Fair negotiation of termination agreements: Offer may also be presented for immediate acceptance only

Employment relationships can be terminated in various ways. The termination agreement, in which the parties of employment mutually agree on the termination of employment, is an extremely relevant way of terminating employment in practice. In addition to the familiar formalities (in particular complying with the written form requirement), some requirements not explicitly regulated on a statutory basis must also be observed in order to ensure the legal validity of the termination agreement and to minimize the risk of subsequent challenge by the employee. Among other things, the requirement of fair negotiation must be taken into account, on which the Federal Labor Court recently once again ruled:

Termination agreement as reaction to alleged misconduct

In the case at hand (Federal Labor Court, ruling of 24.02.2022 – 6 AZR 333/21) employer and employee disagreed as to whether their employment relationship had been validly dissolved by means of a termination agreement. The employee and later plaintiff was employed as sales team coordinator. The employer accused the employee of manipulating purchase prices in the computer system to pretend a higher sales profit. At the end of 2019, a meeting was held to discuss these allegations. The managing director of the employer, the employee and her lawyer were present at this meeting. After a break of ten minutes, during which the three persons sat at the table in silence, the employee signed a termination agreement prepared by the employer. The termination agreement provided for a mutually agreed termination of the employment at the end of the month.

Ineffectiveness of termination agreement?

The employee subsequently went to court, claiming the employment relationship to be continued beyond the termination date stipulated in the termination agreement. She claimed to have been threatened with extraordinary dismissal and the filing of criminal charges if she did not sign the termination agreement. Furthermore, her request to think about the termination agreement and seek further legal advice had been denied.

Requirement of fair negotiation not violated

However, the Federal Labor Court found that the employment relationship had been effectively terminated by the termination agreement. In particular, the Federal Labor Court – of which only a press release is available so far – did not see any violation of the principle of fair negotiation with regard to the termination agreement.

If a termination agreement is concluded in violation of the requirement of fair negotiation, the labor court can determine its voidness. In practice, however, this is limited to exceptional cases, such as when the employer visits the sick employee at home unannounced and takes advantage of the employee’s weaking due to illness to conclude a termination agreement (Federal Labor Court ruling of 07.02.2019 – 6 AZR 75/18).

Termination agreement for immediate acceptance

In the present case, the Federal Labor Court did not consider the employee’s freedom of decision to be violated by the fact that the offer of the termination agreement had only been made by the employer for immediate acceptance and the employee therefore had to decide on the offer immediately.

Threat of extraordinary dismissal and criminal charges

The Federal Labor Court also regarded the announcement of further legal consequences for the employee to be legitimate. Given the facts of the case, the employer was allowed to seriously consider an extraordinary dismissal as well as filing criminal charges.

Termination agreements in employment law practice

With this ruling, the Federal Labor Court has specified the requirement of fair negotiations in case of negotiating termination agreements. Presenting a termination agreement to the employee for immediate acceptance does not per se violate the principle of fair negotiations. Exceptions apply if further circumstances, such as a weaking of the employee due to illness, are added.

To be on the safe side, it remains recommendable to allow the employee a few days to consider the offer and seek legal support. This reduces the risk that the employee later regrets the decision to sign the agreement and tries to challenge it.

Employers may also communicate towards the employee that they will take further legal action if the employee does not accept the termination agreement, as long as this further action seems reasonable considering the facts of the case.

Negotiation advice for termination agreements

Only in exceptional cases termination agreements can retroactively be considered invalid due to a violation of the requirement of fair negotiations. Nevertheless, employers may not threaten or deliberately deceive employees during the negotiation process. However, communicating to the employee that criminal charges will be filed and/or an extraordinary termination will be issued in case the termination agreement is not accepted is permissible, if such measures seem reasonable considering the facts of the case.

Hence, when negotiating a termination agreement, employers do neither have to deny their own interests nor create a particularly pleasant negotiation atmosphere. Negotiations also do not have to be announced in advance.