The effectiveness of German labor courts
By Sabine Feindura
For people coming from Anglo-Saxon countries, lawsuits are to be avoided at all costs as lawyers’ fees are extremely high and lawsuits take so long that most employers try to settle by any means as soon as possible. In Germany however, lawsuits are fast and cost-effective so there is no need to pay any price to avoid one.
German labor courts act swiftly
Although not all labor courts in Germany are the same, most of them schedule the first oral hearing within a month of the filing date. Until then, the defendant does not even have to file a submission. This first oral hearing has the express purpose of trying to find an amicable solution or settlement. And very often it works, as lawyers and parties sit next to each other in one room and have nothing else to do other than discuss the matter before a respected judge. In this setting, even long-running arguments are often brought to a swift end. Otherwise a second oral hearing is scheduled, and the parties are invited to file written submissions within set deadlines. These second hearings mostly take place within four months of the first hearing and at least half of them end the lawsuit. Thus, in less than six months, there can be a settlement or a judgment. Therefore, if an employer feels that, under German law, the (former or present) employee is claiming far too much and does not concede during negotiations, it is an option to let the employee sue the employer for the lawsuit to bring the employee down to earth.
German labor courts love settlements
As German procedural rules expect the judge as well as the parties to aim for an amicable solution at any stage of the lawsuit, there is always room for negotiation. Parties may include offers in their written submissions or oral hearings at any time. During the oral hearings, they may leave the courtroom to discuss settlement proposals separately, likewise at any time. If a settlement is agreed, the labor court dispenses with court fees, in order to encourage settlements. Moreover, a settlement is quickly enforceable without any further expensive or time-consuming requirements.
No reimbursement of lawyers’ fees
In order to enable employees to sue their employer, procedural rules determine that any party to a labor lawsuit before courts of first instance has to bear its own costs and lawyer’s fees, no matter who wins the case. Meanwhile in civil cases, the losing party has to bear the costs of their own lawyer as well as the costs of the opposing party’s lawyer, plus the court fees. Therefore, employees suing their employer need not fear the expense of their employer’s lawyer.
Statutory lawyers’ fees
There are statutory minimum fees for German lawyers that depend on the value of all claims involved. In case of claims that have no explicit value, a table has been developed by German labor courts with fictitious values of nonfinancial claims. For example, the value of a claim for unfair dismissal is one fourth of the annual remuneration of the dismissed employee. Based on the value of all claims involved, the corresponding value of one fee unit can be found in another table. This fee unit falls due several times depending on the development of the case. The maximum is 3.5 fee units, incurred if a settlement is concluded. With a judgment, a lawyer can only earn up to 2.5 fee units during the first instance. The second and third instance – if available – are a little bit more expensive. Any lawyer should thus be able to determine the cost of a lawsuit in advance, but one must be aware that costs can increase later on if supplemental claims or counterclaims are raised.
Of course, most qualified German lawyers corresponding in English with foreign clients don’t work for the statutory minimum fee but knowing that it exists may help in negotiations about hourly rates and chargeable hours. Where the remuneration of the dismissed employee is very high or where other substantial claims are involved the statutory fee may even be acceptable for some qualified lawyers.
Employees who cannot afford a lawyer can obtain subsidies from the state to pay for one. They can even approach the relevant labor court and ask a legal clerk to draft and file their claims for free. In the first instance, parties are not obligated to have a lawyer but it is extremely advisable as German employment law is complex and judges have their own language.
If you have employees, under German law, the court will temper excessive expectations. But get yourself a good German lawyer and make sure you don’t miss the invitation to the first oral hearing, which may come round very fast! In the case of a dismissal, the employee must file a lawsuit to challenge the termination within 21 days after receipt of notice. This does not leave much time for negotiation between the parties. The invitation to the first oral hearing may be sent out within a week after the claim was filed and the first oral hearing may be scheduled just two weeks later after the invitation comes in. It is easy to miss if mail is not checked carefully.
If the employer is a foreign company, the written claim of a German employee and the invitation to the first oral hearing must be translated into the language spoken at the employer’s head office at the expense of the employee filing the claim. The translation costs are a substantial hurdle to filing a lawsuit but many German employees have insurance for legal fees. The translation may take weeks or months, so foreign employers must be prepared to receive an invitation to a first oral hearing much later than employers based in Germany. Many foreign companies choose to set up a German entity to employ staff in Germany. If employees work from home, there may not even be any premises of a legal entity in Germany. In such cases, the legal head office of such an entity is often the premises of the tax consultant working for the company, or the employee’s home itself. It may also be that an invitation to an oral hearing is not acknowledged in time as the mail was not forwarded to the correct person. Thus, in case your German base is the office of your tax advisor, make sure they do forward the invitation as soon as possible. In case the legal seat of your employing entity is the home office of the dismissed employee, it is advisable to change the legal seat to the office of your tax advisor and name his address in the notice letter.