ECJ: Not all employer side missteps within mass dismissal proceedings lead to the invalidity of subsequent dismissals

In its recent ruling of July 13, 2023, the European Court of Justice (Case No. C-134/22) clarified that a breach of the employer's obligation to notify the Unemployment Agency in mass dismissal proceedings pursuant to sec. 17 para. 3 sentence 1 of the German Unfair Dismissals Act (KSchG) does not lead to the invalidity of the subsequent dismissals.

Background to the case

The European Court of Justice's decision was based on a question referred by the Federal Labour Court (case no.: 6 AZR 155/21 (A)). In the underlying action for protection against dismissal, the Federal Labour Court (BAG) had to decide on the validity of a dismissal after a mass dismissal procedure had been carried out.

The employer concerned had decided to completely shut down its business operations. As a result of this decision, it entered into negotiations with the works council on a reconciliation of interests, which at the same time served to conduct the so-called "consultation procedure" pursuant to sec 17 para.2 of the Protection against Unfair Dismissal Act (KSchG), which was required in the context of the mass dismissal procedure. The employer and the works council finally agreed on a reconciliation of interests without the employer having previously forwarded a copy of the notification addressed to the works council to the competent employment agency in accordance with the legal requirements of sec. 17 para.3 sentence 1 KSchG. Only then did the employer notify the Unemployment Agency of the collective dismissals (sec. 18 para.1 KSchG) and subsequently announced the dismissals.

Labour law background

The BAG posed the question of the consequences of a violation of the duty of notification stipulated in sec. 17 para.3 sentence 1 of the KSchG.  Pursuant to sec. 17 para.2 KSchG an employer who intends to dismiss a certain number of employees has to provide the works council in advance with certain information on the planned dismissals within the framework of the consultation procedure, in particular the reasons for the dismissals, the number and occupational groups of the employees to be dismissed, the dismissal periods, etc. The employer is obliged to inform the works council of the reasons for the dismissals. Pursuant to sec 17 para.3 sentence 1 KSchG, it must at the same time send a copy of these notifications to the competent Unemployment Agency.

Since sec. 17 para. 3 sentence 1 KSchG is the German implementation of the requirements of the EU Mass Dismissal Directive, but neither (i) the Directive, nor (ii) the German provision standardise consequences of errors in the event of infringements, the BAG was of the opinion that the protective purpose of the transfer to the Unemployment Agency had to be clarified, in particular as to whether this confers individual protection on employees.

The ECJ's decision

The ECJ ruled that the transfer did not confer individual protection, but rather served to inform the Unemployment Agency about the impending dismissals and to prepare it for an increased number of jobseekers as a result of the dismissals. Consequently, no individual protection for the individual employee could be derived from this, so that the employee could not invoke the invalidity of the dismissal in the event of mistakes being made.

Impact on the practice

It is clear after the ECJ's decision that the incorrect or omitted notification within the meaning of sec. 17 para. 3 sentence 1 KSchG does not lead to the invalidity of the subsequent dismissals. This decision was obvious insofar as the wording of the provision does not provide any indication of the intended individual protection of the individual employee.

However, the decision is surprising in view of the fact that for more than ten years the BAG had assumed that the respective dismissals were invalid in almost all cases in which sec. 17 of the KSchG was violated in mass dismissal proceedings. The BAG always derived this legal consequence from sec. 17 of the KSchG in conjunction with sec. 134 of the German Civil Code (Bürgerliches Gesetzbuch - BGB), taking into account the values of the EU Mass Dismissals Directive, which, in the BAG's view, is intended to provide maximum protection for employees. However, all these cases related to violations of sec. 17 para. 1 and para. 2 KSchG

In this context, it remains to be seen what consequences will arise in the future from other mistakes made in mass dismissal proceedings and whether case law will also no longer grant individual protection to them. Since sec. 17 KSchG does not provide for corresponding sanctions with regard to any of the requirements, it remains to be seen what follow-up decisions the BAG will make. Until then, it is advisable for employers to strictly comply with the legal requirements of sec. 17 KSchG in the case of planned mass dismissals in order not to risk the invalidity of the notices to be issued.