Obligation of Fair Negotiation in Termination Agreements

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Ruling of the Federal Labour Court – Case No. 6 AZR 333/21

In the context of termination agreements in employment law, the principle of fair negotiation applies. However, in exceptional cases, a termination agreement may still come into effect even if pressure was applied and the principle of fair negotiation was violated. This was clarified by the Federal Labour Court in its ruling on February 24, 2022 (Case No. 6 AZR 333/21).

Facing the threat of dismissal, a termination agreement can be a sensible alternative for ending an employment relationship. Employers benefit from this as they are not bound by notice periods and do not need to justify the dismissal. For the employee, being offered a termination agreement can create a good negotiating position, for example, to secure a severance payment, according to the commercial law firm MTR Legal Lawyers, which provides advice on employment law, among other areas.

Employer and Employee Must Agree to the Termination Agreement

Both employer and employee must agree to the termination agreement. This free decision should not be influenced by putting one side under pressure. The principle of fair negotiation applies. This principle is violated if one side consents to the termination agreement only because pressure was exerted on them.

However, in exceptional cases, the termination agreement can still be effectively concluded, as shown by the ruling of the Federal Labour Court (BAG). This must be decided based on the negotiation situation in each individual case.

Employee Must Sign the Termination Agreement Immediately

In the underlying case, the management accused a team coordinator in the sales department of unauthorized alteration or reduction of purchase prices in her area to reflect a higher sales profit. The manager summoned the employee to the office, confronted her with the accusations, and offered her a termination agreement. The condition: she had to sign the agreement immediately. Apart from a ten-minute break, the woman was given no time to consider. The employee eventually signed the termination agreement, which included, among other things, a mutual termination of the employment relationship.

Shortly afterwards, however, the woman declared the annulment of the termination agreement due to unlawful threat. Details of the conversation remained disputed between the parties. The woman claimed she was pressured into signing the agreement, with the threat of immediate dismissal and the filing of a criminal complaint. Her request for more time to consider, in order to seek legal advice, was not granted. She signed the termination agreement only because of this threat. The employer thus violated the principle of fair negotiation, the woman argued, and sued for the continuation of the employment relationship.

BAG Dismisses Lawsuit

However, she was unsuccessful at the Regional Labour Court of Hamm, and the BAG also dismissed the lawsuit in the appeal process. The Sixth Senate of the Federal Labour Court assumed in favor of the plaintiff that she was indeed threatened with immediate dismissal and the filing of a criminal complaint during the conversation. Yet, even then, there was no unlawful threat, the Senate clarified.

The justification was that a reasonable employer could seriously consider both immediate dismissal and the filing of a criminal complaint in such a case. The employer also did not negotiate unfairly, and even if the employee had to decide immediately whether to accept the termination agreement, her freedom of choice was not impaired. That the employer made his offer of a termination agreement dependent on immediate acceptance did not constitute a breach of duty. Therefore, the termination agreement was effectively concluded, ruled the BAG.

Circumstances of the Individual Case Decisive

When concluding a termination agreement, the principle of fair negotiation according to § 241 Para. 2 BGB must be taken into account. According to this regulation, employers and employees must consider the interests, rights, and legal goods of the other. Whether there is a violation of this principle must be decided based on the circumstances of the individual case.


MTR Legal Lawyers provide advice on employment law.


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