The legislator applies strict conditions to a termination, as we have already reported. This is why mutually concluding a termination agreement may offer an effective solution when a company wishes to part with an employee. Neither protection against dismissal nor notice periods or even the co-determination rights of the works council or staff council have to be observed. Nevertheless, companies need to consider several factors when negotiating a termination agreement:
The Federal Labor Court provides guidelines for negotiations
The Federal Labor Court (Bundesarbeitsgericht, BAG) has developed case groups defining when a negotiation situation violates fair negotiation requirements (decision dated February 19, 2019 – 6 AZR 75/18). In a decision from February of this year, Germany’s highest labor court further clarified its case law and examined the freedoms (BAG, decision dated February 24, 2022 – 6 AZR 333/21).
In the proceedings, the parties disputed the continuation of an employment relationship following the conclusion of a termination agreement. The plaintiff was employed as a sales team coordinator in the building services department and was instructed to attend a meeting with the managing director and an attorney for labor law. The latter accused her of unjustifiably reducing purchase prices in the defendant’s IT system in order to simulate higher sales profits. After approximately ten minutes, during which the three attendees sat in silence at the table, the plaintiff signed the termination agreement prepared by the defendant.
The plaintiff then challenged the termination agreement on the grounds of unlawful threat, arguing that the defendant had violated the fair negotiation requirement. She had been threatened with extraordinary termination and criminal charges should she refuse to sign the termination agreement. Her request for more time to consider the matter and to obtain legal advice had been refused. The Labor Court upheld the claim, whereas the Hamm Regional Labor Court dismissed it.
The plaintiff’s appeal to the BAG was unsuccessful. The appeal was dismissed because the alleged threat was not unlawful. In this specific case, a reasonable employer could have considered both extraordinary termination and criminal charges against the plaintiff. Only if, after considering the full circumstances of the specific case, the employer must assume that the threatened termination will most likely not stand up to review by the labor court, are they prohibited from using the prospect of such termination to convince the employee to conclude a termination agreement.
The BAG also saw no violation of the fair negotiation requirement. This protects the decision-making freedom of the contract partner. This freedom is abusively influenced if, for example, the employer exercises or exploits psychological pressure in such a way that it impairs or prevents a person from freely reaching a decision. It is important to differentiate between this and the situation in which an employer issues an offer which can only be accepted “here and now”. This matches the legal model of Section 147 of the German Civil Code (BGB), defining an offer made between parties present which can only be accepted immediately. Ultimately, the employee is free to refuse the offer and to end the situation simply by saying “no”. The BAG does not regard the fact that this is only possible by rejecting the termination agreement offer to be unfair. This represents a permissible means of exerting pressure during the course of contractual negotiations. Therefore, the employer was legitimately attempting to achieve its negotiation objective. The same also applies if the employer refuses to comply with the employee’s request for more time to consider the issue and obtain legal advice.
Evidence of violation
Ultimately, the matter depends on the overall circumstances of the specific case. According to case law, a violation of the fair negotiation requirement may exist in the following contract negotiation situations, for example:
- The employer uses a pressure situation or some form of superiority to their advantage and, for example, deliberately exploits objectively recognizable physical or mental weaknesses and inadequate language skills to make it significantly more difficult or impossible for the employee to make a free and well-considered decision.
- The employer invites the employee into the room under a pretext and keeps them there for several hours while effectively interrogating them and isolating them from outside contact.
- The employer takes the employee completely by surprise at a completely unexpected time or place.
Permissible negotiation situations and forms of pressure
Conversely, the following situations do not generally represent a violation of the fair negotiation requirement:
- The employer threatens the employee with extraordinary termination and, as a reasonable employer, would also be entitled to consider this due to a serious breach of duty.
- The employer expresses criticism of the employee’s conduct and the employee reacts with shock.
- The employer does not take precautions to guarantee the employee’s decision-making freedom by asking the employee whether they are sick or taking medication that may impair them, for example.
- The employer does not grant the employee time to consider the matter or the opportunity to obtain legal advice.
- The employer does not grant the employee a right of withdrawal or revocation.
- The employer does not provide advance notice that it intends to offer a termination agreement.
Employers face a number of pitfalls when concluding termination agreements. HR managers always need to bear in mind the fair negotiation requirement with regard to the circumstances and the negotiation situation. The Federal Labor Court has established corresponding guidelines. Documenting the contents and the circumstances of a meeting afterwards is advisable.