Statutory Period of Notice for Service Contracts with Managing Directors: New Decision of the German Federal Labour Court of 11 June 2020

By Dr Angelika Baumhof and Cathrin Kirchbach, Jakoby Dr Baumhof

The Federal Labour Court (BAG) has ruled that in the absence of a contractual provision on the period of notice in service contracts with managing directors, the statutory provision of § 621 of the German Civil Code (BGB) applies. The decision is surprising, as the Federal Court of Justice (BGH) has so far assumed an analogous application of § 622 BGB (only applicable to employment contracts) in order to protect minor shareholding and third-party managing directors.

The BAG, on the other hand, does not consider the requirements for analogy to be given, as this would conflict with the case law of the BAG on employee-like persons, who are generally more economically dependent and therefore need more social protection than managing directors.

§ 621 BGB determines the notice period based on the periods for which the remuneration is calculated. If the remuneration is calculated on a monthly basis, the employment relationship can be terminated at the latest on the 15th of a month to the end of the month. If the remuneration is calculated based on longer periods, the employment relationship may be terminated with six weeks’ notice to the end of a calendar quarter. § 622 BGB, on the other hand, provides for a notice period of four weeks to the middle or end of a month, which applies to both parties. For the employer, this notice period is extended, with increasing length of service to up to seven months to the end of the month. § 622 BGB is therefore in the interest of managing directors.

Thus, in view of the divergent provisions of § 621 and § 622 BGB, it is now necessary to determine a notice period in employment contracts for managing directors. For existing contracts that only refer to the statutory notice periods, contractual clarifications or new provisions are now required.

Published: Employment Law Newsletter, No.10, Spring 2021 l Photo: Jan Schuler - stock.adobe.com