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Germany Internationales Arbeitsrecht

Germany: The perfect restructuring (part 2: kick-off with works council)

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The second in a series on ‘the perfect restructuring’ in an employment law context, this article examines best practice for handling the kick-off with the works council for a business restructure from a German perspective.

Having presented the preparation and planning phase in part 1 of our series on restructuring, in part 2 we will devote ourselves to the start of the negotiation phase. In this phase, restructuring projects often develop a certain momentum of their own, which has to be controlled. This can only be achieved if the tactical set-up for negotiations with the works council is clearly defined. This already applies to the kick-off meeting…

Letting the cat out of the bag….

The kick-off meeting is the first opportunity for the company to present its plans to the workforce. In some cases employees will be surprised by the plans; in other cases they will have been expecting the announcement. In both scenarios the following applies: the content and form of communication should be carefully considered and adapted to the specific circumstances of the company and its situation. Below we set out some recommendations on how to manage this crucial stage.

Who attends the kick-off meeting?

It is obvious that company representatives and works council members will take part in the kick-off meeting. If it is unclear whether the local, general or group works council should attend the meetings, all boards can be invited as a precautionary measure.

In some cases it makes sense to invite the entire workforce to a subsequent meeting shortly after the kick-off meeting. That way the employees will be informed about the restructuring plans directly by their employer, which prevents incorrect information from being passed (deliberately) on to the employees by the works council.

It may be advisable for external lawyers to participate in the kick-off meeting as representatives of the company, particularly if the works council also brings a lawyer.

Who presents the plans?

There is no universal answer to who is best placed to present the restructuring plans on behalf of the company. It depends on the factual circumstances. It could make sense for a representative from a lower hierarchical level rather than management to announce the plans.

In other scenarios it may be advisable for the chief executive officer to present the planned restructuring measures personally in order to demonstrate company management’s determination. This also sends a clear signal for subsequent negotiations with the works council.

What plans should be presented?

The restructuring plans should be presented in a reasonable degree of detail. This also applies to setting out the employer’s rationale and underlines that the restructuring plans are serious and necessary. The works council will (must) recognise that only ‘how’ the restructuring will be implemented is up for negotiation rather than ‘whether’ the restructuring will be implemented at all. However, when presenting plans, it must be borne in mind that, in accordance with the legal concept set out in s111 of the German Works Constitutional Act, ‘whether’ the restructuring will be implemented must also be discussed during negotiation of the ‘balance of interests agreement’ (‘Interessenausgleich’, the agreement setting out the terms and timing of restructuring).

If headcount reductions are required, the employer should emphasise the benefits of the restructuring. It may even be possible to win over some employees who are not affected by the job cuts as proponents of the restructuring. In any case, emphasising the positive aspects of the restructuring plan reduces the risk of a negative mood developing in the workforce after the kick-off meeting.

At the kick-off meeting, the company should already have a first draft of the balance of interests agreement available. The draft can be passed on to the works council, so that there is already a concrete focus for negotiations, which can be discussed in subsequent meetings.

What happens after the kick-off meeting?

Negotiations of the balance of interests agreement and the social plan should take place rapidly after the kick-off meeting. Not much time should be allowed to pass without the employer’s side and the employee side coming to together to progress negotiations. In addition, the start of negotiations usually brings a little more calm to the workforce, because the company’s plans can be explained in detail and open queries can be clarified during negotiations. Employers should already submit concrete meeting proposals to the works council at the kick-off meeting.

To be continued …

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