University of Northumbria at Newcastle
Unit: Employee Relations in Europe
Unit Code: GO099
Semester 2 1999/2000
Protection against dismissal in Great Britain and Germany within the context of the European Union -
Name: Brigitte Wallner
In the past few years there have been many discussions about convergence criteria and the Euro. The introduction of the Euro should complete a uniform European economic area. But does a European social union also belong to a European economic union? Is a common marketing area actually conceivable without approximately homogeneous standards in social and work rights? Are there national differences, and which consequences could they possibly have for the economic situation?
I will try to tackle these questions through a comparison of the dismissal-regulations in the UK and Germany. Firstly, I will describe relevant European legal work- and social-norms. Then I will describe and compare the British and German protection-against-dismissal-regulations. A critical assessment will show the pros and cons of both systems. Finally, I will try to briefly stress the demands the European Union has to view.
2. THE LEGAL RULES
2.1 The European legal rules
Until the 1980s, work- and social-rights were the stepchildren of the European community. And to a certain extent they still are. Undoubtedly, when the EEC was created in 1958, the creation of a common economic area with free trafficking of goods was the main aim. A reversal took place in 1989 when eleven of the twelve member states adopted the Social Charter. In the meantime (by the end of 1999) the UK has also signed it.
In European Social politics secondary-legal realisation of the EC-treaty (primary right) predominantly takes place in the form of guidelines. In contrast to regulations, which have direct legal effects for the member states, guidelines contain only a target. According to the subsidiary principle a member state must carry out the actual conversion into national laws by itself. Furthermore, it is up to each member state to create, or let exist, more favourable regulations for its employees. It can be assumed that, especially within the area of European work and social rights, guidelines are preferred to regulations, due to the different structures of job markets and industrial laws in the individual member countries.
EU-legislation has, so far, "comparatively little direct impact on the determination of individual terms and conditions of employment" (European Management Guides 1991, p.xx). The Social Charter provides "the basis of a number of proposed directives which would set a framework of minimum rights and principles which member-states would have to implement, either by amending national legislation, passing new primary legislation or incorporating into binding agreements" (European Management Guides 1991, p.xxii f.). The most important regulations and guidelines concerning work and social rights refer to proof of an employment relationship, an homogenisation of contractual standards, hours of work, atypical work, protection of employees against employers' inability to pay, minimum standards for industrial safety, protection of special groups of employees and gender-equality. (cf. for example Gold (ed.) 1993, ch.3, p.64-83; European Management Guides 1991, p.xxiv-xxvi).
Only two Directives directly concern protection against dismissal: the Directive on collective redundancies and the Directive on the transfer of undertakings. The directive on collective redundancies was adopted in 1975 and covers rights to information and consultation when mass redundancies are planned. This Directive was upgraded within the Social Action Programme which accompanied the Social Charter in 1989.
The Directive on the transfer of undertakings was adopted in 1977 to guarantee continuity of employees' contractual and statutory rights in cases of merger and take-overs.
2.2 The German Legal Rules
"German industrial relations are characterized by a high degree of juridification – that is, legal rules cover almost every area, together with a multiplicity of institutions" (Gold/Weiss (eds.) 1999, p.84).
The two directives directly concerning protection against dismissal (the transition-guideline and the mass redundancy-guideline) did not need to be transferred into German legislation: § 613 a BGB regulates the transition of divisions, §§ 111 ff. BetrVG and § 17 KSchG regulates mass redundancy. However, "legislative interventions in the area of labour law (relating to protection against unfair dismissal (...) [et.al., B.W.]) have not led to an essential change in the traditional protective structure" (Gold/Weiss (eds.) 1999, p.85).
In Germany dismissal rules refer, in the predominant number of cases, to unlimited employer-employee relationships. With the expiry of a limited work contract the employer-employee relationship is terminated, without requiring notice.
"Most of the protective legislation makes no distinction between the public and private sector"(Gold/Weiss (eds.) 1999, p.69). Only career public servants ("Beamte") "are not covered by the rules of labour law, but by career public service law which falls under public law. Their terms and conditions of employment are regulated solely by statute" (Gold/Weiss (eds.) 1999, p.70).
There are two distinct types of dismissal: a "ausserordentliche" (= summary) dismissal generally only occurs after serious breaches of contractual or other obligations, for example "criminal behaviour or persistent refusal to comply with the contract of employment" (European Management Guides 1991, p.88). The only period which must be considered is that a "summary dismissal must be effected within two weeks of the occurrence which has prompted the dismissal" (European Management Guides 1991, p.88).
