What Is the Best Way to Undergo Staff Cutbacks?
We hear from Christian Bitsch, who tells us how businesses should consider staff cutbacks and how you should plan ahead, prior to letting anyone go.
Letting your staff go is never an easy process and undergoing staff cutbacks drag along extra stress and worry, especially for your employees. With it often being presented with high emotion and upset, it is of paramount importance that everything is done correctly, in order to ensure you will face prosecution or liability.
With economic uncertainty, when is best for businesses to consider staff cutbacks as an option?
We usually recommend reviewing and implementing staff adjustments at companies during a good and successful phase. In most cases, it is considerably more difficult to implement staff adjustments once a crisis has occurred, because the works councils and trade unions are more vigilant and show greater resistance.
What is the planning part of the process? What must businesses plan accordingly, prior to letting anyone go?
Depending on the scope of the staff cutbacks, a range of mandatory legal steps must be planned and adhered to. For example, in Germany, the members of the works council must be fully involved at an early stage. Likewise, from a certain scale on, a so-called mass redundancy notice must be sent to the competent authorities. This regularly results in public attention and has to be well planned.
It is even more important, however, to prepare the restructuring measure really well with regard to personnel. German law requires a social selection, which means that the staff members to be dismissed cannot be unilaterally selected. With proper planning, however, the social selection can be structured, thus providing the possibility to control the cutback according to corporate requirements.
Is there any process which helps determine who should stay and who should go?
Yes, that is indeed possible. Under specific circumstances, German labour law allows for a deviation from the generally prescribed social selection. This, however, must , in any event,be planned and well prepared.
What complications can employees’ employment contract pose? How can employers work around this?
In some industries, employment contracts cannot be terminated at all or only with very long notice periods. Partly, there are also post-contractual payment obligations. We usually achieve to resolve such problems and to reach the goal. However, in many cases, this works only by skillfully negotiating with employees or works council members.
Negotiating the dismissal fee: which method works best?
It needs to be noted that a dismissal fee as such does not exist in Germany. Only in the case of large-scale cutbacks can the works council request such fee. In practice, severance payments are nevertheless often made, partly because employers are poorly advised or poorly prepared for cutback measures. In my experience, especially a good preparation of the relevant dismissal helps avoiding unnecessary costs.
Are there any legal loopholes businesses need to be aware of, before beginning the dismissal process?
The most important aspect is to coordinate any communication with the lawyers. In many cases, a premature or ill-considered announcement by the company leads to a risk, because the employees and works council members rely thereon. As an example, just take the famous press conference of Deutsche Bank AG several years ago, where record profits and staff cutbacks were announced in the same press conference. No wonder that the trade unions and the works councils later insisted on huge severance payments.
Dr. Christian Bitsch
BLUEDEX | PartG mbB
Tower 185 · Friedrich-Ebert-Anlage 35-37
60327 Frankfurt am Main
T: +49 (0) 69 – 78 90 48 50
Dr. Christian Bitsch is a Partner in the law firm BLUEDEX, specialising in labour and employment law in Germany. Dr Bitsch advises and represents multinationals, mid-sized enterprises and public institutions in questions of labour law. He has a particular specialisation in questions of labour relations and rights of codetermination, employment contract law for board members and labour law in corporate groups. Moreover, he has considerable expertise in restructuring and post-transaction projects.