Dismissal for operational reasons – what those affected should know

You would like to know more about the dismissal for operational reasons Are you concerned about your company's restructuring and the possibility of losing your job? Perhaps you've already received a dismissal for operational reasons and urgently need some initial legal guidance on how to handle it. This is a completely new situation for you, and one that may be worrying. After all, you're at risk of losing your job.

This article aims to inform you about dismissal for operational reasons and alleviate your fears and uncertainty. In particular, you will learn:

• how you are protected against dismissal for operational reasons,
• under which conditions a dismissal for operational reasons is (in)effective,
• whether and how you can take action against dismissal for operational reasons,
• to what extent it makes sense to take action against a dismissal for operational reasons and
• whether you can expect severance pay.

If you have received a notice of termination for operational reasons, you should definitely act quickly. Dismissal protection suit is only possible within three weeks of receiving the termination notice. Failure to do so generally results in the loss of any opportunity to challenge the termination, even if it is unlawful.

1. What is a dismissal for operational reasons?

Is an employment relationship subject to protection against dismissal under the Dismissal Protection Act – in short Consumer Protection Act -, it can only be terminated if the termination socially justified One of the three grounds for dismissal that constitute social justification is operational-related reasons. Operational reasons exist when the continued employment of the employee is no longer possible due to urgent operational requirements.

This gives employers the option to reduce staffing levels if staffing needs have decreased. Such a measure falls under the fundamental right to freedom of entrepreneurial decision. If a company closes a branch, department, or production facility, it is a business decision that both the state and employees must accept within certain limits.

If a company is merely planning measures that will lead to staff reductions but has not yet made any concrete decisions or similar, dismissals for operational reasons would not (yet) be permissible.

2. When is dismissal for operational reasons permissible?

For a dismissal for operational reasons three Requirements necessary:

• Existence of “urgent operational requirements”
• No alternative employment opportunity for the employee (i.e. milder measures instead of dismissal)
• A properly conducted social selection

Urgent operational requirements for dismissal for operational reasons

For a dismissal for operational reasons, on the one hand operational requirements On the other hand, for a dismissal for operational reasons, these requirements must be urgent A dismissal for operational reasons always begins with a business decision. For example, if a branch or production facility is closed, this is based on such a business decision. This decision then leads to job losses.

The employer must explain both precisely and, above all, comprehensibly in any dismissal protection proceedings. For example, if a branch was closed due to declining sales, this results in the dismissal of the branch's employees for operational reasons. In this case, the decline in sales may have triggered a business decision—the closure of a branch—but it is not the cause of the dismissal, since the cause of the dismissal lies in a business decision.

The trigger or reason for a business decision can be either external circumstances or internal reasons.

External reasons for job loss

Under external reasons are circumstances that have no direct connection to the organization and management of the business, but nevertheless have an impact on the business. They can justify an urgent operational need for termination if the workload has decreased permanently due to these circumstances. This reduction in the workload must result in no need for continued employment for one or more employees. The employer's burden of proof is therefore strict. He must demonstrate that

• there is no short-term downward movement,
• but a permanent decline in orders is to be expected and
• a fluctuation in orders can be ruled out prognostically.

To demonstrate this, an employer must demonstrate a decline in workload using data records from representative reference periods (Federal Labor Court, judgment of 20 February 2014 – 2 AZR 346/12).

Since it is often difficult to present external reasons to the satisfaction of labor courts, employers will use these external reasons, such as a decline in economic performance, merely as a starting point for an organizational measure, the implementation of which will also eliminate the need for continued employment of employees in the future. Examples:

• Change of shifts
• Change of opening hours
• Concentration on the core business

Then the external reasons are merely the motive and background for this Organizational decision, with which an employer intends to better position the company for the future. Judicial review of this decision is significantly limited.

Internal reasons for dismissals

Business decisions are often made internal Reasons are made. For example, if a machine is purchased that replaces several jobs, these are purely internal reasons that have nothing to do with declining sales, price increases, or other external reasons. Internal reasons are simply facts that the employer decides on because they see a need for them. In most cases, these are cost-saving or rationalization reasons.

Examples of internal reasons include

• Closure of operational units
• Relocation of production abroad
• Merging or outsourcing departments
• Automation e.g. through new machines
• Conversion of production e.g. through new manufacturing processes

A clear distinction between internal and external reasons is often not possible, since internal and external reasons overlap. Proving internal reasons is generally much easier for the employer.

Job losses due to business decisions

Therefore, if an employer no longer sees a need for a worker, for example because the economic environment has changed, and decides to implement an organizational measure of the type described above, they can, in principle, terminate the employment for operational reasons. Under the Dismissal Protection Act, they are not required to retain jobs and employees they no longer need.

