Sozialauswahl (social selection, § 1(3) KSchG)

When making an operationally driven dismissal, the employer — in insolvency, the administrator — must select which of the comparable, interchangeable employees to actually dismiss. Under § 1(3) of the Dismissal Protection Act (KSchG), four criteria apply: length of service, age, maintenance obligations and any severe disability. Whoever is least in need of protection under these criteria is dismissed first.

The employer may exclude individual employees from the social selection where continuing their employment is in the legitimate operational interest because of their knowledge, skills or performance, or to preserve a balanced staff structure (§ 1(3) sentence 2 KSchG) — the practically most important exception, e.g. for know-how carriers. In insolvency, a named list of employees to be dismissed can additionally be agreed with the works council as part of a reconciliation of interests (§ 125 InsO), which substantially narrows the courts' ability to review the selection.

Relevant for buyers whenever a deal requires reducing headcount before or after closing: a flawed social selection makes the dismissal invalid and can bring back employees who were meant to be let go. A named list negotiated by the administrator with the works council before signing creates materially more legal certainty than individual dismissals after closing.