According to § 113, paragraph 1 of the German Insolvency Code (InsO), the insolvency administrator has the right to terminate an employment relationship with a notice period of no more than three months to the end of the month, even if the employment contract provides for longer notice periods. This applies even if the employee in question had already been given notice with the longer statutory or contractual notice period. This was recently decided by the Federal Labor Court (BAG) (judgment dated May 22, 2003 – 2 AZR 255/02).
In November 2000, the defendant had been appointed as the preliminary insolvency administrator for the assets of the employer, with whom the plaintiff had been employed since 1979. Among other powers, the defendant was also granted the right by the competent district court to issue dismissals as the provisional insolvency administrator.
In December 2000, the defendant terminated the plaintiff's employment as of July 31, 2001, with the six-month notice period applicable to the employment relationship. He stated the reason for the termination was the planned closure of the business. The plaintiff did not take legal action against this termination. After insolvency proceedings were opened against the employer's assets on January 1, 2001 and the defendant had now been appointed as insolvency administrator,This time, however, with the shortened notice period of § 113 para. 1 InsO as of April 30, 2001.
The plaintiff now wanted it established that his employment relationship continued beyond April 30, 2001 until July 31, 2001. However, the BAG dismissed the complaint in the last instance, as did the labor court and the Hamm Higher Labor Court. It also considered the (second) termination as of April 30, 2001 to be effective, so that the employment relationship ended at the end of April 30, 2001. According to the BAG, the second termination is not an inadmissible repeat termination. The insolvency administrator's special right of termination under § 113 (1) InsO exists independently of whether the employee has already been previously terminated by the employer itself or – as in this case – by the preliminary insolvency administrator. Nor is the closure of the business already exhausted as a reason for termination. The second termination is based largely on the opening of insolvency proceedings and the special right of termination triggered by this. However, these are new facts that would have changed the previous termination situation.
According to section 113 (1) of the German Insolvency Code (InsO), it is therefore possible that an employee who has already been dismissed may receive a further notice of dismissal that terminates the employment relationship at an even earlier date. The ineffectiveness of the "overriding" termination does not follow from this alone.
If the employee wishes to claim the invalidity of the termination by the insolvency administrator, he must, in accordance with § 113 (2) InsO, file an action with the labor court within three weeks of receiving notice of termination. This deadline applies outside of insolvency according to § 4 of the German Dismissal Protection Act only in the event that the employee defends himself against a dismissal with the reason that it is socially unjustified. In the event of insolvency, all grounds for invalidity can only be asserted within the three-week period. The three-week period therefore forces the employee to react quickly to a letter of dismissal.
There is a small consolation for employees who have been dismissed by the insolvency administrator: at least they can claim compensation from their former employer for the premature termination of the employment relationship (section 113 (1) InsO). Whether the former employer still has sufficient funds to satisfy this compensation claim in the event of insolvency is another matter altogether.
If the employee is no longer able to take the remainder of his vacation by the time his employment relationship ends, he is entitled to vacation pay in lieu. In its judgment of March 25, 2002, the Federal Labor Court ruled that this vacation pay claim is directed against the insolvency administrator and, as a mass liability within the meaning of § 55 (1) no. 2 InsO, takes precedence over the other insolvency creditors. This means that the employee has a good chance of at least getting his vacation pay claims paid out in full by the insolvency administrator.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.