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An employee’s entitlement to continued employment should the permanent establishment relocate abroad

An employee’s entitlement to continued employment should the permanent establishment relocate abroad

If an employee is protected by the German Protection Against Dismissal Act, (s)he may only be dismissed with a reason (either personal, conduct-related or operational). An example of an operational reason for termination is a decision by an employer to completely shut down a permanent establishment. An employer’s business-related decision to close a location does not have to be reviewed by the courts to establish its factual justification or appropriateness; all that need be verified is whether it is clearly lacking objectivity, unreasonable or arbitrary. In principle, the employer is at liberty to decide which labour will be performed at which location. Therefore, if an employer decides to close a permanent establishment, this decision is not subject to review by the courts and may constitute a reason for termination.

If, however, the employer has the option of deploying the employee whose contract has been terminated at another permanent establishment operated by the business, this may result in the employee having an entitlement to continued employment at the other permanent establishment. The court may review, without restriction, whether the employer’s decision (closure of a permanent establishment) has actually been implemented and the individual employee’s post has actually become redundant as a result. It may be that part of the closed permanent establishment is to be continued at another operational unit of the company, at which a vacant position is available for the employee affected. The employee concerned may then, depending on the circumstances, have an entitlement to continued employment at the other location. Whether or not such an entitlement exists depends on various factors, such as the geographical distance between the locations in question.

In a recent decision, the Federal Labour Court decided that an obligation on the part of the employer pursuant to the Protection Against Dismissal Act to employ the employee in another vacant role at the same or another operational unit of the company cannot, in principle, be applied to posts at an operational unit based abroad. Therefore, if the employer relocates part of its production facilities from Germany to Spain, this cannot, in principle, give rise to an entitlement on the part of the employee whose contract has been terminated in Germany to continued employment at the operational unit in Spain.

According to settled case law of the Federal Labour Court, the relevant rules of the Protection Against Dismissal Act apply only to business operations located in Germany.

The situation may, however, be different if an employer maintains several permanent establishments not far from a national border in Germany and abroad, under the same management, and transfers the tasks of one permanent establishment to another across the border. If an employer therefore closes an operational unit in Kleve (Germany) and relocates the activities of the closed permanent establishment to Nijmegen, the Federal Labour Court’s judgment cannot be applied to the facts. Thus the employee’s entitlement to continued employment cannot be automatically ruled out on the grounds of the international element.

The situation is different if all or part of an operational unit is transferred to a neighbouring and, moreover, German-speaking location abroad. If an employer relocates an organisationally identifiable part of its business operations abroad, with a simultaneous change of ownership, the employment conditions of the employees affected are transferred to the new employer abroad.

By Susanne Hermsen

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