No Crash Landing, please.

 Are Remote Offices, short working hours and short-time work only the harbingers of company closures, mass dismissals and social compensation plans?


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No Crash Landing, please The coronavirus pandemic has become the corona crisis.

The coronavirus pandemic has become the corona crisis. Memories of the great recession of 2007 are coming back. Could it be that Remote Offices, short working hours and short-time work are just the harbingers of company closures, mass dismissals and social compensation plans?

It is possible. Many people even think it is very likely. That is why well-advised companies will prepare themselves for this emergency at the moment, i.e. in time. There is a good reason why the word “crisis” (from the Greek κρίσις krísis as opinion, assessment, decision) indicates reliable differentiation and decision-making.

Now: Be Careful With Short-Time Work

In March 2020, many companies took advantage of the simplified paths and compensated with short-time work for lost working hours in the workplaces. Important information is available on short-time allowance, on how short-time work is organized, and also on alternative strategies, such as granting leave and Flexi II. Good negotiation also includes, from the companies’ point of view, staggering an increase in short-time work compensation – if at all economically justifiable – downwards. For example, starting with an increase to 80% of the last monthly net remuneration, then reducing it to 75% after one month, to 70% after another month, and so on.

However, short-time work must not become a one-way street or, even worse, a dead end. Even now, great caution has to be exercised with regard to company agreements on short-time work. Otherwise, state support will quickly prove to be a stumbling block when alternative ways have to be sought and found to overcome the crisis, because short-time work in the company does not categorically rule out the need to dismiss staff. Nevertheless, the effort required to justify dismissals for operational reasons is much greater if short-time work immediately preceded the dismissal. On top of this, many works agreements on short-time work include a ban on dismissal. Therefore, such company agreements should not be of long duration (no more than two months) and companies should explicitly provide for other reaction options if the situation (further) deteriorates. It is essential not to prematurely rule out all other options through short-time work.

When and where it is necessary: Reduction In Force

So what is important here is to think in terms of reverse planning. Due to the coronavirus pandemic, many companies will sooner or later be forced to dismiss staff. In this case, the co-determination rights of the works council must be taken into account. Even in the current crisis, these rights are not suspended.

Employers are obliged to inform the works council in good time and comprehensively if the reduction in personnel exceeds the limit for the operational change and to discuss the planned operational change with the works council. A social compensation plan is to be concluded with the works council and – beforehand – an attempt to agree on a reconciliation of interests is to be made. Unlike the social plan, the reconciliation of interests is not compulsory. If there is no consensus, the conciliation body must decide as a neutral company arbitration board. If companies and works councils do not even agree on a chairman and the number of members of the conciliation body, a court appointment must be made.

Especially under time pressure and as a reaction to the crisis, the company management’s project management will be essential. This concerns the conception and planning, information and consultation with the works council and, above all, the implementation phase.

In the opinion of some labor courts, the works council can secure its right to consultation by means of a court injunction. In such cases, the labor court would then prohibit the company from carrying out the measure for one or two months if the right to consultation has not been fulfilled beforehand, mainly by agreeing a reconciliation of interests with the works council.

Reconciliation of Interests, Social Plan & Corona Crisis

It is either not possible or only possible to a very limited extent to discuss staff reductions with the works council under the current measures to limit the coronavirus pandemic (contact ban, etc.). According to recommendations of the Robert Koch-Institute, it is not a good idea to conduct negotiations with several participants, for example in a conciliation body. In addition, companies will have great difficulties in finding people to chair and assess a conciliation body. Although we are already experiencing the use of videoconferencing to conduct conciliation body meetings, for example with the conference tools Microsoft Teams or Zoom, such conciliation bodies are only allowed to negotiate. They are not allowed to pass resolutions, as the law requires oral deliberation for this. And oralmeans the presence of the members of the conciliation body when decisions are made.

In such cases, employers should nevertheless inform the works council of the planned staff cuts, the necessity of the measure and its effects in detail by e-mail. It seems hardly likely that the courts – if they even negotiate at all – will issue a temporary injunction to companies if staff cuts are then carried out. A social plan can still be negotiated and concluded after the measure has been completed. This should also be expressly confirmed to the works council.

In addition, the employer has to comply with the requirements for mass dismissal. Even the slightest mistake can lead to the invalidity of the termination. The proper consultation of the works council and the proof of this to the employment agency are important elements of an effective notification of mass dismissal. We recommend employers inform the works council in full by e-mail or in writing, in particular through its chairperson, in any case. Consultation with the works council can also take place via a video or telephone conference. If that is not possible (e.g. because the works council refuses) the company will have to wait for the 14-day period regulated in Article 17 para. 3 Employment Protection Act (KSchG) in the case of a complete refusal before it can hand in the mass dismissal together with a presentation of the negotiation efforts. If the works council insists on a face-to-face counselling session, it is currently still doubtful whether the courts will accept a refusal by the employer. In all cases, the company should then again suggest a video or telephone conference with the works council with a concrete invitation (dial-in data, date, time, topic, etc.). The greater the provable efforts made by the employer, the more likely it is that a court will consider an orderly mass dismissal to have taken place.

If employers carry out a business change without having previously attempted a reconciliation of interests, the employees concerned would be entitled to compensation for disadvantages. But if the company is unable to agree a reconciliation of interests, as outlined above, this claim could be void. Moreover, social plan claims can be counted against any claim arising from disadvantages.

As a conclusion: To deal responsibly with the crisis, you have to plan ahead now.