In the context of compliance investigations, the Federal Labour Court has ruled that the two-week period during which an employee relationship can be terminated under section 626(2) Civil Code (Bürgerliches Gesetzbuch, “BGB”) generally only begins to run when a final or interim report prepared by a compliance department is forwarded to the departments in the company authorised to give notice.
Federal Labour Court, judgment of 5 May 2022 – 2 AZR 483/21
Background
The plaintiff was an employee of the defendant for many years. The defendant is a defence company that was awarded numerous contracts by the Federal Ministry of Defence (Bundesverteidigungsministerium). The defendant’s compliance department received a tip-off in July 2018 that employees of the company were in possession of confidential documents from the Federal Ministry of Defence. In October 2018, the compliance department engaged a law firm to investigate the matter. An interim report – which incriminated 88 persons in addition to the plaintiff – was prepared by the law firm and handed over to the defendant’s management on 16 September 2019. After consulting the works council, the defendant terminated the plaintiff’s employment relationship without notice by letter dated 27 September 2019. The plaintiff successfully argued before both the labour court and the higher labour court that the defendant had not complied with the two-week deadline under section 626(2) BGB since the compliance department had already been aware of the allegations against him for several months.
Federal Labour Court’s decision
The Federal Labour Court ruled that the two-week period did not start until the managing directors authorised to give notice became aware of the reason for termination. The Court pointed out that when the compliance team or the head of the compliance department became aware of the circumstances was irrelevant, as they were not authorised to give notice. It stated that the two-week period could be considered triggered only by way of exception by the earlier knowledge of an unauthorised person if the forwarding of the information to the person authorised to give notice was delayed on purpose or at least due to an inappropriate and superfluous organisational risk created by the employer which impeded the flow of information. In such cases, the employer was, according to the principle of good faith, precluded from relying on the two-week period having been observed. However, the Court further stated that such an organisational failing did not result from the appointment of a supervisor who was not authorised to give notice, or from the establishment of a compliance department to handle internal investigations. In addition, the person not authorised to give notice had to occupy such a prominent position and function in the company that he or she was actually and legally in a position to investigate the matter so comprehensively that the person authorised to give notice could make his or her decision solely on the basis of these findings. It was essentially up to the employee to demonstrate and prove that there were circumstances establishing a breach of trust. The Court stated that the employer’s decision as to whether it could be reasonably expected to continue the employment relationship was based not only on the finding that there had been an objective breach of duty, but also on its knowledge of the extent to which the employees in question were involved and their respective roles in the company. It was only the interim report that contained all the facts that allowed such a decision to be made. The Federal Labour Court referred the case back to the Higher Labour Court for further clarification of the facts.
Our assessment
In order to avoid premature decisions being made on the termination of employment relationships, time-consuming investigations are needed to clarify complex compliance-related situations. The Federal Labour Court has therefore rightly found that the time at which a person not authorised to give notice becomes aware of circumstances justifying termination can only be used as the start of the two-week period in exceptional cases. This should give employers much-needed certainty when it comes to having their own compliance departments carry out internal investigations. From a practical point of view, the decision clarifies two key points: Firstly, the right of termination under section 626 BGB is not forfeited even in the case of a protracted compliance investigation directed against a large number of potentially affected persons. And secondly, it is generally left up to the compliance department to decide when the investigations are deemed completed and the management or other persons authorised to give notice are informed. However, the Federal Labour Court has made it clear that the employer may not drag out compliance investigations at will. It should in particular be possible to have the two-week period start earlier if the investigations are solely aimed at preventing violations.
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