefore invalid.
Severance pay for operational termination
Under the conditions of § 1a (1) of the Protection Against Dismissal Act (KSchG), the employer can combine an severance offer with the termination. This requires:
- In a dismissal for urgent operational requirements, the employer must state that the dismissal is based on urgent operational requirements and that the employee is entitled to a severance payment of a specific amount upon the expiration of the notice period.
This is usually associated with the indication:
„The employee may not file a lawsuit for protection against dismissal within the aforementioned 3-week period.“
Severance pay amount for operational redundancy
As a rule, a maximum of 0.5 gross monthly salaries per year of employment are awarded (see Section 1a II KSchG).
Termination agreement instead of termination for operational reasons
Employers often offer employees a termination agreement before making redundancies. This can be worthwhile for the employee if it results in a higher severance payment. However, it should be noted that signing a termination agreement can generally lead to a suspension of unemployment benefits according to § 159 I No. 1 SGB III. While this suspension usually does not occur if there is an important reason for signing, as is the case in the situation of an otherwise issued redundancy, the reason for signing the termination agreement to avoid an otherwise issued redundancy must be included in the termination agreement for the employment agency to consider.
Conclusion: Conduct in case of dismissal for operational reasons
When it comes to redundancies, a number of complex regulations must be observed. These are frequently modified and supplemented by new rulings from labor courts. This makes it increasingly difficult to get an overview of the validity of redundancies. If you are affected by a redundancy, it is therefore absolutely advisable to seek legal advice from a Certified Specialist in Labor Law to obtain one who is familiar with current developments and has process experience.
Consulting in times of Corona
The coronavirus crisis presents a challenge for both employers and employees.
Therefore, our team of specialized lawyers is fully available to you during this difficult time.
- Full commitment of lawyers and staff
- Off-hours accessibility service
- Top priority for your request
- Upon request, an appointment on short notice at one of our offices.
- Alternative secure processing via phone and email
Simply log in at Phone. +49 6151 – 99 55 0 or send us a message via the form below Contact Form.
We will take on your case promptly and advise you purposefully.