From the previous statements and the feature “urgentHowever, it should not be concluded that the company must be in financial difficulty for a dismissal for operational reasons to be possible. Even organizational decisions not driven by a crisis can socially justify dismissals for operational reasons. This already follows from the employer's constitutionally guaranteed entrepreneurial freedom.

Limits of internal reasons for dismissals for operational reasons

The Burden of proof for internal company reasons is generally lower than for external reasons. However, this does not mean that all internal company reasons must be accepted by the labor courts as justification for dismissal for operational reasons. Here, too, the employer certain limits If exceeded, dismissal for operational reasons may be inadmissible.

These include, for example:

• the obvious Irrelevance a business decision if it violates laws or contracts
• the obvious unreason a business decision, e.g. in the absence of economic and strategic business sense
• the obvious arbitrariness a business decision, e.g. if employees are to be deprived of general protection against dismissal due to restructuring of the company organisation

3. Are there milder measures than dismissal for operational reasons

In the case of a transfer, a comparable position must be available by the end of the notice period or become available within a foreseeable period after the end of the notice period (for example, the time a job applicant would need to become familiar with the job is reasonable). If positions with less favorable conditions are available, such as lower pay or fewer weekly working hours, a change of contract may be considered as a more lenient measure. If comparable positions with equivalent or worse working conditions exist within the company, the employer must transfer the employee or issue a change of contract.

More on the topic Notice of change read in this article.

Workplace with comparable activities

However, a transfer or a change of contract is only considered if the employee has the skills and knowledge required for the position in question and can therefore meet the requirements of the vacant position. The priority of a transfer or a change of contract in the case of vacant positions for which the employee is suitable is an expression of the principle of proportionality. The employer's obligations here are correspondingly extensive, as the Federal Labor Court has pointed out:

The offer of continued employment under changed (worse) conditions may only be omitted in extreme cases (e.g. in the case of completely substandard employment...). Continued employment must also be given priority if it is only possible after the employee has been trained in a vacant position, or possibly only after a reasonable retraining or further training measure has been offered to the employee.

BAG, judgment of 5 June 2008 – 2 AZR 107/07

Reasonable retraining and further training by employers

After Section 1 paragraph 2 sentence 3 KSchG A dismissal is socially unjustified if continued employment in a vacant position in the company is possible after reasonable Retraining and further training measures is possible under changed working conditions and you have given your consent to this.

This may result in employers being required to provide a position even after the notice period has expired, which you can fill after appropriate retraining and further training measures. Employers may only waive reasonable retraining and further training measures if there will be no employment opportunities for the employee even after completing these measures.

4. What is social selection?

If employees are to be dismissed for operational reasons, Section 1 paragraph 3 KSchG a so-called Social selection to be carried out if more employees would have to be dismissed than comparable vacancies are available in the company. Priority should be given to those employees for whom the dismissal represents less social hardship and who are least in need of social protection. For this purpose, personal characteristics should be selected that can provide information about the need for protection and enable a comparison of social protection needs. According to Section 1 (3) of the KSchG, the following characteristics must be taken into account in any case:

• the length of service,
• the age,
• the maintenance obligations, as well as
• any severe disability of the employee.

The characteristics are listed exhaustively – further social circumstances are only to be taken into account if they are directly related to the social data mentioned.

Comparability of employees

Social selection extends to all employees of a company who are actually and legally comparable. A company is the organizational unit within which a company, alone or jointly with its employees, pursues specific work-related objectives using both material and immaterial resources. The employer must also include company divisions and departments in the social selection process, even if they are located far from the main company. This applies as long as they can be assigned to the company in terms of work and the management is identical.

The question of what constitutes a company is important because if the group of comparable employees is incorrectly formed, the social selection would not extend to all comparable employees in the entire company. The social selection would then be flawed.

Comparability: At legal, technical and hierarchical levels

If the company is clearly defined in this way, the employer is obligated to include comparable employees in the social selection process. The only question to be asked is whether the employee to be dismissed is comparable to other employees, not the other way around. Social selection is therefore, in some respects, a "one-way street." Comparability must cover the following aspects:

• Hierarchy level: Must be the same organizational hierarchy level. (Horizontal comparability)
• Qualifications, knowledge, and skills: What matters is which activities and functions (of other employees) an employee can perform based on their actual knowledge and skills. Complete identity of the areas of responsibility is not required. (Professional comparability)
• Contractual content: The employee to be terminated must be able to be unilaterally transferred or relocated to another position based on their employment contract—by right of direction. (Legal comparability)

Non-comparable employees

The employer may exclude certain individuals from the social selection process who are not comparable. These include:

