The Federal Labor Court has therefore developed a principle of fair negotiation for such situations. Rather than dictating the content of the termination agreement, the court aims to make the process fairer. Stefanie Jung, Professor of Corporate Law at TUM Campus Heilbronn, has examined this requirement for fair negotiation: “The employee’s position is particularly weak when negotiating termination agreements – some employees feel like a rabbit caught in the headlights. Employers often threaten summary dismissal whilst simultaneously applying time pressure to deprive the affected employees of the opportunity to seek legal advice. The employer, on the other hand, usually does not sit alone in such negotiations, but is accompanied by their lawyers.”
However, the principle of fair negotiation does not effectively prevent this practice and, in Jung’s view, therefore does not lead to “fair” negotiations. Jung’s ideal scenario for such hearings is therefore as follows: the employer gives two working days’ notice of the meeting, specifying the subject matter, in this case the termination agreement. This allows sufficient time for legal advice. This is followed by a further two working days’ reflection period before any agreement is concluded.
Big Picture: Freedom of Negotiation
Whilst working on the principle of fair negotiation, Jung noticed that freedom of negotiation is not discussed as a counterpart to freedom of contract. “The latter is recognized as a consequence of private autonomy and is enshrined in the Basic Law. It therefore struck me as odd that freedom of negotiation has not been discussed anywhere to date, even though negotiations are central to the formation of contracts,” explains Jung. The freedom of the parties to conduct their negotiations autonomously is a fundamental prerequisite for finding compromises that can then be set out in a contract. Freedom of negotiation is thus a central building block of a functioning market economy.
This led Jung to ask whether freedom of negotiation and freedom of contract are one and the same. “Not for me, because negotiations do not always aim to conclude a contract, but also serve, for example, to gather information or fulfil a satisfaction function,” explains the professor. Freedom of negotiation is also a procedural freedom that serves the purpose of guaranteeing a fair process and balancing out any imbalances between the parties. Freedom of contract, on the other hand, aims, amongst other things, at a fair contract – that is, at the content – and is thus a substantive freedom.
Synergies and Differences in Relation to Freedom of Contract
Jung therefore wishes to establish freedom of negotiation as a distinct concept alongside freedom of contract. “I demonstrate that the former sometimes takes different forms from the latter, owing to its procedural nature. Ultimately, freedom of negotiation should help us to reflect on existing regulations – this is central to the entire legal system, as there are provisions in many areas that restrict freedom of negotiation. Over the last 20 years, more and more new regulations have been introduced – such as the requirement to negotiate fairly.”
Jung emphasizes that freedom of negotiation and freedom of contract are closely linked despite their distinct nature: “Certain restrictions on freedom of contract do, in fact, also affect freedom of negotiation and vice versa. However, there are also many restrictions where this is not the case.” If, for example, the duration of negotiations is restricted by law, the content can still be freely agreed upon. The same applies with regard to fraudulent misrepresentation and unlawful threats. The relevant legal provisions restrict freedom of negotiation by classifying such tactics as unlawful. The content of the contract, however, remains freely determined. Similarly, the principle of fair negotiation affects only freedom of negotiation, not freedom of contract.
Freedom of Contract as an Independent Concept
Jung explains: “My concept has the potential to have a major impact on legislation. This is because any legal restrictions would have to be justified in the light of freedom of contract.” The result, however, would not simply be more freedom and less regulation – but rather better regulation. This is because restrictions on one freedom can also serve as a functional equivalent to limiting another freedom. At the same time, regulations affecting freedom of negotiation and freedom of contract can also complement one another effectively.
The professor now hopes that the concept she has proposed will be taken up by both the courts and her colleagues: “I hope that in future, freedom of negotiation will be used as an argument in all legislation concerning negotiations – regardless of the direction it takes.”