Mistakes in Works Council Consultation Prior to Termination: Serious Consequences, but Avoidable

If a works council exists in the establishment, the employer must consult it before issuing any notice of termination (Section 102(1) of the Works Constitution Act ("Betriebsverfassungsgesetz (BetrVG)")). This applies regardless of whether the employer intends to issue an ordinary termination, an extraordinary termination, or a dismissal with the option of altered terms, whether the Protection Against Dismissal Act ("Kündigungsschutzgesetz (KSchG)") applies, or whether the employee is still within the statutory waiting period.

The consultation does not necessarily have to be submitted to the works council by the head of HR or a statutory representative (such as a managing director or board member). It is sufficient for the consultation to be initiated by any person authorized to do so. Such authorization does not have to be evidenced. The works council therefore may not reject the consultation on the ground that no power of attorney has been presented.

A termination issued without prior consultation of the works council is invalid. The same applies where the consultation was not conducted properly. In that case, the court will rule in favor of the employee on that basis alone, even if the termination would otherwise have been justified. The consequence is that the employment relationship continues and the employee must remain employed. The time and costs invested in the dismissal protection proceedings will have been wasted. In addition, the employer may be required to pay default-of-acceptance wages. This is particularly frustrating because mistakes in works council consultations are often avoidable. Employers should therefore pay particular attention to the points set out below.

The law does not prescribe any particular form for the consultation, meaning that it could, in principle, be conducted orally. Nevertheless, employers are strongly advised to consult the works council at least in text form, where appropriate attaching further documents (for example, records of a prior investigatory hearing or warning letters). Why? In any subsequent dismissal protection proceedings, the employer must plead and prove that the works council was properly consulted. This can usually be done by producing the properly prepared consultation letter. By contrast, it is generally difficult to convincingly plead and prove that an oral consultation was properly conducted.

The employer needs to consult the works council on each intended termination and must identify the type of termination. Even if the employer intends to issue an extraordinary termination and, in the alternative, an ordinary termination, it must expressly consult the works council both on the extraordinary termination and on the ordinary termination. The same applies where the employer intends to issue both a termination based on established misconduct and a termination based on suspicion; these are legally two separate terminations, each requiring consultation of the works council.

As a general rule, the employer must provide the social data of the employee whose employment is to be terminated. If material information is missing, incomplete, or incorrect, this may render the subsequent termination invalid. The personal information typically to be provided includes:

In addition, any other relevant circumstances should be stated, in particular any special protection against dismissal.

The employer must inform the works council of the circumstances that, from the employer’s perspective, were decisive for its decision to terminate; the facts have to be presented accurately and completely. This also includes exculpatory facts in the employee’s favor. The information provided must enable the works council to make an informed statement on the intended termination.

In any subsequent dismissal protection litigation, the employer may rely only on the facts or breaches of duty included in the consultation. If, after the consultation, the employer becomes aware of additional facts relevant to the termination, a supplemental or renewed consultation of the works council may be required.

Special considerations apply where the employer intends to terminate the employment relationship within the first six months of employment (the statutory waiting period). During this period, a brief subjective assessment by the employer stating that the employee has not met expectations is sufficient. Only if the employer wishes to base the termination on specific reasons must those reasons be set out in full. In practice, however, there is usually no need to do so, meaning that relying on a subjective assessment is generally the simpler and more legally secure approach.

Before issuing a dismissal for operational reasons, the employer must not only explain the entrepreneurial decision and the elimination of the need for employment. Rather, it must state whether vacant positions within the company exist and whether continued employment in such a position would be possible, at least after a reasonable period of training or induction. In addition, the employer needs to explain to what extent it has conducted a social selection, or why such selection was not required. This includes statements regarding comparable employees. Where comparability exists, the key social data (length of service, age, maintenance obligations, severe disability) and the assessment made must also be included.

The employer must not issue the termination prematurely. It may issue the termination only after receiving the works council’s final statement or after the response period has expired. In the case of an ordinary termination, the works council has one week to provide its statement. In the case of an extraordinary termination, the statement may be submitted within three days (Section 102(2) BetrVG).

Whether and how the works council responds is irrelevant to the validity of the termination. The only decisive factor is that the consultation itself has taken place. An objection may merely trigger additional legal consequences, in particular a claim to continued employment (see Section 102(5) BetrVG).

Mistakes in works council consultations are among the most common avoidable grounds for a termination to be held invalid. Employers should therefore not treat the consultation as a mere formality, but should devote to it the same level of attention as to the preparation of the termination itself. By observing the key requirements and carefully documenting the consultation, employers can significantly reduce unnecessary litigation and cost risks.