In practice, managing directors (Geschäftsführer) frequently try to attack the validity of
The German Dismissal Protection Act Does Not Apply to Managing Directors
Pursuant to section 14(1) no. 1 of the German Dismissal Protection Act (Kündigungsschutzgesetz, KSchG), the provisions on dismissal protection
“do not apply, within the operation of a legal entity, to the members of a corporate body which has been appointed to legally represent the legal entity“.
Accordingly, the general rights of dismissal protection under the Act do not apply to legal representatives of legal entities, such as for instance the managing director of a German company with limited liability (GmbH). Notably, unlike other employees, the dismissal of a managing director
The Facts of the Case
The claimant had been employed by the defendant since 1996. In 2011, the defendant appointed the claimant as managing director. Alongside the claimant, the defendant company had an additional 98 managing directors. Detailed signature guidelines were in place containing regulations on the managing directors’ powers to represent the defendant.
In February 2014, the defendant gave
The claimant argued the dismissal was invalid due to lack of
The claimant’s appeal on points of law before the Federal Labor Court was unsuccessful. Contrary to the view of the claimant, the dismissal was not required to be socially justified pursuant to section 14(1) no. 1 KSchG.
The Federal Labor Court confirmed its previous case law according to which the provisions of the first chapter of the KSchG do not apply to
According to the Court, section 14(1) no. 1 KSchG applies even if the relationship under the law of obligations which underlies the corporate office is substantively an employment relationship. There are no considerations under European law which would run counter to such
At the same time, any restrictions placed by the parties on the managing director’s power of representation, as contained in the signature guidelines, are irrelevant. This is because it is not possible for the statutory power of representation to be restricted vis-à-vis third parties.
Furthermore, the Court held that the exclusion from the general rights of protection against dismissal did not contravene article 12(1) of the German Constitution nor did it constitute a breach of article 3(1) of the German Constitution by treating differently senior employees and members of statutory corporate representatives.
The appointment as managing director may, at best, constitute an abuse of
The judgment of the Federal Labor Court is consistent with previous case law. The Court expressly makes the point that only the formal corporate office as managing director at the time the notice was received is relevant. Managing directors, accordingly, cannot rely on an alleged employee status even if they were bound by instructions, or if their power of representation was restricted inter parties.
However, managing directors are not left entirely unprotected. As explained by the Federal Labor Court, managing directors are protected by general clauses under civil law against the exercise of the right of dismissal in contravention of moral principles or good faith.
Notably, the appointment as managing director may constitute an abuse of legal process if such appointment is merely used as the pretext to a dismissal shortly
The Federal Labor Court has provided legal clarity by discussing in detail the possible objections against a lack of protection against dismissal for managing directors. By doing so, the Court ends the practice frequently used by managing directors whose employment has been terminated, to turn to the courts alleging employee status and claiming rights of protection against dismissal.