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Two-week period to give notice of termination for cause

Two-week period to give notice of termination for cause

Beginning of the two-week period specified in §626(2) of the German Civil Code (BGB) in Group-wide internal investigations by the Compliance Department.
(Higher Labor Court Hamm, decision dated July 15, 2014 – 7 Sa 94/14)

The plaintiff was employed by the defendant as a construction manager. The Chief Compliance Officer of the parent company of the defendant received a notice of irregular operations within the group on September 14, 2012. In the context of the internal investigation, employee Y of the G1 GmbH stated that the plaintiff had received from his managing director both money and smartphones for orders placed. On November 7, 2012, the human resources manager of the defendant was informed of this. At the end of November, Y and another employee of the G1 GmbH confirmed in affidavits, on request of the defendant, their allegations against the plaintiff. The defendant waited for an audit memorandum to be submitted by the Compliance Department, which occurred on December 18, 2012, heard the plaintiff concerning the strong suspicions of wrongful acts on December 27, 2012, and declared several terminations. Like the Labor Court, the Higher Labor Court ruled that the terminations without notice were ineffective due to the non-observance of the two-week period required by §626 of the German Civil Code. The period began with the briefing of the human resources manager of the defendant on November 7, 2012, as the essential facts for the decision to terminate were contained in the briefing. A suspension of the period is only considered until the submission of the affidavits. Further investigations from the viewpoint of group-wide relevance would not have led to the period being suspended.

Practical recommendations:
The period to give notice of termination for cause specified in §626 of the German Civil Code commences once the person authorized to terminate – that is, the employer – has reliable and positive knowledge (as thorough as possible) of the facts relevant to termination and can then make the decision regarding the reasonableness of continued employment. Termination in corruption cases of employees that themselves confess to the corruption is sometimes viewed as bad faith by the courts if the perpetrators are merely part of a group-wide system of corruption. Therefore, it can be argued that the two-week period in such cases first commences once the entire system of compliance violations is investigated and it has become clear how breaches of duty of individual employees, and possibly of different hierarchical levels, are related. In this case, however, the Higher Labor Court denied a suspension of the period due to the group-wide investigation. The defendant had explained the necessity of the inquiry by the Compliance Department of the parent company of the group solely with the expertise of the Compliance Department and not with the necessity of first having to explain an entire system of compliance violations to evaluate the conduct of the plaintiff. This is not enough for a suspension of the period by way of group-wide investigations. In cases related to a group of companies, the respective employer has to carefully examine when the period specified in §626 of the German Civil Code begins for his employees involved, as it may be necessary to dismiss individual employees extraordinarily before the entire investigation concludes. As the Higher Labor Court emphasized, this does not exclude new terminations if other circumstances that reinforce the conviction arise.

By Michael Eschenbacher

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