Germany: An employer cannot validly dismiss own employees for operational reasons as long as he covers a permanent need for workforce with leased employees

Under German law, a dismissal for operational reasons is only valid if the employee in question cannot be assigned to another vacant position within the company. In the case at hand, an employee challenged the validity of his termination arguing that his employer had not observed this principle. The employer was an automotive supplier and employed 106 permanent own employees as well as leased employees (Leiharbeitnehmer). Legally, leased employees are employees of the lessor and are leased to a third company on behalf of an agreement between the lessor and the client/lessee. Leasing of employees usually happens on a temporary basis in order to fill temporary workforce needs.

In the present case, the automotive supplier dismissed several employees for operational reasons, due to a decreasing number of orders. In the two years before the dismissals, the employer continuously employed six leased employees with only few interruptions. Upon the lawsuit of one of the dismissed employees, the State Labor Court in Cologne found his dismissal invalid because the employee could have been assigned to one of the positions that have so far been filled by leased employees. The court reasoned that positions filled by leased employees are considered vacant positions when it comes to dismissals for operational reasons,  unless the leased employees only serve the purpose to temporarily substitute for own employees of the employer who are absent due to sickness, maternal or parental leave. In the present case, however, the leased employees covered a permanent need for workforce and were not only substituting for absent employees of the employer. Therefore, the employer would have had to first terminate employee leasing towards the lessor and to fill their positions with own employees before dismissing them for operational reasons.

The current ruling from the court in Cologne confirmed the prior jurisdiction on dismissals for operational reasons in connection with the use of leased employees. This shows that employers still make avoidable mistakes in this area. When it comes to dismissals for operational reasons, employers must critically examine whether there are any vacant positions in the company before issuing a termination. Permanently required positions filled by leased employees who are not only covering for absent employees of the employer have to be regarded as vacant in this sense and thus have to be assigned to otherwise redundant employees.

For more information on these articles or any other issues involving labour and employment matters in Germany, please contact Dr. Tobias Pusch (Partner) of Pusch Wahlig Workplace Law at pusch@pwwl.de or visit www.pwwl.de.