Managing Directors and Interns are to be Considered “Employees” with Regard to Notifications of Mass Dismissal

In its decision dated 9 July 2015 (C-229/14 – Balkaya/Kiesel Abbruch- und Recycling Technik) the European Court of Justice (“ECJ”) ruled, that managing directors and interns may be considered “employees” within the meaning of the threshold for the obligation to give notice of mass dismissal. Accordingly, national regulations which leave out this group of people, such as sec. 17 of the German Employment Protection Act (Kündigungsschutzgesetz – “KSchG”) are not consistent with European law.

The ECJ has decided that the term “employee” must be defined consistently throughout the European Union. To this end, objective criteria must be used in which the existence of a subordination relationship must play an important role. A material criterion is therefore, whether a person, for a certain period of time, provides services to another person, is bound to this person’s instructions and receives remuneration for these services. This is true for third-party directors as well as for interns.

With its Balkaya-decision, the EJC confirms the rulings in the matters of Junk and Danosa. As in connection with the Junk-decision ten years ago, the EJC once more addresses the German implementation of the EU directive for mass dismissals (Massenentlassungs-RL 98/59/EG).

A failure to notify or a faulty mass dismissal notification will result in the invalidity of all dismissals. Therefore, the ECJ’s decision will have an impact on business operations. According to the European directive, the threshold values of sec. 17 KschG should also take into account interns, employees in retraining measures and managing directors in addition to all other employees and perhaps even board members. Against this background, great attention must be paid with respect to mass dismissal notifications.

Whether the present decision will also have an impact on other European law based regulations, such as the German Federal Leave Act (Bundesurlaubsgesetz) or the German Working Hours Act (Arbeitszeitgesetz) remains to be seen, and is certainly not ruled out. The ECJ has once more confirmed its broad understanding of the term “employee” in European law.