The company in labor law

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The enterprise / What is an enterprise in labor law

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The definition of an establishment in labor law and whether or not a worker is employed by it plays a role in scenarios such as the Transfer of operationsbut also actions for protection against dismissal, Cancellations and Severance payments plays a major role. In the following, we break down the concept of an enterprise in labor law in more detail.

What exactly does the term operation mean?

Definition according to German labor law

There is a clear unambiguous definition of this term according to the German Labor law unfortunately not. The main reason for the various different interpretations of the term "establishment" is the different legal purposes to which it is subject. This is because in European law, different directives fulfill different functions. One Business Transfer Directive for example, pursues a different purpose than a mass dismissal directive. Another reason for the different legal application and meaning of the term "establishment" is that the case law of the European Court of Justice (ECJ) is only partially consistent with that of the German Federal Labor Court (BAG).

Distinction between the terms enterprise and company

Distinction operation and enterprise

Basically, to separate the concepts of the enterprise and the enterprise there is a serious difference, the enterprise represents the legal unit of the company, while the enterprise represents the work organizational unit of the company.

Companies can, for example, have several establishments, but conversely several companies can also form / represent a merged establishment, but this case is rather the exception. If, for example, a company tries to legally separate work processes within a company that run into each other by installing several companies, it is still not possible to circumvent protection against dismissal of employees, as the concept of company size remains unaffected. In this case, all employees are nevertheless added up in order to determine the size of the company.

What does the Works Constitution Act describe?

The Works Constitution Act (BetrVG)

According to established case law of the German Federal Labor Court (BAG), the concept of an establishment under the Works Constitution Act (BetrVG) an organizational unit within which the employer and the employed workers pursue defined work-related purposes. However, physical proximity or unity is by no means decisive here, but rather uniform management/leadership, contract design, accounting, duty as well as vacation scheduling and hiring and firing.

Is there a possibility of forming a residual operation?

Is there a residual operation?

In the case of the gradual liquidation of an enterprise, no "residual enterprises" are created, since a unit cannot be formed only by a liquidation. This must not happen, in particular, because otherwise conditions of the Transfer of operations would be given. Therefore, in any case, the person who acquires / buys the last tangible asset, machine, is obliged to take over the employed workers as well. However, this does not correspond to the sense of the Transfer of operations.

Which salaried employee is assigned to which part of the company?

Assignment of employees to parts of the company

The assignment of employees who, in a special sense, perform tasks exclusively for only one part of the company within the scope of their employment relationship is clearly and simply assigned to the individual part of the company.

But what about higher-level departments / units of the company?

In most cases, employees of staff departments, the personnel department or the accounting department, for example, cannot be specifically assigned to a part of the business and are therefore not transferred when the business is sold, unless they have only worked for a specific part of the business. However, this only occurs in rare cases in small and medium-sized companies, but it does at the group level. Since it is quite common in a corporate environment that, for example, someone in the personnel department is only entrusted with the hiring and firing of employees from a certain area.

General labor law