VW commissioned the Fraunhofer Institute to investigate the impact of electromobility and digitalization on the quantity and quality of employment up until 2030. The results of the study: Job reductions in this decade will be significantly lower than feared. Strategic countermeasures such as the development of new business areas would help to mitigate the effects on employment associated with electromobility. The high initial investment in digitization will actually lead to an increase in jobs in the medium term. With foresighted planning, the quantitative changes in the case of VW could be designed as a socially acceptable solution – also due to the demographic development. However, the qualitative changes demand a massive increase in expertise in certain areas. In articles 1 and 2 of our series, we presented how this can succeed. The study also identifies new partnerships between OEMs, suppliers, science and politics as a further success factor when shaping the transformation. We also covered this in another article.
However, suppliers in particular often lack one-to-one compensation for combustion components. Jobs will be eliminated and not every employee will be able or willing to qualify for new job profiles. Volunteer programs can serve as a way of avoiding layoffs. However, these usually involve high severance payments. If job cuts become inevitable, companies benefit from developing a long-term concept to address the need for further training ahead of time. Because the earlier the company begins training employees with the skills of the future, the lower the risk that the selection of employees for further training can be contested due to social reasons. Otherwise, employers face the risk of legal action for protection against wrongful dismissal because the selection of employees for qualification must not ignore the social aspects in the event of layoffs.
Strict rules apply to termination for operational reasons
If digitization and decarbonization, along with the associated restructuring of the company, lead to a reduction in staff, this usually involves redundancies for operational reasons. The employer no longer has a permanent need to continue employing the staff member. In our current update concerning terminations, we describe what needs to be considered. The social selection process is especially difficult: According to Section 1 (3) Sentence 1 of the German Employment Protection Act (KSchG), the company must identify those employees who require the least protection among all comparable employees and who, thus, have priority for termination. The deciding criteria are as follows:
- Length of employment with the company,
- Maintenance obligations or
- Any severe disability.
The pitfalls of mass layoffs
Special caution needs to be taken when laying off multiple employees within 30 days. HR has to check whether the requirements for a mass dismissal pursuant to Section 17 of the Employment Protection Act are fulfilled. If so, the Employment Agency must be informed accordingly. The term “mass dismissal” is somewhat misleading. Depending on the size of the company, the threshold may be reached even if the company concludes severance agreements with or dismisses more than five employees. These cases require particular care and attention because the procedure involves numerous formalities and is highly prone to errors. Incorrectly submitting notification of mass dismissals involves severe consequences: All dismissals subject to the notification obligations then become invalid. How should companies proceed?
- The first step consists of notifying and consulting with the works council. The employee representatives must be informed in writing at least two weeks before the Employment Agency is notified. This must include an offer to discuss the issue no earlier than one week after notification. This consultation is concluded once the works council has issued its opinion.
- The second step consists of informing the responsible Employment Agency about the mass dismissal. The Employment Agency provides the corresponding forms. The works council must receive a copy of the documents.
- Pursuant to Section 17 (3) of the Employment Protection Act (KSchG), the employer is required to explain the following to both the works council and the Employment Agency:
- The reasons for the planned layoffs,
- Number and occupational groups of employees to be laid off,
- Number and occupational groups of the employees usually employed,
- Period in which the layoffs are planned,
- Criteria for the selection of employees to be laid off, as well as
- Criteria for calculating any severance payments.
In contrast to the previous instances, the Federal Labor Court clarified the following in its recent decision dated May 19, 2022: Only the mandatory information stipulated in Section 17 (3) sentence 4 of the Employment protection Act (KSchG) is required. If the “optional” information defined in Section 17 (3) sentence 5 of the Employment protection Act (KSchG) such as gender, age, occupation and nationality, is not provided, this does not necessarily mean that the layoffs are invalid. According to the highest labor court judges in Erfurt, case law of the European Court of Justice has also clarified that this information is not mandatory in the notification pursuant to Art. 3 para. 1 subpara. 4 of the EU Collective Redundancies Directive.
- Employers should only issue notice or conclude severance agreements after the Employment Agency has confirmed receipt of the mass dismissal notification.
The digital and green transformation is fundamentally transforming the automotive industry, in particular. Yet this transformation will only succeed if the change has a positive association because the focus is on further training and the element of fear has been removed from the process. In view of the shortage of skilled workers, there are actually much better opportunities than in past periods of upheaval for redundant employees to find jobs at other companies that are looking for employees. This is all the more true when existing instruments such as transfer companies are developed to meet the needs of the future, providing the re-skilling and upskilling for expertise that is in demand. If staff reductions are unavoidable, the process involves pitfalls, especially in the case of mass layoffs. The consequences for employers can be costly.