Judgment of the Arbeitsgericht of Berlin of 25 August 2020 in Cases 34 Ca 6664/20, 34 Ca 6667/20, and 34 Ca 6668/20
At the beginning of 2021, COVID-19 still had a tight hold on the economy. The financial consequences have impacted nearly all sectors, with consistent fixed costs on one side and often sinking sales on the other. It is obvious for many employers that they can reduce personnel costs by issuing compulsory redundancies. While certain laws and provisions have been “softened” or are applied much less vigorously as a result of the corona crisis, legislators and courts remain firm in their assessment of the conditions for termination. The catchword “corona” does not have any effect here, as three parallel judgments of the Labour Court (Arbeitsgericht) in Berlin show.
Facts of the case
The employer employs around 30 people. By letter dated 30 April 2020, the employer terminated the employment relationship with ten of its employees, effective 31 July 2020. The employer justified the redundancies based on the fact that several customer contracts had been terminated due to the corona pandemic and key customers had filed for insolvency. This resulted in a 43% loss in sales, making it necessary for the company to reduce its number of employees from 32 to 22. Three employees brought actions for unfair dismissal.
The Labour Court agreed with the three Claimants in three parallel judgments and held that the operational redundancies were unjustified.
The Court was not convinced that there were urgent operational grounds within the meaning of the Act against Unfair Dismissal, which would prevent the continued employment of the Claimants. The employer generally has the burden of proof in this respect.
In all three cases, the employer used the significant drop in sales to justify the dismissals. In the Court’s view, the employer had not sufficiently shown that redundancies were based on a suitable corporate concept that took into account the loss of work as a result of the loss of sales. Justifying redundancies purely based on a significant drop in sales is insufficient for such a concept and does not constitute a sufficiently plausible justification.
Consequences for practice
The Labour Court in Berlin clarifies that the economic consequences of the corona pandemic will not alone justify redundances on operational grounds. The catchword “corona” is not sufficient. Instead, following the reinforced case law of the Federal Labour Court (Bundesarbeitsgericht), employers must show why not only a temporary drop in work, but a permanent drop in the volume of orders and decline in sales must be assumed and to what extent this necessitates the decision leading to the permanent reduction of jobs. If employees of the company are already working in short-time work, this will be more difficult as short-time work is an indication that the reduction in the number of employees needed is not permanent.
Good news for employers: compulsory redundancies may be used even during short-time work and the corona crisis. Still, the Courts require a business concept that demonstrates an acceptable justification for the actual permanent drop in jobs. This again raises the already high hurdle for the legality of operational redundancies where short-time work is involved. However, it is not impossible.
Author: Regina Holzer