Termination agreements and the requirement of fair negotiation

Instead of notice, an employment relationship can also be terminated by mutual agreement between the employer and the employee by means of a termination agreement. In this case, the law of fair negotiation must be observed.

But does an employer still negotiate fairly if he presents the employee a termination agreement that the employee can only accept immediately and without consulting a lawyer/legal advice?

1. Termination agreement

There are different ways to terminate an employment relationship. Terminating an employment relationship by means of a termination agreement is a popular option - especially for employers. Because, due to private autonomy, both parties (employer and employee) can terminate and thus end the employment relationship at any time without the existence of a reason for notice or other requirements (such as the involvement of the works council) and without observing a notice period.

The parties only have to manifest their will to terminate the employment relationship in writing, cf. section 623 BGB.

The termination agreement has its legal limits if, for example, it violates a legal prohibition, good faith (section 242 BGB), immorality or the requirement of fair negotiation.

(2) The requirement of fair negotiation

The requirement of fair negotiation is a secondary obligation established in the context of independent legal transactions when entering into contractual negotiations within the meaning of section 311 (2) no. 1 in conjunction with section 241 (2) BGB (BAG, 07.02.2019 - 6 AZR 75/18). Since the termination agreement constitutes an independent legal transaction, this collateral duty and thus the requirement of fair negotiation also apply in connection with the commencement of negotiations on a termination agreement (BAG, 07.02.2019 - 6 AZR 75/18).

A violation of the requirement of fair negotiation occurs if one side, when entering into contract negotiations, induces or exploits a negotiation situation which constitutes unfair treatment of the contractual partner. The decisive factor here is above all whether one side influences the contractual partner in his freedom of decision in a way that is to be disapproved of, e.g. creates or exploits a psychological pressure situation that makes a free and considered decision by the contractual partner considerably more difficult or even impossible (BAG, 24.02.2022 - 6 AZR 333/21).

The principle of fair negotiation is intended to ensure a minimum degree of fairness already in the run-up to the conclusion of the contract (BAG, 07.02.2019 - 6 AZR 75/18). Whether this was ensured in a specific negotiation situation is to be determined on the basis of the overall circumstances in the respective individual case.

3. Submission of a termination agreement for immediate signature - decision of the BAG (Federal Labour Court) of February 24^th 2022 (ref.: 6 AZR 333/21)

In its recent decision of February 24^th 2022, the BAG dealt with the principle of fair negotiation.

a) Facts of the case

The BAG's decision was based on the following facts: An employee was asked to sign a termination agreement in the office of the managing director. When the employee arrived there, the employer's lawyer, who was also present together with the managing director, introduced himself to the employee as a lawyer for labour law. Then the two (the manager and the lawyer) accused the employee of having committed fraud against and to the detriment of the employer. In the course of this, they presented the employee with a prepared termination agreement, which provided for the employee's mutually agreed departure for operational reasons.

In addition, the employee claimed that the managing director and the employee's lawyer had not complied with her request for further time to think things over or with her request for legal advice. Rather, the employee further alleged, the employer's lawyer stated that the termination agreement was "off the table" when the employee walked through the door.

After a break of about ten minutes (this is again undisputed and is not only alleged by the employee), during which the three persons present sat in silence at the table, the employee then finally signed the offered termination agreement.

b) Legal assessment

The BAG ruled that the employer in this case did not violate the requirement of fair negotiation. In particular, he did not violate the employee's freedom of decision by submitting the termination agreement to her for immediate acceptance, so that she had to decide directly (BAG, 24.02.2022 - 6 AZR 333/21).

Furthermore, the BAG argued: In order to comply with the requirement of fair negotiation, the contractual partner's freedom of decision must be guaranteed. This means that the contracting party should be and remain "master" of its decision at all times. This is, among other things, no longer the case if the employee, when viewed objectively, must assume that the only option left to him/her is to sign the termination agreement in order to escape the negotiation situation.

However, such a constellation must be distinguished from the situation in which an employer makes an offer to the employee which is only to be accepted "now and today" (see BAG, 27.11.2003 - 2 AZR 135/0). This is because in doing so the employer merely complies with the statutory model according to which an offer made in the presence of others can only be accepted immediately pursuant to section 147 (1) sentence 1 BGB. In this context, the employee is still free to decide not to accept this offer and to end the situation by simply saying "no". The fact that the conclusion of the termination agreement would then have been excluded is the normal legal consequence of section 147 (1) sentence 1 BGB and thus does not present itself as unfair. Rather, this is a permissible pressure in the context of contractual negotiations with which the employer legitimately attempts to achieve its negotiation goal (BAG, 24.02.2022 - 6 AZR 333/21).

Moreover, there is also no unfair negotiation if the employer in such a situation does not comply with the employee's request for granting a (further) period of reflection and obtaining legal advice, but rather emphasises to the employee that he will no longer maintain the offer of a termination agreement if the employee leaves the room. Even in this constellation, the employee can withdraw from this situation at any time by simply saying "no" (BAG, 24.02.2022 - 6 AZR 333/21).

According to the BAG, the decisive factor in such a situation is the question to be answered from an objective point of view:

Can the employee withdraw from the negotiation situation by a mere "no" or can the employee only end the negotiation situation by signing the termination agreement?

4. Conclusion

The BAG's decision is to be welcomed, especially for the employer. This is because the employer can now strengthen its negotiating position vis-à-vis the employee in negotiations on a termination agreement with legal certainty to the extent that it may put the employee under time pressure. Especially in cases where the employer wants to reach an agreement in order to avoid an extraordinary dismissal, this makes a lot of sense (also in the interest of the employee). After all, in the case of extraordinary dismissal, the employer is under enormous time pressure, as he has to comply with the 2-week cut-off period. However, if he is not allowed to put the employee under such time pressure in the context of negotiations on a termination agreement, he would be deterred from even attempting to reach an agreement with the employee.

Furthermore, it must be taken into account that although an exceptional situation regularly exists for the employee during the negotiation of a termination agreement, this does not automatically lead to the invalidity of the termination agreement due to the violation of the requirement of fair negotiation. After all, the negotiation of a termination agreement is still a negotiation conducted within the framework of contractual freedom in which both contracting parties should have the possibility (as is also usual in other contractual negotiations) to exert pressure in order to achieve their negotiation goals

Author: Larissa-Roxana Stergiou, Associate Laywer