• Employees without protection against dismissal under the Dismissal Protection Act
• Dormant employment relationships
• Employees with special statutory protection against dismissal who are absolutely non-dismissible (works council members, trainees, conscripts)
• Employees with special statutory protection against dismissal who can only be dismissed with the consent of an authority, unless the authority has granted consent or the employer has submitted a corresponding application (pregnant women, employees on parental leave, severely disabled people)
• Employees who are not subject to ordinary termination under the collective agreement, provided that the application of the collective agreement provision in the specific case does not lead to a grossly incorrect selection result (Federal Labor Court, judgment of 20 June 2013 – 2 AZR 295/12)
• Employees who are contractually non-dismissible if the result of the social selection would not result in a gross selection error and no abuse of law would have occurred (Federal Labor Court, judgment of 20 June 2013 – 2 AZR 271/12)
• Fixed-term employees, unless the possibility of ordinary termination has been agreed

Highly qualified employees whose knowledge, skills and performance are particularly necessary for the success of the company or important for the personnel structure (Section 1 (3) Sentence 2 KSchG) can also be exempted if this is legitimate business interest The employer is not required to make use of this option. However, if they do so, they must comply with the principle of equal treatment under labor law. On the other hand, employees have no right to be excluded from social selection based on their performance.

Scope for assessment and implementation of social selection

When conducting social selection, the four legally defined characteristics (length of service, age, maintenance obligations and severe disability) play a role insofar as they are intended to reflect the ranking of social protection needs within the group of comparable employees.

However, the law only says something about the characteristics, but not about the precise implementation Social selection. Although the criteria are generally of equal importance, the employer has a certain degree of leeway in their implementation. The only requirement is that all criteria have been sufficiently considered, so that, for example, adjustments to the weighting may be permissible.

Social selection is often based on certain point systems used to objectify and compare employees. Specific point systems are assigned to individual characteristics. For example, a point system approved by the Federal Labor Court looks like this:

It is expressly permissible for employers to place greater emphasis on maintenance obligations, as in the present points table. This is because the social data on age and length of service tend to disproportionately favor older employees.

5. What are the consequences of incorrect social selection?

It is not certain that social selection always identifies those employees who are dismissed because of their lower social protection needs, but the law does not require this either. Every social selection system can have both disadvantages and advantages. For this reason, Section 1 Paragraph 3 of the KSchG does not require perfect social selection, but only sufficient consideration of the four characteristics specified in the law.

Therefore, errors in the social selection process do not always render the dismissals for operational reasons unlawful. Only if an error is objectively reflected in the selection of the employees to be dismissed can it be considered at all. However, if the employer makes an objectively justifiable selection despite the social selection process being flawed, even if only by chance, the error is irrelevant.

Social selection based on a points system

If the employer uses a points system, the assessment of whether the error has had an impact is carried out in the following steps:

• Is there a points system that ensures a balance in terms of social criteria?
• Is there no gross selection error according to Section 1 Paragraph 4 of the KSchG?
• What rank would the terminated employee have if the points system were properly applied?

If, however, a points system is lacking, the following applies: Only employees who are significantly more deserving of protection can invoke a selection error. It must be established that the employer, even given the discretion it is entitled to, could not have made any other decision than the one in favor of the employee being dismissed.

Conversely, this means that an erroneous social selection is legally irrelevant if an employee would be liable to dismissal under all conceivable outcomes of the assessment.

As I told you about the topic Termination You can find out how we can help here.

Social selection: Examination only for gross errors

Social selection can only be checked for gross errors if a List of names is present or it Selection guidelines In this case, the assessment of gross errors relates to the selection criteria and their relative weighting.

The social selection is grossly incorrect if there is an evident, massive deviation from the principles of Section 1 of the Employment Protection Act (KSchG) and the balancing of interests lacks any social balance. However, if a list of names or selection guidelines are missing, gross error is not the standard (Federal Labor Court, judgment of 19 July 2012 – 2 AZR 386/11).

6. How can I check how the social selection was carried out?

According to Section 1 Paragraph 3 Sentence 1 of the KSchG, employees have a right to be informed about the reasons for social selection in the context of dismissal for operational reasons. Right to information to the employer. This is intended to provide you with the following information regarding social selection:

• Relevant social considerations
• Formation of the comparison group
• Names of the employees included in the social selection
• Weighting of social criteria
• Exclusion of employees from social selection and reasons

Only with this information can you assess the chances of success of a wrongful termination claim. However, this also means that the employer must provide you with this data immediately after issuing a dismissal for operational reasons.

The information does not have to be based on objective criteria with regard to the social selection. The employer only has to provide the reasons for the social selection from his subjective point of view. disclose.

