Site Closure: The Sequence Is Decisive
Operational change and site closure: reconciliation of interests, social plan and collective redundancy notification from the employer's perspective
According to media reports, a large automotive supplier intends to close several German sites and to cut jobs on a large scale. Many mid-sized companies, too, are currently considering merging or closing plants. The entrepreneurial decision is free. Its implementation, however, follows a fixed statutory procedure. Those who do not comply risk ineffective dismissals and additional costs.
When is there an operational change?
Under § 111 sentence 1 BetrVG (Works Constitution Act), in companies that as a rule have more than 20 employees entitled to vote, the employer must inform the works council of planned operational changes in good time and comprehensively, and consult it on them. Under § 111 sentence 3 no. 1 BetrVG, the shutdown of the entire establishment or of significant parts of it expressly counts as an operational change. A site closure as a rule meets this. “In good time” means: while the planning can still be influenced, that is, before implementation begins.
Reconciliation of interests: the “whether” and “how”
In the reconciliation of interests (Interessenausgleich), employer and works council negotiate whether, when and how the measure is implemented. The works council cannot compel it. The employer must, however, make a serious attempt to reach one. If the talks fail, according to case law it must call the conciliation board (Einigungsstelle) – an in-house arbitration body with a neutral chair (BAG, judgment of 16.08.2011 – 1 AZR 44/10). Only then is the attempt complete.
An employer who dismisses without this attempt owes the dismissed employees compensation for disadvantages (Nachteilsausgleich), that is, severance fixed by the court (§ 113 para. 3 BetrVG). Whether the works council can stop implementation in advance by way of an interim injunction has not been settled by the highest courts; the regional labour courts decide inconsistently.
An advantage for employers: where the employees to be dismissed are named in the reconciliation of interests (list of names), it is presumed that the dismissal is operationally justified. The court then reviews the social selection only for gross errors (§ 1 para. 5 KSchG, Protection Against Dismissal Act).
Social plan: financial compensation
The social plan regulates severance payments and other benefits to compensate for economic disadvantages. Unlike the reconciliation of interests, it can be enforced: if the parties do not agree, the conciliation board decides (§ 112 para. 4 BetrVG). In doing so it must also take into account the economic viability for the company (§ 112 para. 5 BetrVG). Where the measure consists solely of staff reductions, enforceability applies only above certain thresholds; for newly founded companies, exceptions apply in the first four years (§ 112a BetrVG).
Collective redundancy notification: errors are expensive
Where the dismissals within 30 calendar days reach the thresholds of § 17 para. 1 KSchG, the employer must first inform the works council in writing and consult it (consultation procedure) and then notify the dismissals to the Employment Agency. Following the Court of Justice of the European Union, the Federal Labour Court has confirmed: if the notification is missing, or is filed before the consultation has been completed, the dismissals are ineffective (BAG, judgments of 01.04.2026 – 6 AZR 157/22 and 6 AZR 152/22). Minor errors in the notification may be harmless if the notification fulfils its purpose (BAG, judgment of 25.06.2026 – 6 AZR 7/26). The sequence, however, is mandatory.
Practical checklist for companies
Check the thresholds: operational change (§ 111 BetrVG), social plan obligation (§ 112a BetrVG), collective redundancy (§ 17 KSchG).
Inform the works council early and completely; document the documents provided.
Plan the timetable with a buffer for the conciliation board and the consultation procedure.
Aim for a reconciliation of interests with a list of names where possible.
File the collective redundancy notification only after the consultation has been completed, and give notice of dismissal only afterwards.
Hear the works council before every dismissal (§ 102 para. 1 BetrVG).
Calculate the social plan volume economically at an early stage.
Conclusion
A site closure rarely fails because of the decision, but often because of the procedure. Those who observe the sequence gain legal certainty and limit severance risks. Please contact us if you have any questions.
As of: 03.11.2026
NIETZER Rechtsanwälte · Attorneys at Law (USA) · Heilbronn · www.unternehmensrecht.com
This article is for general information purposes only and does not replace legal advice in an individual case.
