On July 13, 2016, the Frankfurt Higher Labor Court held the
dismissal of an employee in response to demands by the New York
State Department of Financial Services (NYDFS) was invalid.
(Frankfurt Labor Court, 18 Sa 1498/15). This holding demonstrates
that obligations imposed by agreements with U.S. supervisory
authorities do not supersede German employment dismissal law.
In this case, a Commerzbank employee in Germany challenged his
dismissal, which was made following demands by the NYDFS, a
financial supervisory authority. The bank asserted that a consent
order stemming from charges brought by the NYDFS forced it to
terminate the employment relationship. According to the financial
watchdog, employees at the Hamburg branch had concealed certain
payments that made it impossible for the bank's New York branch
to verify whether the bank complied with U.S. regulations under the
In addition to a substantial fine, the supervisory authority
demanded the dismissal of several Commerzbank employees in Germany.
The NYDFS argued it wanted to impose sanctions against
individuals—the same action it would have taken against
individuals in the United States—to serve as a deterrent.
The Frankfurt Higher Labor Court held the dismissal of the
employee to be wrongful, approving the Frankfurt Labor Court's
In considering this matter, the Frankfurt Higher Labor Court
left open the question of the conditions under which a bank can
argue that it had to terminate an employment contract subject to
German law because of such sanctions. The court stated, however,
that Commerzbank's obligation under the consent order was
expressly subject to the dismissal being approved by a German
The court ultimately ruled that the dismissal was not justified
under German labor law. It stated if the aim of a supervisory
authority's measure was to impose a punishment that had to be
implemented by an employer, this would not meet the conditions for
a so-called "dismissal under pressure" previously
recognized by German Federal Labor Court precedent.
Under German law, where an employer is put under pressure by an
external third party—for example, a customer, a coworker or a
public authority—the dismissal may be fair depending on the
circumstances. However, the employer cannot rely on the wishes of
that third party alone; it must also consider fully the injustice
of the dismissal on the employee. Furthermore, the pressure exerted
must reach a level of harm the employer cannot avoid. If, on the
other hand, the employer is left with alternative options to avert
the harm, the dismissal will not be considered justified by the
third party's pressure.
In the case at hand, the NYDFS did provide Commerzbank with an
alternative to act other than dismissing the employee. If a
dismissal were to be held wrongful, the consent order stated,
Commerzbank would have the option to continue the employment, as
long as the employee would not be working in the same department.
Hence, the consent order did leave Commerzbank with an alternative
course of action.
For that same reason, the employee's win in court will
remain a pyrrhic victory for now. The dismissal was held unlawful,
but Commerzbank is not obliged to employ him in his old department
until the legal proceedings are completed. The Higher Labor Court
allowed an appeal to be brought before the Federal Labor Court; the
judgment is therefore not yet legally binding.
This decision shows that obligations arising from settlement
agreements with U.S. supervisory authorities cannot cancel German
dismissal protection law. The same holding is likely to apply to
orders or stipulations asserted by U.S. supervisory bodies. These
settlements, orders or stipulations therefore do not constitute
recognized grounds for dismissal.
In similar cases, German employers must consider that the
requirements for effective dismissal under German law apply,
regardless of what demands are made by the U.S. supervisory
authorities. Therefore, if in doubt, in most cases offering the
employee a termination agreement providing for a rather high
severance payment would be needed to incentivize the employee to
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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