A "ordentliche" (=ordinary) notice takes place within legal minimum periods: "two weeks for a blue-collar worker and four weeks for a white-collar employee. Long-service employees are entitled to longer periods of notice" (European Management Guides 1991, p.91). The duration depends on length of service. A reduction of these terms of notice is only possible in a limited number of exceptional cases (e.g. for temporary help). An agreement of longer terms of notice is possible in the collective agreement and is common. These terms of notice then apply to all employees, independently of whether they are tariff-bound or not, and since BverfGE 1982, also independently of whether they are employees or workers. When the enterprise employs less than 11 constant employees it is not necessary to give a specification of reasons for giving notice. However, in larger companies the protection against dismissal act applies. Starting from six month's employment a notice is socially ineffective, as per the protection-against-dismissal-act, whenever no personal – (e.g. long term illness), behaviour- (e.g. violation of the contractual obligations) or company-conditioned reasons exist. The latter mostly refers to the work in the sense of bad performance, the fulfilment or defaulting of certain duties to exercise diligence etc. A company-conditioned notice (redundancy) can be made because of "urgent operating reasons" (European Management Guides 1991, p.88), which do not allow sustained employment at its existing level.
A contract of employment can also be terminated by mutual agreement. "One important element is that the employee agrees to allow employment to end before the expiry of the notice period stipulated in law, collective agreement or individual contract" (European Management Guides 1991, p.93).
Some employees have special protection against dismissal. Pregnant women, parents on parental leave and disabled employees are protected against both summary and ordinary dismissal. People protected against ordinary, but not summary dismissals are conscripts on military service, apprentices/trainees, members of works councils and "older employees" (usually over 53-55 with a minimum of three years of service). (cf. European Management Guides 1991, p.93f.)
In Germany "there is a legal requirement on employers to notify works councils (...) of any proposed dismissal, whether 'ordinary' (...) or summary" (European Management Guides 1991, p.86). The works council can reject a notice, although its contradiction "does not prevent the employer from issuing notice to the employee" (European Management Guides 1991, p.88). When an employee objects a notice he/she "must notify the works council within a week" (European Management Guides 1991, p.95). If no resolution is achieved through the works council, an individual can contest the perceived unfair dismissal at a labour court (within three weeks of the notice being given). If the inefficacy of a notice is recognised by the labour court, a claim to reinstatement exists. In practice reinstatement does not often happen. Rather more common is a compensation payment to terminate the contract of employment.
2.3 The British Legal Rules
"In the UK, cases concerning rights of employees are generally dealt with by industrial tribunals" (Gold/Weiss (eds.) 1999, p.66). Legal rules pertaining to protection against dismissal can be found, above all, in the Redundancy Payments Act of 1964, Industrial Relations Act of 1971, Employment Protection Act of 1975, Employment Rights Act of 1996, Employment Protection Consolidation Act of 1978 and in the Trade Union and Labour Relations Consolidation Act of 1992 (cf. Ferner/Hyman (eds.) 1998, p.11f).
Protection against dismissal starts after one month of employment. The legal period of notice must amount to, with a of up to two years worked, one week and after two years one week per man-year, however 12 weeks is the maximum. (cf. http://www.bma.de/eu_atlas/kuendig2.htm) It is not only a notice if an employer dismisses an employee, but also if the employer behaves contrary to the terms of the agreement and the employee becomes indirectly forced to quit (constructive dismissal).
In the UK non-extending or non-renewing of a limited work contract (fixed term contract) is regarded as dismissal. In practice limited work contracts are therefore provided with a renouncement of the complaint right.
As in German industrial law, there is distinction between redundancy and other reasons for giving notice. The Institute of unfair dismissal also covers behavioural and personal reasons for giving notice. In contrast to German industrial law, personal reasons for giving notice can already be present when the employer can prove in court that the capability or the performance of the employee does not meet the agreements in the contract of employment. Regulations to protect employees from redundancy have existed since 1965 (Redundancy Payments Act). Nowadays it is regulated in the EPCA and in the Employment Rights Act, section 105 ff.
