Not without (my) lawyer: Operational changes & reconciliation of interests.

 For many employers, legal advice is the best option in the event of structural changes within the company.

Not without (my) lawyer: Operational changes & reconciliation of interests.

Many companies are currently undergoing major changes as a consequence of the global economic situation. If such a change is regarded as operational change pursuant to labor law, professional legal support helps to effectively and optimally shape the change process.

When change represents an operational change

More than a few of the challenges that companies have faced in recent years have had a massive impact: Pandemics, war in Europe, energy crises and inflation often force employers to make unwanted changes or active adjustments.

In terms of labor law, such extensive changes can be considered operational changes. An operational change is described as a significant change, reorientation or also a restriction of a company or its operational processes.

Changes of this nature become relevant under labor law if the change to the company involves significant interventions in or negative changes for the workforce.

The German Federal Labor Court (BAG) always regards the cases specified in Section 111 of the Works Constitution Act (BetrVG) as an operational change. When it comes to

  • restricting and/or ceasing or relocating operations or significant parts of an operation,
  • a merger with other companies and/or splitting up companies,
  • a fundamental reorganization or
  • the introduction of fundamentally new working methods and production processes,

then these changes are always deemed to be operational changes and involve the corresponding legal consequences.

However, other cases also exist in which a change within the company with negative consequences for the workforce can also be considered an operational change. This must then be determined for each individual case.

Employers are required to inform employees

Determining whether a change is an operational change may be essential for employers: If a change involving labor law aspects is foreseeable, companies with more than 20 employees have to inform the works council as soon as they begin planning the change and consult the works council regarding future changes in a timely manner.

As a consequence, even companies with as few as 20 employees cannot freely design their change processes exactly as they desire. Rather, they are required to discuss the impending changes extensively with the works council and to conclude corresponding agreements. If the works council is informed late, incompletely or even incorrectly, companies can face fines of up to € 10,000.00.

Reconciliation of interests: The if, when and how of the operational change

The reconciliation of interests is such an arrangement. In the reconciliation of interests, the employer and the works council agree on the if, when and how of the operational change. This is often a complex process given that the reconciliation of interests affects many different areas. In some cases, this may even include a social plan as part of the operational change.

A social plan mitigates the economic disadvantages of an operational change, for example, through severance payments to employees who lose their jobs in the course of a change in operations (Section 112 of the Works Constitution Act (BetrVG)).

Reconciliation of interests is not an everyday process

An operational change together with all of the associated negotiations and agreements are rarely part of a company’s daily business. These change processes, concluding a reconciliation of interests and a social plan can quickly become overwhelming tasks for the company. In such situations, those responsible are well advised to seek professional assistance if it becomes apparent that an operational change lies ahead. This support helps the company to reliably fulfill its legal information obligations to the works council, for example.

Professional support is equally essential in this context in order to draft and negotiate the actual agreement as precisely as possible, while taking into account all of the possible interactions.

Consequently, the proactive and professional approach to an operational change with regard to labor law contributes to achieving efficient and with legally secure structural changes to the company.

See also our seven-part series on structural change and labor law to discover more structuring options.

Summary of the key facts:

  • Structural changes within companies can represent an operational change, requiring a reconciliation of interests and even the social plan agreed between the company and the works council.
  • In the reconciliation of interests, the company and the works council agree on the if, when and how of the operational change.
  • The reconciliation of interests, taking into consideration the possible interactions with other areas such as a social plan, is legally complex.
  • Professional legal support provides companies with a secure labor law foundation in the event of operational changes.