Transfer of Tasks to a Group Affiliate Can Justify a Dismissal for Operational Reasons (Federal Labour Court, 2 AZR 227/22)

In its judgment of 28 February 2023 (2 AZR 227/22), the Federal Labour Court (Bundesarbeitsgericht, BAG) clarified important principles regarding dismissals for operational reasons (betriebsbedingte Kündigung). In essence, the court held that the transfer of tasks to a foreign group company can constitute an "urgent operational requirement" within the meaning of § 1(2) of the German Protection Against Dismissal Act (KSchG) if the position in Germany ceases to exist. Entrepreneurial decisions on restructuring are reviewed by the courts only for arbitrariness, not for their economic necessity. If tasks cease to exist and the position is not filled again, the dismissal is socially justified, irrespective of which person at the group affiliate takes over the tasks.

This case law strengthens the entrepreneurial freedom to optimise business processes across the group. A dismissal for operational reasons can also be valid where the employee's tasks are transferred to another group company (including abroad) in the course of an entrepreneurial decision, as long as the decision is not arbitrary.