Question

You are an international human resources consultant retained by River Wind Products, a U.S. corporation headquartered in Seattle. River Wind recently downsized its operations located in Germany, which resulted in significant layoffs. The basis of this decision was the inability of the German plants to generate sufficient revenues. Although marginally profitable, River Winds concluded that it would be fiscally prudent to downsize the facilities. River Winds provided ten days written notice to their employees at these facilities prior to their termination. In response, the employees have submitted claims for wrongful discharge. You have been retained to advise River Wind's board of directors on the validity of these claims. Did River wind's closure of the plant violate German law? Are the former employees' claims for wrongful discharge valid? Why or why not?

Answer 1

As the adviser to the board of directors at River Wind, it is of utmost importance, urgency and sincerity that immediate preventive action is initiated to close the dispute and mitigate the high risk of litigation in the jurisdiction German court of labour. River Wind has exposed itself to litigation as a result of a poor and hasty decision to prematurely terminate employees with following due procedures as per German employment law.

Even just under the principles of natural justice and common law, ten days notice period or notice pay would be seen as grossly inadequate by any court of law and the termination order would be set aside by the court and award back wages, interest on the outstanding amounts and in some cases even exemplary costs to the employees.

Now, in German labour law, it is clearly mandated in the Civil Code that a minimum stipulated period of notice to employees is four weeks unless the employee is on probation of six months then the notice period should be two weeks as stipulated.

Under the German Civil Code, the notice period gradually increases in terms of duration in months depending on the duration of an employees employment with the same organization unless an organization has no more than 20 employees then the notice period irrespective of tenure is fixed at a minimum of four weeks.

Thus, these former employees have every ground to be aggrieved and their claim for wrongful discharge may be upheld by the jurisdiction labour court of law.

In light of these German labour laws, River Wind would face a negative outcome in any litigation brought about by the aggrieved employees and so must take steps towards damage control and initiate a meditation settlement with the aggrieved employees.

Normally, employee contracts which are stated in the appointment letter/order and the employee handbook would be clearly mentioning all the terms and conditions of the contract between employer and employee. This contract should be drafted and finalized in accordance to host country/local labour laws and should not run foul of them.

It is unfair to the employees to be laid off without adequate warning and notice period or notice pay in lieu of notice period as they have to maintain their families and need some overlapping time to search and obtain another job which is difficult in certain niche areas of expertise and technical work where the jobs supply may be low in the market.

River Wind is well within their right to close their plant owing to losses but it must first ensure all suppliers, employees, customers and creditors dues and any outstanding government taxes are paid off and fully settled amicably in order to be an ethical organization and not face future litigation.

If River Wind followed all laws and procedures and after that closed down their plant in Germany, then those former employees cannot have any claims for wrongful discharge.