Change in operations / transfer of operations

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The operational change:

BAUMFALK Law Office in Kerpen-Horrem, Witten and Cologne

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A change in operations is governed by the standard of § 111 BetrVG paraphrased. In the event of a change in operations, provided that the business generally employs more than twenty employees, the employer must inform the works council in good time and comprehensively of any planned changes to operations that will have significant disadvantages for the workforce or significant sections of the workforce. Further consultation of the entrepreneur with the works council on the planned operational changes is obligatory. If the company employs more than 300 employees, the works council has the right to consult an advisor. This advisor should and must provide support. 

However, there may be the following reasons for a change in operations: The operation is restricted or completely shut down, significant parts of the operation are restricted or shut down, the operation is relocated or significant parts of the operation are relocated, the operation is merged with other operations, the operation is split, the organization of the operation is fundamentally changed, the purpose of the operation or operating facilities are changed, new working methods are introduced or manufacturing processes are fundamentally introduced.

In these five cases, a change in operations is then present in any case and it does not have to be determined separately whether there are also significant disadvantages for the workforce. However, it remains important to consider the employees. In all of these possibilities for a change in operations, there must be a significant disadvantage for the employees as a result of the planned operational changes. In case of doubt, these disadvantages must be compensated for in a reconciliation of interests or a social plan for the company. It is not uncommon for a reconciliation of interests to result in new works agreements under § 112 BetrVG. However, if a company agreement is not reached, the company's social plan shall have the same effect as a company agreement concluded by both parties.

With regard to the disadvantages that arise for the employees of the company, it is not relevant whether these disadvantages are economic or immaterial. Among other things, this could be, for example, a loss of importance of important qualifications which are fundamentally no longer needed due to new work processes or even dismissals are the result of a change in operations. In this case, one speaks of the loss of the economic basis of existence. If an employer is thinking about and wants to implement such a change in operations, he is already obliged to inform the works council comprehensively and to discuss the planned changes with it in his own planning or at the beginning of considerations. The list of the § 111 BetrVG is not conclusive, however, and other cases of operational change remain quite conceivable.

As already mentioned above, the prerequisites for a change in operations are at least 21 employees entitled to vote and the planned change in the workforce or at least significant parts of the workforce which would suffer a significant disadvantage as a result of the change in operations. In principle, however, such operational changes are also possible in a small business. It therefore depends on the number of employees in a company and not on its size. An example of this is a company with 1000 employees, which divides its employees among many small companies. For example with approx. 15 employees per company and location. If a change in operations such as a plant closure is then to be carried out in such a company, there is a plant closure subject to co-determination in accordance with § Section 111 Sentence 3 No. 1 BetrVG yet.

Another example of a change in operations is a pure reduction in personnel. This can be considered a reduction of the entire company or significant parts of the company in accordance with the Works Constitution Act. A prerequisite for this, however, is that the mass layoff involves an appropriate number of employees who are to be laid off. The benchmark for this can be the Dismissal Protection Act which stipulates that the employer must issue a mass layoff notice in the event of mass layoffs.

A plant shutdown or closure is a permanent abandonment of the company's purpose, usually accompanied by the simultaneous dissolution of an organization. It must therefore not be merely a temporary closure, as occurred in the case of the Corona pandemic. Whether a plant closure is a closure of essential parts of a plant is determined according to a numerical ratio from the Dismissal Protection Act assessed.

The relocation of a business means that the entire business or at least a significant part of the business or parts of the business are relocated. This can be assessed quite simply. If the employee has to perform the same activity at another location as before, it is simply a relocation. However, it is important that the relocation is not a minor change. 

This would not mean a relocation of the business. If, however, the employee has to use other routes to get to the company (this could already be the case if the company is relocated from the outskirts to the city center), this could be a relocation subject to co-determination by the works council. However, again only a significant part of the workforce and not the entire workforce must be affected.

