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Social selection and age: when can dismissals be challenged?

In large-scale redundancy exercises for operational reasons the employer may carry out the social selection required by law (sect. 1 para. 3 of the Protection against Dismissal Act – Kündigungsschutzgesetz, KSchG) in such a way that the social selection will be conducted within specific previously identified age groups. In this way, not all employees of the company are compared in the context of the social selection. Instead, all employees in certain groups (all 31 to 40 years olds, 41 to 50 years olds etc.) are compared. This ensures that the existing age structure within the company is maintained and will not alter significantly as a result of collective redundancies.

In this context, the Federal Labor Court ruled on 26 March 2015 (docket no.: 2 AZR 478/13 – Bundesarbeitsgericht, BAG) that the employer – when conducting social selection based on age groups – is obliged to “thin out” each age group equally. This means terminations need to be equally proportioned in each age group.

Now the question arises, whether the employer is also obliged to “thin out” each age group equally in cases where the employer and the works council created a reconciliation of interests with a list of names.

In cases of collective redundancies, sect. 111 of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) generally applies. Accordingly, the employer must try to negotiate a reconciliation of interests with the works council while the works council may demand a redundancy plan. If a reconciliation of interests with a list of names has been created, it is presumed according to sect. 1 para. 5 of the Protection against Dismissal Act, that the termination of the employees listed is justified by urgent operational requirements. In addition, the social selection may only be reviewed by the labor court for serious mistakes.

Therefore, the question arises whether a disproportionate termination quota in the different age groups will still be illegal where there is a reconciliation of interest with a list of names. In other words, is the disproportionate allocation of terminations among age groups a serious mistake within the meaning of sect. 1 para. 5 of the Protection against Dismissal Act? If it is not, the disproportionate terminations would be legal.

In the present case decided by the Federal Labor Court on March 26, 2015, a 55 years old employee was terminated in the course of collective redundancies due to operational reasons. Her employment relationship had lasted for 16 years. Her complaint referred to the fact that a higher percentage of older employees had been terminated. In her opinion, her termination was illegal, although the employer acted in accordance with the reconciliation of interest and the list of names.

The Federal Labor Court upheld the employee’s claim. According to sect. 1 para. 3 cl. 2 of the Protection against Dismissal Act a balanced personnel structure needs to be secured, but not installed. Therefore, the termination quota (eg 20 %) must be applied to each age group proportionally if the employer is carrying out a social selection based on age groups. If the employer allocates the terminations quota unequally in the different age groups, a “serious mistake” is made in the social selection and although there is a reconciliation of interests with a list of names, a dismissal may be unlawful.