Friday, 14. June 2024

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The Termination of Older Employees (50 plus)

Many cases of termination involve older employees (m/f). Reason enough to take a closer look at this constellation.

1. Starting Point

A dismissal or termination  is often the consequence of a conflict.

Our time is fast moving. Technologies change, old procedures are replaced by new ones. This often means that the demands at work also change. But not every older employee is able to keep up.

The salary level of older employees is generally higher than that of entry-level employees. Over the years, the (albeit small) salary increases have added up to quite a respectable wage level.

Thus, it is more common for the young, well-educated employee fresh out of college to work more effectively and be more “resilient” than the older employee who has been with the company for a long time. This is because the value of experience diminishes when work techniques are constantly changing. And as back pain increases, enthusiasm for work decreases.

In addition: Not every 55-year-old is able to subordinate himself without visible discomfort to a 35-year-old manager. However, the employment relationship is characterized by the fact that the employee is subject to instructions from the employer (or the manager appointed by the employer).

Only one person can be the head of a department. There are many qualified employees who lack the necessary leadership quality – or what the boss considers to be it. The constellation is particularly “toxic” when the qualified 55-year-old skilled worker without apparent leadership quality meets the technically less qualified, but decidedly “assertive” 35-year-old head of department. After all, not everyone who cannot lead wants to be led.

In such a situation, the employer sometimes wishes to part with the older employee.

However, it is notoriously difficult for an older employee to find adequate follow-up employment on the labor market. This often leads to the older employee wanting to hold on to his job at all costs, even though he (or she)  is actually rather dissatisfied there himself. The uncertainty as to how things will continue professionally and above all financially causes – understandably – anxiety.

Finding an adequate solution for both sides in this situation is not easy.

2. Legal considerations regarding termination

Let’s assume that the Dismissal Protection Act (Kündigungsschutzgesetz) applies in the company in question and that the (older) employee has not given cause for extraordinary termination without notice/termination for cause with immediate effect (fristlose Kündigung aus wichtigem Grund). Then we have to see whether there is a reason for termination under the Dismissal Protection Act.

Keep in mind: There is no „hire and fire“ in German employment law, especially when it comes to older employees. As an employer, you always need a reason for termination. It does not have to be as grave, serious or important as in a termination for cause (wichtiger Grund) under § 626 BGB (German Civil Code), but we are far from (termination of) employment at will here.

a) Behavior-related reasons (verhaltensbedingt)

Behavior-related grounds for termination can be: Refusal to work or failure to follow instructions from a superior. Poor performance or violations of company guidelines may also be considered.

As a rule, termination for behavioral reasons (verhaltensbedingte Kündigung) requires that the employee has previously been duly warned and continues his misconduct despite a warning (Abmahnung).

Of course, the employee’s age and length of service (Betriebszugehörigkeit) must also be taken into account when considering whether the present reason justifies termination.

Frequently, the misconduct of which the employee is accused does not constitute a reason that clearly justifies termination for conduct-related reasons when the overall situation is considered.

b) Person-related reasons (personenbedingt)

A dismissal may also be justified if the employee is not (or no longer) able to meet the requirements of the job due to his personal characteristics (personenbedingte Kündigung).

In the case of frequent short illnesses or a long-term illness, the future health prognosis (Gesundheitsprognose) is always important. If the doctor considers an improvement to be possible or even probable, the employer is likely to be shipwrecked with a dismissal due to illness.

A person-related reason for termination can also be that the employee simply does not understand a new technology, for example. However, before the employer resorts to dismissal in such a situation, he must try to familiarize the employee with the new technology and train him accordingly. A 55-year-old cannot be dismissed because he is unable to master the new IT system completely error-free within 14 days.

c) Operational reasons (betriebsbedingt)

In the event of termination for operational reasons (betriebsbedingte Kündigung), older employees are known to be more protected than younger employees with less seniority (Dauer der Betriebszugehörigkeit). Age and length of service are two essential criteria to be taken into account in the „social selection process“ (Sozialauswahl).

Therefore, if the older employee does not occupy a “special position” (which is eliminated for operational reasons) that makes him or her incomparable to any other employee, he or she should generally have the better cards in the social selection (among comparable employees) to be made in the context of the termination for operational reasons.

d) Priority of dismissal with notice of change (Änderungskündigung)

In addition to the above-mentioned problems, there is often also the requirement of the “priority of the dismissal with notice of change” (Vorrang der Änderungskündigung). This means that before the employer issues a termination notice to end the employment completely, he must first check whether it is not also possible to change the working conditions. If the employee then accepts these, even if only conditionally, the employment relationship must not be terminated.

e) Conclusion

The termination of an older employee is often legally difficult.

