Termination of employment without notice for the purpose of implementing short-time work

(Stuttgart Labor Court, judgement of 22.10.2020 Ref.: 11 Ca 2950/20)

Short-time work has proved to be an effective and tried-and-tested means of mitigating the negative economic consequences caused by the COVID 19 pandemic. However, especially in companies without works councils, the employer cannot unilaterally introduce short-time work without the consent of the employee, even if the statutory requirements for the receiving of short-time work benefits are met. The consent of the employee may be granted anticipated in the employment contract already. However, what is to do if this has been neglected, the employee refuses to grant his consent to the introduction of short-time working and the deadlines for notice of ordinary termination pending a change of contract are long? In this case, the Stuttgart Labor Court has decided currently: short-time work may also be introduced by means of an exceptional notice of termination pending a change of contract for operational reasons.

The judgement of the Stuttgart Labor Court was based on the following facts: The plaintiff was employed by the defendant (temporary employment agency) as a staff dispatcher. Due to the COVID 19 pandemic, the defendant recorded a considerable loss of working hours and notified the Federal Employment Agency. The latter confirmed that the defendant met the requirements for the receiving of short-time benefits and approved the benefits. The plaintiff did not comply with the defendant's request to sign an agreement in order to introduce short-time work. Thereupon, the defendant announced both an exceptional notice of termination of the plaintiff’s employment contract and, in the alternative an ordinary notice of termination with effect from July 31, 2020. Coincidently, the defendant offered the continuation of the plaintiff’s employment contract provided that if the requirements of §§ 95 et seq. SGB III will be met, the defendant is entitled to introduce short-time work for a certain period and to adjust the plaintiff's remuneration in accordance with the reduction of working hours. The remaining terms and conditions of the employment contract remained unchanged. 

The Stuttgart Labor Court dismissed the action, seeking a declaration of invalidity of the exceptional notice of termination pending a change of contract. According to the Stuttgart Labor Court, if the employer were merely referred to the ordinary notice of termination in order to introduce short-time work, due to the impending lapse of time the employer could not use the regulatory instruments of short-time work in a meaningful way, as the short-time work period could be over just as quickly. Particularly, this applies to the current COVID 19-related situation, in which the closure (but also opening) of facilities takes place without longer notice. This has an unforeseeable short-term effect on the need for work. Pursuant to the Stuttgart Labor Court, if the employer were only allowed to use the ordinary notice of termination pending a change of contract, the introduction of short-time work would be impossible in practice, especially in the case of longer periods of notice. 

According to the Stuttgart Labor Court, an exceptional notice of termination pending a change of contract for operational reasons for the purpose of introducing short-time work was socially justified and proportionate, as first, it was induced by urgent operational requirements, particularly a significant loss of working hours within the meaning of Section 96 SGB III, and second, the employee had to accept the proportionate changes. The arrangement of short-time work was conditional on whether the personal requirements for the receipt of short-time benefit in the person of the employee were met. Further, a notice period was observed and the short-time work was limited in time. Accordingly, the strict standard applied by the courts in the case of notices of termination pending a change of contract for the purpose of fee reduction was not applicable in the present case, as the short-time work did not interfere with the parties' equivalent interest and it was not introduced permanently. 

The decision and the reasoning of the Stuttgart Labor Court are to be welcomed, as it provides clarity at the legal level with regard to the employer's powers when introducing short-time work and expands the employer's scope of action. Nevertheless, the protection of employees, which must be considered in principle consistently, is taken into account by the fact that the notice of termination pending a change of contract may include mandatory changes only and must always be drafted in a sufficiently precise manner.