News Employment law – No protection against unfair dismissals in small businesses – high requirements for the existence of a joint business – dismissal while on sick leave permissible

Foreign companies are usually pleasantly surprised by the German legislation of protection against unfair dismissals. This is because it does not apply to so-called small businesses that regularly employ not more than 10 employees. If several such small businesses belong to a group of companies, the question arises with regard to protection against unfair dismissals whether all individual operations constitute a joint business. If this is the case, all employees of the individual operations are counted together for the purpose of determining the applicability of the German Unfair Dismissal Act. An essential prerequisite for this is that all operations are centrally managed in personnel matters. This means that personnel is deployed across all operations and is also managed centrally in a uniform manner. It is also relevant if essential operating resources are used jointly and decisions on their use are also made centrally.

Good news for the employer side: case law continues to be extremely cautious about the assumption of such a joint business. In its judgement of 21 May 2021 (2 AZR 560/20), the Federal Labour Court once again dismissed an unfair dismissal claim of an employee of a small business entity who wanted to defend himself against his dismissal by invoking the existence of a joint operation. The lower courts had also dismissed the case.

The decision is also welcome, from the employer’s point of view, with regard to the interpretation of the rule which prohibits an employer from discriminating against an employee because the employee is permissibly exercising his or her rights. In this case, the employer had given notice of termination in connection with the employee’s sick leave. The employee considered the dismissal to be invalid only because it was a reaction to his sick leave. However, the Federal Labour Court did not see sufficient evidence for this and confirmed that dismissals in small businesses, to which in principal no protection against unfair dismissal applies, are also permissible if the employer wants to prevent new disruptions to the business operations that are to be feared in the future due to further incapacity to work.

This was not an unfair motive for the dismissal.