A division of the business, on the other hand, occurs when the existing business or organization with a single management is divided among several organizations with independent management. Thus, a unitary operation existing until then no longer exists. On the other hand, there can also be a merger of establishments. This is the case when at least two smaller operations with their own management are combined into one independent operation with unified management. An example of this is the takeover of a small business by a larger business. Here, too, a disadvantage for all or a significant part of the workforce must be the result of the division of the business.

However, it is more interesting to consider the change in the purpose of the company, its organization or facilities. We can speak of a change in the company organization if internal company processes or the responsibility of employees (especially their performance responsibility) is changed or restricted and the new organization can no longer be compared with the old organization that existed until then. An example of this would be a change in the performance hierarchy - levels are eliminated or new ones are created. An indication of this would be, for example, that the existing organization chart (the graphic representation of the structure of the organization or the company) has to be changed.

The purpose of a company includes the services offered or the production of a company. A change can be said to occur when the production or service is replaced or modified. Among other things, it is also the case with outsourcing that the purpose of the business can be changed. However, outsourcing means that tasks, which were previously performed by the company itself, are handed over to an external company. Easier to define is the change of operational equipment. This is the case when machines or equipment are added.

The last possibility of operational change mentioned in the law is the introduction of new or working methods or production processes. These are rationalization measures that go beyond the usual innovations due to technology or the age of the machines. This results in a significant change in the work processes, tasks or work techniques of the employed workers.

Should a change in operations exist in the aforementioned possibilities, the works council must be consulted and deliberate together with the employer. This usually takes place in two steps. In the first step, the employer must inform the works council about a planned change in operations but also communicate with it the probable disadvantages for the affected employees in a comprehensive but above all timely manner. The employer must therefore already anticipate at this planning stage how high and, above all, which disadvantages could exist. Thus, in case of doubt, the disadvantages are not yet determined or could be less than expected, but the greatest disadvantage should always be assumed and, in case of doubt, should not increase.

In the subsequent consultation meetings with the works council and a possible advisor, serious discussions and negotiations must take place with an existing will to reconcile interests. This reconciliation of interests here mostly contains regulations on the employer's planning and their entrepreneurial decision. Thus, there must be a balance between the entrepreneurial foresight and the protection of the employees. This also includes economic reasons of the employer, should for whatever reason an economic branch of the company no longer be profitable. However, it remains important to know that the works council cannot force a reconciliation of interests with the employer. This means that although the works council has a right to negotiate, the employer is free to conclude a reconciliation of interests.

In a second step, the works council then negotiates a social plan with the employer. This social plan is an agreement between the parties to compensate or mitigate the disadvantages for the employees. This social plan can also be enforced by the works council. This would be done by appealing to the conciliation body. The second step is not mandatory. It can already be omitted if the employer and the works council agree on a reconciliation of interests. The result of this is that the works council cannot really have a say in a change in operations. 

This continues to fall under the co-determination-free part of entrepreneurial freedom. The only possibility of co-determination by the works council remains how the disadvantages of the employees associated with the operational change are compensated or at least mitigated. In case of doubt, this can be done by enforcing a social plan through the conciliation body.

The transfer of operations:

Details of the transfer of operations

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A transfer of an undertaking primarily involves the sale of an entire undertaking to another person. Fundamental to this is the transfer "by legal transaction". A legal transaction in this sense can be the lease, division of a company, merger of companies or, in most cases, the sale of a company. In this case, production facilities, offices and other property of the previous owner are transferred to the new owner. Employees would thus possibly suffer a disadvantage if they were to lose their jobs as a result of the sale. 

For this reason, the Civil Code (BGB) provides for a regulation where, according to § Section 613 a (1) sentence 1 the new owner of the company must fulfill the rights and obligations of the old employer and also stand in for them. This means that the sale of a company is treated in the same way for employers as a change of employer. The actual employment relationship remains in the same form as before. Here, the protection of the employee by the BGB is thus set very high.

