Publication date: 14 May 2019
Exercise due care in the event of a dismissal of the director under the articles of association. A breach of any of the following may lead to the entitlement to a fair compensation. (1) There must be at least one reasonable ground for dismissal. (2) The obligation to reinstatement by the employer continues to apply and may even extend to foreign establishments. (3) The termination bans continue to exist.
A corporate dismissal of the director under the articles of association in principle also includes the termination of the employment contract. This means the rules for dismissal must be taken into account. If this is not the case, there is a risk that the employer might have to pay a fair compensation in addition to the transitional compensation.
There are three situations in which the director under the articles of association can claim a fair compensation.
When calculating the amount of compensation, the court takes into account, among other things, the income of the director and the damage he is likely to suffer. In principle, the latter will be based on the salary times the expected duration of unemployment. Here it is important that a director cannot claim reinstatement of employment.
How can you prevent having to pay extra compensation?
Also in the case of the dismissal of a director, one of the legal grounds for dismissal is required. Often the reason for dismissal will be a difference of opinion about the policy to be pursued. The court will rule that this is the case if:
It is advisable to include the reason for dismissal in the dismissal decision or letter of dismissal to prevent discussions about the reason for the dismissal.
The dismissal of a director under the articles of association is also subject to an obligation to reinstatement. The employer has a best efforts obligation to investigate whether reinstatement within a reasonable period will be possible. In the event of directors under the articles of association, it is often difficult to find another suitable position within the organisation, in particular if it is a small organisation. If the company is part of a group, other business units must also be considered. In that case, the obligation to reinstatement can also extend to foreign establishments.
The obligation to reinstatement does not mean a job guarantee. There is only a best efforts obligation and an investigation obligation. The employer must prove however that he has complied with these.
Termination bans continue to apply in the event of a dismissal of the director under the articles of association. For example, a director who is ill cannot be dismissed. This termination ban does not apply if the director has called in sick after having received the invitation to the General Meeting of Shareholders (GM) where this item is on the agenda.
In the event of a dismissal of the director under the articles of association, the notice period that is included in the employment contract or collective agreement must be taken into account. If nothing was agreed in this regard, the statutory notice period will apply. This depends on the duration of the employment.
In the event the notice period is too short, the employer must pay the employee compensation. This is equal to the salary the employee should have received with due observance of the notice period.
Would you like to get more information about the dismissal of directors under the articles of association of other high-level employees? Do you have other employment law questions? Please contact us:
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