End operational exercise

The most important facts in brief:

• The easiest way to terminate a company practice is to Revocation of the company exerciseif there is a reservation of revocation.
• Without a reservation of revocation, the requirements for terminating a company practice are high; for example, a Notice of termination.
• It is not possible to terminate the company practice through a "contrary" company practice.

What is a company exercise?

In the case of a company practice, the employee has a claim against the employer because the employer regularly and repeatedly provides a service (e.g. a monetary payment).

ExampleIf an employer pays a Christmas bonus amounting to one month's salary to all employees for three consecutive years, then the employees are also entitled to receive the Christmas bonus in the fourth year.

The following requirements must be met for a company practice to arise:

1. Repeated, uniform performanceThe employer must have provided a benefit several times and in the same form to a number of employees. The company practice has a collective reference, which means that benefits to only individual employees are not sufficient to establish a company practice. The benefit does not have to be provided to all employees. However, the larger the group of people involved, the more likely it is that a company practice is established. In the case of cash payments (e.g. Christmas bonus), three payments are sufficient to establish a company practice.
2. Acceptance by the employeeRepeated, uniform performance by the employer constitutes an offer by the employer. Employees usually tacitly accept this offer by continuing to work.
3. No exclusionThe establishment of a company practice can be prevented by employers expressly declaring that the benefit is provided voluntarily and that the benefit is not binding for the future.

A company practice means that an entitlement to the benefit also exists in the future. In the example above, for example, there is also an entitlement to the payment of the Christmas bonus in the future.

How do you end a company exercise?

A company practice can be terminated in three ways: an agreement can be reached, notice of termination can be given or revocation can be declared. The creation of a company practice does not mean that the obligation to perform is unalterable. You can therefore terminate a company practice in the following ways:

• RevocationThe revocation of a company practice requires that the company practice contains a reservation of revocation. It is important to proceed carefully when formulating the reservation of revocation. The reservation of revocation must often be checked against the standards for general terms and conditions, so that there are high requirements with regard to effectiveness. For example, the following wording leads to the ineffectiveness of the revocation reservation ("The payment of one month's salary as a Christmas bonus is voluntary and can be revoked at any time"). The background to this is that revocation is only possible if there is an obligation to pay, in which case the payment is not voluntary. The wording is therefore contradictory and therefore invalid.
• AgreementA company practice can be terminated with an agreement. One option is to conclude an individual amendment agreement with each employee. However, such a procedure is not very practicable for larger companies. There is also the risk that an agreement cannot be reached with every employee, resulting in unequal treatment within the company. Alternatively, a works agreement can also be concluded. In such a case, the company agreement must not be worse than the previous company practice. Deteriorations for individual employees are permissible if they are offset by improvements for other employees.
• Notice of terminationA company practice can also be terminated with a change of notice. However, this requires that there is a reason for termination (§§ 1, 2 KSchG). Accordingly, the requirements for a dismissal with notice of change are very high.
• Not: Company exerciseIn the past, a company practice could be terminated with a contrary company practice. Such a possibility no longer exists today. The background to this is that the Federal Labor Court is of the opinion that a contractual agreement cannot be permanently waived through silence.

What are the special features of collective employment law?

If there is a works council in a company, there are some co-determination rights of the works council that must be observed:

• DistributionThe works council already has a right of co-determination when the company exercise is concluded. The employer can decide independently how much money or other benefits are to be distributed. However, the decision on how the money is to be distributed requires the consent of the works council.
• RemovalIf a company practice is terminated by revocation, the revocation does not require consent even if the revocation affects the entire company. However, consent is required if the company practice is replaced by a company agreement.

Tips for ending a company exercise

It is very difficult to eliminate a company practice. That is why it is highly relevant for the company practice that the termination of the company practice is taken into account from the outset. The following tips will help you with this:

• No company practiceThe easiest way to avoid being subject to the obligations of a company practice is to ensure that there is no company practice. On the one hand, a benefit should only be provided subject to reservation. On the other hand, the employee bears the burden of proof that a company practice has been agreed. If it is unclear whether a company practice has been agreed, it therefore makes sense to dispute the agreement of a company practice.
• Reservation of revocationIf a company practice arises, you should in any case agree a reservation of revocation. Otherwise, it will be very difficult to remove a company practice at a later date. It is very important to meet the high requirements for the effectiveness of the reservation of revocation. As these are usually general terms and conditions, the reservation of revocation must be formulated clearly and unambiguously.