7. Am I entitled to severance pay if I am dismissed for operational reasons?

There are none There is no automatic legal entitlement to severance pay upon termination, even for operational reasons. This is one of the most persistent myths in labor law.

Employer can offer severance pay

However, in the case of redundancies for operational reasons, there is the special feature of § 1a KSchGAccording to Section 1a of the German Dismissal Protection Act (KSchG), employees who are dismissed for operational reasons receive severance pay if the employer offers it with the dismissal. 

In return for waiving the right to file a claim for unfair dismissal, the employee receives a severance payment of half a month's salary per year of employmentHowever, this only applies if the employer explicitly offers this with the notice of termination. If the employer does not offer this, there is no entitlement to severance pay.

No legal entitlement to severance pay

This means: There is no legal right to severance pay! Severance pay is also not the goal of a wrongful termination lawsuit before a labor court. The goal of such a lawsuit is always to exploit the right to dismissal and thus regain the job.

In many cases, a settlement is reached, which may also include severance pay, but this depends on the employer's willingness to settle. Whether the settlement includes severance pay, and how much it amounts, also depends on how skillfully the negotiations are conducted and how confident the employer is that the termination will stand up in court.

More on the topic severance pay You can find out more in this article.

Settlement before the labor court can enable severance pay

Although a settlement results in the loss of the job, the employee receives severance pay, and the proceedings are legally concluded—especially from the employer's perspective. If the employer does not offer severance pay, the employee does not have to agree to the settlement. Yet, this is precisely the incentive for many employers to enter into a settlement. The labor court then no longer examines whether errors were made in the dismissal for operational reasons, for example, whether there were other vacant positions or whether the social selection process was flawless. With the settlement, the proceedings are concluded and closed.

An ineffective dismissal for operational reasons, on the other hand, can cost the employer a lot of money. Employers therefore prefer a legally secure termination – in return for a severance payment acceptable to the employee. The more uncertain the dismissal, the higher the severance payment.

Severance pay in the event of operational changes and social plan

There is one exception to the principle that no severance pay is paid in the case of redundancies. Quite often, the dismissal is part of a larger restructuring measure. This can be the threshold for Operational change exceed. If a works council exists, the employer may be required to negotiate a social plan. In a social plan, the employer and works council must compensate or at least significantly mitigate the economic disadvantages of the employees. This can be achieved, among other things, through the payment of severance payments.

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8. What do I do if I have been given notice of termination for operational reasons?

If you have been given notice of dismissal for operational reasons, you have two options: To sue or not to sueWhich option you choose depends primarily on your own interests and economic considerations.

If you want to file a wrongful termination suit, you don't have much time. The suit must be filed within three weeks after receipt of the notice of termination at the competent labor court. Employees who wish to file a claim for protection against dismissal should be advised by a Specialist lawyer for labor law If you allow the three-week notice period to expire, the termination becomes effective. You can then no longer challenge the termination, regardless of whether it was unlawful or not. The employment relationship will then end as terminated.

However, you can also decide against filing a lawsuit from the outset. Which of the two options you choose depends on many factors. These include:

• Does a claim for unfair dismissal have a (likely) chance of success?
• How much will the lawsuit cost you?
• Are you convinced that the termination is invalid and do you want your job back?
• What are the chances of receiving severance pay?
• Would the severance payment outweigh the costs of a wrongful termination lawsuit?

Financial considerations play a minor role if you have legal expenses insurance. Then you don't have to worry about legal fees. You can take the full risk. In all other cases, however, your interests and the chances of success in the case are always decisive.

9. Conclusion

• Requirements for dismissal for operational reasons: Dismissal for operational reasons is only permissible if there are urgent operational requirements, there is no other employment opportunity for the employee and a proper social selection process has been carried out.
• Types of operational requirements: Operational reasons can be both external (e.g. a decrease in work volume due to a lack of orders) and internal (e.g. closure of departments or automation).
• Milder means: Before dismissing an employee for operational reasons, the employer must consider whether less restrictive measures, such as transfers or retraining, are possible. Only after these options have been exhausted is dismissal permissible.
• Social selectionIn the case of dismissals for operational reasons, the employer must conduct a social selection process, taking into account criteria such as length of service, age, maintenance obligations, and severe disability. The goal is to protect those employees most in need of social protection.
• Review of social selection: Errors in the social selection process only invalidate the dismissal if they objectively have a detrimental impact on the selection of the dismissed employee. The selection process can only be reviewed for gross errors if a list of names or selection guidelines are available.
• Legal remedies and deadlines: Affected employees must file a claim for protection against dismissal within three weeks of receiving notice of termination if they wish to legally defend themselves against the termination.

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