3. (Better) Option: Termination agreement

If both sides know or at least clearly feel that a continuation of the employment relationship does not make sense, the conclusion of a termination agreement, i.e. an amicable termination of the employment relationship, is usually the best option.

(We will not consider arrangements such as partial retirement – Altersteilzeit – at this point).

a) Avoidance of a blocking period (Sperrzeit)

An essential component of such a termination agreement is, on the one hand, the avoidance of a blocking period for unemployment benefits (Sperrzeit beim Arbeitslosengeld). But this is rather a “technical” question. More on this in another article.

b) Severance pay (Abfindung)

Even more important, of course, is the severance pay. As is well known, the labor courts use the standard formula: “Severance pay = half gross monthly salary per year of service”. But this formula is not set in stone.

Particularly in the case of older employees whose termination is legally invalid with a certain degree of probability, the severance pay formula tends to be “one full gross month’s salary per year of service”.

This is often too much for the employer, because it adds up to a considerable sum if the employee has been with the company for a long time and has a high salary. The employee, on the other hand, fears that this severance pay, which he also has to pay tax on, will not be enough to bridge the time until retirement.

c) “Mediative” considerations

In this situation, employer and employee should consider the following:

(a) The severance pay is not only paid in consideration of the services the older employee has rendered in the last (conflict-ridden) months, but in some way compensates for his or her lifetime achievements. Sometimes it helps if the employer keeps in mind that the employee has also done very good work for the company over a longer period of time during the last 20 years. So as an employer, one should not only remember the conflicts of the last few months, but rather keep an eye on the entire employment relationship.

b) And the employee should reason: Of course, the loss of a job represents a considerable cut, which is associated with considerable imponderables (uncertainties) for the future. But: In most cases, the older employee has been able to build up a certain amount of assets in the course of his or her working life, so that he or she does not immediately fall into poverty. Every end – even if it sounds a bit trite – represents a new beginning, or can represent a new beginning if you seize the opportunities that present themselves. Were the last 20 years as “Head of QA and the Shipping Department” really what you dreamed of your life to be? Aren’t there still things, be it professionally or in your free time, for which you would like to have more time than you could spare in the past because of your job?…

(For those employees among you, for whom the job has meant life, let me quote – analogously – the Roman philosopher Seneca (- it was Seneca, wasn’t it?), who said: “You stay and I go. But which of the two is better, I do not know.” – Such a job loss after 20 years with the company can be very dramatic for the person concerned. As a consultant who deals with layoffs on a daily basis, you should never completely lose sight of that.) …

c) The new situation is, as I said, especially difficult for the employee who loses his job. Coming to terms with his new situation, or even making friends with it, requires a certain amount of time. Perhaps there is an opportunity here to continue to employ the employee on a self-employed basis as a consultant in the future. A combination of severance pay and ongoing consulting fees is sometimes a better alternative than a very high severance payment as a one-time payment. For the employee, this solution allows a gradual transition into a new phase of life. (Note: But be careful that this does not cause problems with unemployment benefits. You have to observe the limits!)

d) The most important recommendation, however, is: You should not see your counterpart primarily as an opponent, but as a former work partner with whom you have worked well for a long time. Respect for the other person’s performance and insight into operational necessities, i.e. a mutual understanding of the other person’s situation, are often the starting point for an appropriate solution.

e) The task of the lawyer in such a constellation is, in my opinion, to promote this mutual understanding. Of course, the lawyer is a party representative and not a mediator. But it sometimes helps to bring aspects of mediation into settlement negotiations. After all, the best solution is the one with which both sides are satisfied in the end.

4. One final word

Last but not least, a “note of caution” to authorized signatories and VPs who proudly represent the employer in termination and severance negotiations with rank-and-file team members: Unless you belong to the top management of the mother company or at least to the management of your subsidiary, you are also “only” an employee of your company. It may therefore happen to you tomorrow that your superior approaches you and communicates the company’s intention that they also want to part with you. You should always keep this in mind when you take the hard corporate line in severance talks with your employees. Such an attitude can also “fall on your feet” at a later point in time.

So don’t let yourself be blindly “harnessed to the cart” like an ox, but put yourself in the position of your counterpart who is losing the job he or she has held with the company for the last 20 years. Instead of always wanting to push the severance pay down, you can also let it be known “upwards”, i.e. to the management, that it might be appropriate to be a little more accommodating and generous than you would actually have to be because of your own “position of power”. Just as an idea. …

Dr. Wolfgang Gottwald
Rechtsanwalt/Attorney at Law

Attorney at Law

Leopoldstraße 51
80802 München

Tel.: 089/383 293-10
Fax: 089/383 293-13