Staged plant closure: Employers are not free in social selection

If an employer plans to shut down a business in stages, special rules apply for social selection in the event of redundancies for operational reasons. In January, the Düsseldorf Regional Labour Court (LAG) issued a groundbreaking ruling in this regard and clarified that "in principle, the employees most worthy of social protection must be employed to carry out the winding-up work" (judgment of 09.01.24, Ref.: 3 Sa 529/23).

Are employers free to make a social selection in the event of a phased closure? No, decided the Düsseldorf Regional Labor Court and ruled, as previously the Solingen Labor Court (judgment of 13.04.23, Ref.: 3 Ca 126/23), that special rules apply to redundancies for operational reasons. In principle, it is clear that "the employees most worthy of social protection are to be engaged in the winding-up work".

Employee has to leave as part of a plant shutdown - three months earlier than colleagues

In this specific case, an employee of a now insolvent aluminum parts production company with almost 600 employees filed an action for unfair dismissal. The plaintiff had been dismissed with effect from 31.03.2023 by letter dated 16.12.22, while forty other employees of the company did not receive their notices of termination until 30.06.2023. The affected employees were all part of the 53-strong wind-down team that was active beyond 1.1.23, when all other employees were "irrevocably released". The company's business activities were discontinued on December 31, 2022, preceded by the opening of insolvency proceedings in self-administration over the employer's assets on March 1, 2022.

LAG: Employer has "no free choice as to whom to terminate sooner or later"

The processing team continued to work for the production company beyond the end of the year. 13 employees were dismissed with effect from 31.03.23, 40 employees with effect from 30.06.23. One of the 13 affected employees dismissed earlier filed an action for unfair dismissal. The case first landed before the Solingen Labor Court, where the man was granted justice. The Düsseldorf Higher Labor Court confirmed the decision in January 2024, stating that the dismissal was not legally valid due to a lack of social selection in accordance with Section 1 (3) KSchG. In principle, it applies that "the employees most worthy of social protection are to be employed with the winding-up work". The employer does not have the freedom to decide "whom to dismiss earlier or later".

Selection must be based on the activities involved

Accordingly, the social selection in the present case was "methodically incorrect", the judges in North Rhine-Westphalia ruled, referring to the employer's incorrect formation of the comparison groups. The company had based these on the activities originally carried out and, according to the judges, the selection should have been made "on the basis of the activities still to be carried out in the processing team". However, the defendant had only provided incomplete information on this and, moreover, not at all on which tasks were carried out in the processing team and which requirement profiles were necessary for this. The defendant was therefore unable to rebut the presumption of incorrect social selection. An appeal to the Federal Labor Court was not permitted.

Employers must carry out careful social selection

For companies, the ruling from Düsseldorf sets a clear framework for a correctly carried out social selection in the event of redundancies for operational reasons. Careful social selection is essential and should also be documented. Failure to carry out a proper social selection can lead to legal disputes that can be painful for the employer at a later date.