GmbH managing directors do not (in principle) enjoy any protection against dismissal

The Federal Labor Court recently dealt with the legal question of whether the Dismissal Protection Act applies to a GmbH managing director and whether he therefore enjoys protection against dismissal. The assumption of such protection against dismissal would mean that the company would only be authorized to terminate the employment relationship if there was social justification within the meaning of Section 1 Paragraph 2 KSchG.

However, in the decision of September 21, 2017 (ref.: 2 AZR 865/16), the Federal Labor Court stated very clearly that in such a case, the Dismissal Protection Act does not apply if, at the time of receipt of the notice of termination, the organizational position is: Managing director still exists. This is the case if the managing director has neither resigned from his position nor been dismissed when the letter of termination is received.
This means that the managing director, whose position on a board still exists, cannot rely on the provisions of the Dismissal Protection Act even - or especially - if he provides the services he owes on the basis of an employment relationship - and not a freelance service contract.
In short: Unless the (employment) contract contains a different regulation, the employment relationship with a managing director can be terminated by the company at any time. A reason for termination is not necessary for an effective termination. This applies because the Federal Labor Court considers the company's interest in being able to terminate the employment or employment contracts with board members who are to be dismissed without the requirement of social justification in accordance with Section 1 of the Dismissal Protection Act to be particularly worthy of protection. Furthermore, in the court's opinion, there are no constitutional or European law requirements that prevent such application of the law.
The decision makes it clear that the drafting of managing director employment contracts requires legal advice so that an appropriate contractual agreement in the specific individual case enables cooperation to be as smooth as possible.