Relocation to Frankfurt Fraught with Problems

Suzanne Horne, head of the international employment practice at law firm Paul Hastings said: “One of the HR issues that the banks have been wrestling with as part of their Brexit insulation and response strategies is the contrast in labour laws in other EU jurisdictions. Put simply, it is harder and more expensive to terminate employees in Frankfurt or Paris than the UK, other than in exceptional circumstances. The news that Frankfurt is offering banks an exemption for “risk takers” from some of these strong protective rules is an incentive to the banks.

“It would appear that this will be akin to the existing labour law exemption for managing directors from the German Dismissal Protection Act. However, a key measure of any successful Brexit relocation will be whether the banks can retain their top talent through the relocation and those talented “risk takers” may be less enamoured with this offer. From an employee engagement perspective, if they are required to relocate why shouldn’t they be entitled to the same legal protections in that jurisdiction? 

“Post-Brexit, there is certain to be a transition period where those relocating employees will forum shop to get the best legal protection if their employment does come to an end and if this new exemption does come into effect satellite litigation as to whether individuals fall within this exemption.”

Alex Howard-Keyes, investment banking partner at human capital consultancy Alderbrooke commented: “Policymakers in Frankfurt are following Macron’s lead by contemplating easing labour laws to lure financial services executives from London. That said, Frankfurt has stolen a march on Paris as the destination of choice for any banks looking to relocate operations as it’s considered a relative safe haven in an unstable Europe.

“Whilst momentum is building towards Frankfurt, obstacles preventing a mass relocation remain. Workers councils in Germany still make the recruitment process difficult, and employees can only resign within dedicated periods each quarter, so it is hard for banks to respond dynamically to changes that effect the need to hire or fire. As with Macron’s attempt to charm bankers, this announcement will give little comfort to banks until they are supported by legislative change. Until then, there may be a modest upscaling of offices in Frankfurt but I believe London retains its status as the financial centre of Europe.”