In the UK, as in Germany, prerequisites for redundancy are a forthcoming locking or sinking of the workforce requirements of a company. These sinking workforce requirements can have different causes: Rationalisation measures, job decrease or the amalgamation of divisions are only three of many possibilities. In the UK a dismissal is admissible due to the bare assumption of sinking workforce requirements in the future. However, every employee is entitled to severance pay, the amount depends on the age of the employee, how many years he/she worked for the company and how much he/she earned. Severance pay is funded by a special fund - the redundancy fund. In Great Britain, as in Germany, there are legal procedural specifications for notice due to economic reasons. For example, workers' delegates have the right to a hearing when there are more than 20 notices within 90 days. More than 20 dismissals is regarded as mass redundancy and therefore must be reported to the national administration. Unjustified dismissals are also those which are due to the fact that a pregnant woman claims her maternity rights. Dismissals due to membership or non-membership in a trade union are, in any case, regarded as "unfair". Furthermore, dismissals due to sexual or racial discrimination are also regarded as unjustified .
The principle that the notice procedure should be "fair" in the sense of the "ACAS code of practice" applies to all the aforementioned forms of notice. The "Advisory, Conciliation and Arbitration Service" (ACAS) was founded in 1974, its function is the improvement of collective and individual work relations. Although the behaviour rules of ACAS do not have any legal power, the duty of employers to observe those rules is determined in the trade union and labour relation act of 1992. However, in practice this codex is rarely observed. Consequently many sacked employees receive remuneration through Industrial Tribunal. "All too often Industrial Tribunals make an award for damages (currently up to £ 10,000) against an employer, not because the employer was wrong to dismiss the employee, but because the method in which the dismissal was carried out was unfair." (http://www.fmb.org.uk/frames/buildersinfo/fmbbuilders/services/legal/dismissal.htm)
Germany and the UK have completely different legal systems. The German system belongs to the Roman-Germanic one, the British to the Anglo-Irish one. Although there are similarities. While German industrial law is shaped substantially by constant jurisdiction, British industrial law is characterised by an addition of legal rules. Thus one can speak of an approximation. Surely, European legal rules also contribute to the standardisation of industrial law, in the sense of a uniform target. However, how this target is reached is more or less left to the member states themselves (principle of subsidiarity).
A significant difference between dismissal in Germany and the UK lies in its definition: a non-extending or non-renewing of a limited work contract (fixed term contract) is regarded as dismissal in the UK, but not in Germany,
Both in Germany and the UK, as in almost all other European Union member states, an employer must justify a dismissal. If a British or German employee considers a notice to be unjustified, he/she can complain to the relevant labour court. If a German labour court acknowledges the inefficacy of the dismissal, the employee also has the right to reinstatement. In the UK, however, an employee is, in the case of an unjustified dismissal, always entitled to severance pay, but British labour courts seldomly force the employer to reinstate or reengage the employee.
In the UK and Germany a forthcoming locking or sinking workforce requirement of a company is a prerequisite to redundancy. While, however, in German industrial law a redundancy is only admissible if, at the time of notice, too many workers are available or if rationalisation measures have already been put into action, in the UK the bare assumption of sinking workforce requirements in the future is sufficient.
According to the civil principle of freedom of contract, the UK legal system proceeds on the assumption that each contracting party must have the right to step out of the contract. On the other hand, however, employers are also be obligated to pay compensation if they do not keep their contractual promises.
Moreover, substantial differences exist in the reference to the period of notice. In Germany the period of notice is between two weeks and seven months. In the UK it is substantially shorter, namely between one and twelve weeks.
In the UK a significant criterion for the evaluation of a notice is "fairness". Even if the notice was otherwise justified, a notice would automatically become unfair when ACAS-codex guidelines are not met. The employee then is legally entitled to severance pay. This is comparable with the automatic inefficacy of a notice in Germany, when the rights of a work council to information and contradiction is not observed. However, this norm only applies when a work council exists.
To sum up, it can be said that in Great Britain the term "dismissal" is broader than in Germany. However, from the view of the employer it is substantially easier to get rid of an unwanted workers relatively quickly (for cash) in the UK. Bad performance or the bare assumption of a job decrease is sufficient as grounds for giving notice.
4. Critical assessment: pro and cons of the two systems
The German system of individually complainable legal protection regulations has both pros and cons. An advantage is that laws are clearer and more unequivocal than jurisdiction. Nevertheless German industrial law is shaped considerably by constant jurisdiction. A disadvantage is that the right to take action refers only individually to each employee. Also collective actions such as strikes are not allowed. This had lead to a purely individualised viewpoint of dismissal. Additionally labour courts are very much stressed by numerous protection against dismissal complaints.