In the event of a transfer of business, the new employer may not make any deviating agreements that result in a disadvantage for the employee. These would be invalid because the legal consequence of the § 613 a BGB is mandatory. It could happen that new employment contracts are drawn up as a result of the transfer of the business and the employee has to sign them, but since the transfer of the business may not in itself entail any change to the contract, there is in itself no reason for a new employment contract. However, there is nothing to be said against a written record between the employee and the new employer recording the change. However, this then only has declaratory effect. In other words, it only states what the law already states.

Any collective agreements and works agreements may also not simply be amended or terminated to the detriment of the employee in the event of the transfer of the business. These must continue to run for at least one year before any adverse change may be made for the employee. Unless other new collective agreements or works agreements take effect that supersede the previously existing ones.

Since the employee is in constant contact with the employer in the regular case, he has a certain possibility or leeway to resist a transfer of business. In order to give employees the chance to remain with either the new or the old employer, the law requires the employer to provide detailed information to the affected employees. In addition, the employees have the right to object to the transfer of their own employment relationship to the new employer on the basis of the information received from the employer. 

This objection is not bound to any justification and the right of objection can be exercised at will or not. The employee has one month to formulate the objection. The time limit starts to run after the employees have been informed about the planned transfer of the business. If the employee does not fully inform about all the reasons mentioned below, the time limit does not start to run. This means that the employees could raise their objection without any time limit.

The consequence of a successful objection is that his employment relationship with the previous employee continues. However, this usually also means that the previous employer has no possibility of continuing to employ the employee. This logically results in a termination for operational reasons. Cancellation of the employee. However, the new employer may not terminate the employment for the reason of the transfer of the business. Other reasons for a Cancellation however, are not included in this.

Prior to a transfer of an undertaking, the employer must inform the employee of the following: the date or planned date of the transfer, the reason for the transfer, the legal, economic and social consequences of the transfer for the employees and the measures envisaged by the employer. Above all, the local labor courts place very high demands on the employer's duty to inform employees. Thus, it can quickly happen that information about an imminent transfer of business is incomplete. However, insufficient information from the employer does not stand in the way of the transfer of the business.

In case of doubt, a transfer of an undertaking is based on the reason for the insolvency. Here, it may be possible that the old employer is responsible for wage arrears. In the event of a sale of the company, the old employer cannot simply extricate itself from this obligation. In this particular case, the BGB also provides for a provision. In the event of a failure to pay wages, the old employer and also the new employer are jointly and severally liable under § 421 BGB. This means that the employee can choose to get and claim the money due to him from one or the other debtor. 

The situation is different for receivables that only become due after the transfer of operations. These can be bonus payments or premiums, for example. In this case, the old employer is only liable pro rata temporis. For example, if a bonus arises monthly but is not paid out until the end of the year, the old employer is only liable for the months of the year in which it was still the original owner of the company. The new employer is then logically liable for the months in which it became the new owner of the company.

In this respect, a conclusion can now be drawn. In the event of a transfer of business, the new employer assumes the rights and obligations of the old employer arising from the existing employment relationships. Both the old and the new owner of the company are subject to special information obligations vis-à-vis the employers. The employees affected by the transfer of business have a special right to object to the transfer of business. Whether they make use of this right is, of course, up to them. It is not uncommon for the consequence of an objection to be termination for operational reasons. 

The provisions of the employment contract are and remain unchanged in the event of a transfer of business. In the case of a new employer who is bound by collective bargaining agreements, collective bargaining agreements with the previous employer shall, in case of doubt or in certain cases, become part of the employment contract with the new employer. The aim of this is to keep the disadvantages for the employee as low as possible or to prevent them from arising in the first place. The old employer, but also the new employer, is subject to a special prohibition of termination with respect to the employee for the reason of the transfer of the business. The sale of the company does not necessarily release the previous employer from its obligations. He may therefore continue to be liable in the same way as the new employer.

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Law firm for labor law in Kerpen, Cologne and Witten

Lawyer for - Labor Law | Criminal Law | IT Law | Data Protection