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The conclusion of a termination agreement subject to the condition of immediate acceptance does not constitute a violation of the fair negotiation requirement

Labor Law

By means of termination agreements, employers can circumvent the legal obstacles and often existing uncertainties related to a dismissal and avoid the costs related to an action for unfair dismissal possibly to be filed by the employee.

German Federal Labor Court, Decision of February 24, 2022 – 6 AZR 333/21, Previous instance: Hamm Regional Labor Court, Decision of May 17, 2021 – 18 Sa 1124/20 

In a fundamental decision of the German federal labor court from 2019 (file no.: 6 AZR 75/18), the fair negotiation requirement was recognized as precondition for the validity of employment-related contracts. Now, with its decision of February 24, 2022 (file no.: 6 AZR 333/21), the German federal labor court further specified the requirements for fair negotiations and established that the existence of a violation against the fair negotiation requirement always had to be assessed on a case-by-case basis taking into account the specific negotiations’ overall circumstances, and the fact that the employer makes the conclusion of a termination agreement dependent on the immediate acceptance of his offer did per se not constitute a breach of duties, even if this resulted in the fact that the employee had no time to consider the offer or seek the requested legal advice.

In the case underlying the German federal labor court’s decision of February 24, 2022 (the decision has so far been published as press release), the employer and the employee were in dispute about the employment relationship’s continued existence after the employee (plaintiff) had contested a termination agreement previously concluded between the parties as she felt to have been forced to conclude such agreement.

On November 22, 2019, the managing director and later attorney of record of the defendant had a meeting with the plaintiff who was employed as team coordinator. In such meeting, the defendant accused the plaintiff to have changed or reduced the purchase prices in the defendant’s IT system without authorization to do so in order to feign higher profits and presented her with a prefabricated termination agreement for her to sign, which provided for a termination of the employment with effect from November 30, 2019, i.e., prior to the end of the ordinary notice period. After a ten-minute break, the plaintiff signed the termination agreement. The further details of the meeting remained disputed. The plaintiff subsequently challenged the termination agreement on the grounds of unlawful threat of November 29, 2019 in order to cause the agreement’s invalidity and continue the employment relationship.

In the subsequent proceedings, the plaintiff asserted that the defendant had threatened her with an extraordinary termination and the filing of charges if she should not sign the termination agreement and that the managing director and later attorney of record had, despite her express request, not granted her more time to consider the agreement and seek legal advice. As such, the defendant had violated the fair negotiation requirement. The regional labor court had allowed the defendant’s appeal after the plaintiff had been successful before the labor court.

The appeal filed by the plaintiff was rejected by the Federal Labor Court. In the Federal Labor Court’s opinion, the Regional Labor Court of the previous instance had already convincingly stated that the defendant had not negotiated unfairly, thereby breaching pre-contractual secondary obligations. The Senate is also of the opinion that, even if the course of the conversation is assumed to be in favor of the plaintiff, it cannot be assumed that the alleged threat was unlawful. Both the issuance of an extraordinary notice of termination and the filing of charges are possible and permissible for a reasonable employer under the present circumstances.

And even the condition imposed by the defendant employer that the termination agreement could only be accepted immediately did not violate the plaintiff's freedom of decision.

The decision is so far only available as a press release.

Practical advice

Employers may inform their employees which legally permissible means are available to them in individual cases and which of these means they can and, if necessary, will use in the near future against the employee concerned in order to sanction such employee’s conduct that is in breach of the contract. These include warnings, ordinary and extraordinary dismissal, as well as the filing of charges if the conduct is relevant under criminal law.

Irrespective of this, employers should, in the context of contract negotiations with employees, always ensure that they do not create or exploit a psychological pressure situation that makes it considerably more difficult or impossible for employees to make a free and considered decision, in order to avoid a challenge based on a violation of the fair negotiation requirement. Following the decision discussed above, the courts will in future assess whether or not the requirement of fair negotiation has been violated on a case-by-case basis, taking into account the specific negotiation situation’s overall circumstances.

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