Where no work council exists, the dismissed employee is left on his/her own. In Germany a quasi two-class society of employees has been created: On the one hand there are employees with no or only slight protection against dismissal (e.g. temporary worker, employees in smaller companies etc.). On the other hand there are employees with extensive protection against dismissal (e.g. pregnant women.)
The principle of collective bargaining in Great Britain can be criticised as it requires an agreement of the majority of staff in order to contradict a notice. This is unlikely, for example, in the case of minority-groups or unpopular employees. Furthermore collective resistance requires strong in-house co-operation. While in Germany the neutrality of the work council to union members and non-union members is at least formally guaranteed, it is not likely in the UK that trade unionists campaign for a dismissed non-union member. However, those problems are being solved by the increasing legalisation of British labour law. Now all employees can take individual legal action against a notice.
However, whether the legal consequences resulting from an unfair dismissal are sufficient to ensure effective protection against dismissal, may be considered as doubtful. Rather it may be assumed that British enterprises see severance pays as component which is taken into account from the very beginning. Therefore British work laws do little to a deter employers from issuing unlawful notices, nor do they hold an incalculable financial risk.
The location debate in Europe plays a large role in political discussion. It is not possible to assume mono-causal connections between protection against unlawful dismissal regulations and unemployment. Nevertheless, it is often argued that industrial law in Germany, and especially protection against dismissal regulations, makes German enterprises inflexible in the European comparison, while the UK laws are often described as a good example of a successful de-regulation policy. This can be agreed with conditionally. Evidence for this is, for example, the fact that the income mobility is substantially higher in Great Britain than in Germany (cf. http://www.iab.de). The objection that German protection against dismissal laws are too complicated, because of the numerous individual laws, can in the meantime be transferred equally to Great Britain. Both states suffer from a lack of a labour legislation which is based upon a large number of individual laws, with no overall concept
The notion "protection against unlawful dismissal" could lead to the assumption that the employee is protected from dismissal. However, this is not the case. Effective protection from dismissal cannot exist because employees are not involved in the relevant management decisions - either in the UK or in Germany (for example (mass) redundancies). The protection against dismissal regulations are there to protect employees from the arbitrary annulment of their contract. Periods of notice are there to give time both to employer and employee to look for a new contracting party. The UK and Germany pursue the implementation of this target in two different ways The German method consists of a system of legal protection regulations, which are complained to judicially. The British technique consists of a system of "collective bargaining" between the parties.
6. Demands on the European Union
A comparison of the protection against dismissal systems in the UK and Germany clearly shows that the European economy is, with reference to work and social politics, very inhomogeneous. Differently regulated protection against dismissal is only one synonym for the different systems of social protection, work times and wages. Many experts rightly fear competition distortions on the job markets. Many companies already make use of the chance to shift jobs into European countries with the lowest wages and the fewest industrial safety regulations. Jobs which still remain in a high-wage countries like Germany are put under pressure due to the foreign competition. This causes the dangers of wage-dumping and social-dumping (cf. for example http://www.bdp.de/online), which will presumably be increased with the introduction of the Euro, as this eliminates foreign exchange risks. Those members who have exemplary work and social politics should not be punished with competitive disadvantages. Better co-operation is urgently needed in the area of job market and social politics at an European Union level in order to create an European work and social union. Those who want a common economic area must also want a common work and social union.
European Management Guides: Terms and Conditions of Employment, London 1991 (Institute of Personnel Management)
The European Union's Server: http://www.europa.eu.int
Federal Ministry of Labour and Social Affairs - Homepage: http://www.bma.de/eu_atlas/kuendig2.htm
The Federation of Master Builders Website: http://www.fmb.org.uk/frames/buildersinfo/fmbbuilders/services/legal/dismissal.htm
Ferner, Anthony/Hyman, Richard (eds): Changing Industrial Relations in Europe, Oxford/Malden 1998 (Blackwell)
Gold, Michael (ed.): The Social Dimension. Employment Policy in the European Community, London 1993 (MacMillan)
Gold, Michael/Weiss, Manfred (eds.): Employment and Industrial Relations in Europe. Volume1, The Hague/London/Boston 1999 (Kluwer Law International)
Institute for Employment Research - Homepage: http://www.iab.de
Verlags GesmbH - Homepage: http://www.bdp.de/online