According to the German Protection Against Dismissal Act (Kündigungsschutzgesetz ; KSchG), a dismissal is considered "socially justified"—and therefore legally binding—if it is contingent on "pressing operational requirements that are opposed to a continued employment of the employee in the firm" (i.e., if it is a dismissal for operational reasons).

A prerequisite is that the job of the dismissed employee has been eliminated without substitution, and no vacancy is available in the company which that employee could fill. When deciding to dismiss the employee, the employer must use the social-selection process—i.e., give due consideration to the employee's personal circumstances. In practice, however, the social-selection process, which is used only in the case of dismissals for operational reasons, is frequently administered incorrectly.

Social Selection

When an employer must dismiss personnel for operational reasons, the decision of whom to dismiss must be made according to defined social criteria: the employees' seniority, age, legal obligations to furnish support, and/or severe disability. As a rule, other criteria—such as job performance, readiness to perform, achievements, popularity, ability to work on a team, and other "soft skills"—cannot be taken into consideration.

The purpose of the social-selection process is to make sure that the dismissal "hits" the employee who, according to his or her data, least depends on the continuation of the employment. This also means that the dismissal does not necessarily affect the person who filled the eliminated position. (I.e., it is the job that is dispensed with, not the employee.)

Implementation of the Social-Selection Process

The social-selection process is applied to all comparable employees of a facility.

The employees to be included in the process must be comparable in terms of their employment contracts; i.e., they must be exchangeable, or exhibit "horizontal comparability." The employer must be entitled to assign the job of the respective other by virtue of its right to issue directions (jobrelated exchangeability). (Comparability, as a rule, refers to the same level of hierarchy within the facility. Vertical comparability, either upward or downward, does not exist.)

Once the group of comparable employees has been determined, the employer must weigh the social data of each person against the data of the others; a point system is often used. Despite the legal prohibition against age discrimination, age may be taken into consideration if doing so is justified by legitimate causes.

In the weighing of the social data, the employer has a scope for evaluation and assessment that is reviewed in court when it is necessary to determine whether all social factors were sufficiently considered.

Exceptions From the Social-Selection Process

The law grants narrow exceptions to the binding socialselection process. Employees whose continued employment is in the legitimate interest of the company, particularly to safeguard a balanced personnel structure within the organization (such as with respect to age), may be excluded from the social-selection process, but only if the company's operational interests outweigh the interests of the employee in need of social protection—an extremely difficult call to make.

Balanced Personnel Structure

A personnel structure that must be balanced with respect to age, for instance, necessitates the protection not just of older employees, but that of younger ones as well. Accordingly, the employer may classify the employees by age, dividing them into groups in their twenties, thirties, and so on, and then dismissing members of each age group on a pro rata basis.

The German Federal Labor Court (Bundesarbeitsgericht ; BAG) has so far not considered the formation of age groups to be a violation of the prohibition against age discrimination (see BAG, judgment dated December 15, 2011, 2 AZR 42/10). The formation of age groups actually has an anti-discriminatory effect, since younger employees, who tend to have less seniority, better health, and fewer dependents, would otherwise be more vulnerable in the social-selection process. However, the formation of age groups is permitted only if it actually leads to maintenance of the existing structure.

If multiple groups of comparable employees are affected by the dismissals, each such group will then be further divided into age groups, from which members are subsequently dismissed on a pro rata basis (BAG, judgment dated July 19, 2012, AZR 352/11).

However, if the number of employees in each of the age groups is unequal (e.g., if three of the company's age groups include only two employees in line for dismissal), social selection on the basis of age is not possible, because dismissal on a pro rata basis will not maintain the age structure of the staff. For this reason, the formation of age groups is an option primarily for larger businesses. Moreover, the employer must seek to safeguard the age structure within the individual comparison groups through the formation of suitable age groups; the aim of safeguarding the age structure for the whole facility is not sufficient to assume the legitimacy of the age groups formed.

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