The German Federal Labor Court (Bundesarbeitsgericht - BAG) has issued a very relevant decision for compliance departments in companies regarding the start of the two-week period of Section 626 (2) of the German Civil Code (Bürgerliches Gesetzbuch - BGB ). In its ruling of May 5, 2022 (Ref.: 2 AZR 483/21), the court established some important principles with regard to comprehensive compliance investigations and the two-week period of Section 626 (2) BGB.
Compliance departments and labor attorneys who accompany such regularly face the question of when specifically the two-week period begins to run. This is often a question that is not easy to answer, especially in complex cases involving many details, persons or data. In this respect, the decision brings a considerable degree of legal certainty. However, it is also clarified that the deliberate postponement of the disclosure of information does not lead to a suspension of the deadline.
In the proceedings, the parties disputed the validity of a termination without notice and, in the alternative, an extraordinary termination with a social expiry period. The defendant company operates in the defense and aerospace sector. In the past, it was a contractor of the Federal Ministry of Defense on several occasions. A compliance department has been formed at the defendant company. In 2018, the department received a tip-off that there were inconsistencies regarding planned procurement projects. The employer then hired an external law firm to investigate the matter and fully clarify the facts. In mid-2019, the company decided to suspend the investigation for the time being and to prepare the results of the investigation to date in an interim report. This was to be handed over to the management so that it could decide on any labor law measures to be taken. The law firm subsequently compiled the identified breaches of duty by the plaintiff and 88 other employees of the defendant in accordance with the order. The report was handed over to the managing director on 16.09.2019. The plaintiff commented on the allegations after being requested to do so by the defendant on 20.09.2019.
After hearing the relevant works council, the defendant employer terminated the employment relationship on 27.09.2022 without notice and, in the alternative, extraordinarily with a social expiry period (corresponding to the ordinary notice period).
The plaintiff defended himself against these terminations by filing an action for protection against dismissal.
The lower courts had upheld the action for protection against dismissal in each case.
The appeal of the defendant company was successful. According to the undisputed submissions of the parties, the defendant company had complied with the two-week period of Section 626 (2) of the German Civil Code in the case to be decided - contrary to the view of the lower courts.
The employer had submitted that a person authorized to give notice (here: management) only became aware of the facts relevant for the termination on September 16, 2019. In this respect, it was also irrelevant for the observance of the deadline of Sec. 626 (2) BGB whether the head of the compliance department had already been aware of the facts relevant for the termination at an earlier point in time. It is undisputed that he was not entitled to give notice of termination.
Furthermore, the findings of the Regional Labor Court did not allow the conclusion that the company could not invoke the observance of the deadline due to good faith (Sec. 242 BGB). This is because such an inadmissible exercise of rights requires at least that the delay in obtaining knowledge by a party entitled to termination is based on improper organization. For this to be the case, the party entitled to give notice would have to have purposefully prevented the flow of information or at least created an improper and superfluous organizational risk that impedes the flow of information in a manner that is incompatible with good faith. However, such a risk does not lie in the fact that the supervisor (head of the Compliance Department) is not at the same time authorized to give notice.
Fortunately, the decision clarifies that knowledge of the management of a compliance department is not sufficient to set in motion the two-week period of Section 626 (2) of the German Civil Code. However, this presupposes - which is usually the case in practice - that there is no authority to terminate the contract there. However, the decision also makes it clear that there is hardly any scope for deliberately postponing the deadline by deliberately or negligently passing on information late.