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Planned closure justifies compulsory redundancy

Published: 02 Jan 2018

If an employer seriously intends to close an establishment then it can issue notices of dismissal due to operational circumstances, i.e. notices of compulsory or forced redundancy. That was the verdict of the Landesarbeitsgericht (LAG) Rheinland-Pfalz [Regional Labour Court of Rhineland-Palatinate] (Az.: 5 Sa 51/16).

We at the commercial law firm GRP Rainer Rechtsanwälte note that an employer is not obligated to put off issuing notices of compulsory redundancy until after an establishment has been shut down. According to a ruling of the LAG Rheinland-Pfalz from January 12, 2017, it is sufficient for there to be a serious intention to close the premises. Having said that, it is necessary for the employer to have genuinely taken a final decision on whether to permanently shut the establishment down at the time of the notice’s receipt.

This condition had been met in the instant case. The 72-yeard-old sole manager as well as sole shareholder of a workshop had decided in April of 2014 to give up the business. The decisive factor behind this decision was the workshop’s poor economic situation, it having failed to generate any profit for years combined with the ongoing poor order situation. Attempts to sell the firm were unsuccessful and there was also no successor to the 72-year-old managing director in sight. To prevent insolvency, the manger decided to shut the premises down. Operational activities were discontinued as of April 30, 2014, with only legacy orders and warranty cases being processed. After filing a mass redundancy notice with the relevant employment agency, the (approx. 60) workers received ordinary and timely notice of dismissal.

One employee lodged an action for wrongful dismissal. He took the view that the employer was supposed to have informed him of the planned closure at an earlier stage so that he might have been able to find a third party to continue the business. The action failed both at first and second instance. The LAG held that the employer’s intention to shut the premises down had already taken on concrete forms as of the date of dismissal. The Court held that the reasons for terminating the business were evident and that the staff had been informed of this in a timely manner. It went on to say that the fact that the workers continued to be employed until the end of the notice period for the purposes of processing legacy orders did not preclude a serious intention to close the business. The Court ruled that for a serious intention to close a business it is sufficient if no further activities are performed by the end of the notice periods. What is not required is that the employer works inefficiently up until that point in time or refrains from carrying out potential transactions.

Lawyers who are experienced in the field of employment law can advise employers on matters pertaining to dismissal as well as in relation to other employment issues.

https://www.grprainer.com/en/legal-advice/employment-law.html

Michael Rainer

Firm: GRP Rainer LLP
Country: Germany

Practice Area: Commercial

  • Augustinerstraße 10
    50667 Cologne





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