Redundancy for operational reasons resulting from the use of AI

Artificial intelligence is transforming business processes and can result in tasks being carried out more quickly or with fewer staff. In the US, according to the Job Cut Announcement Report by Challenger, Gray & Christmas, AI was cited as the reason for 101,743 announced job cuts by the end of June 2026.

A redundancy based on the use of AI must meet the general requirements for redundancy on operational grounds. It is only socially justified if there is an urgent operational need, no reasonable alternative employment is possible, and the necessary social selection process has been carried out properly.

Permanent cessation of the need for employment

The starting point is a business decision which is expected to result in the permanent cessation of the need for employment by the end of the notice period at the latest. In principle, the employer is free to decide for themselves whether and to what extent to integrate AI into their work organisation. The employment tribunals do not assess whether this decision is economically optimal. However, they do examine whether it was actually made and implemented, and whether it provides a plausible explanation for the alleged permanent loss of the need for employment.

A general statement that certain tasks will in future be ‘carried out by AI’ is not sufficient. The employer must set out which tasks have hitherto been performed by the employees concerned, which work steps the AI system will take over, and which tasks will continue to require human involvement.

Generative AI does not often result in a post being made redundant entirely. Typically, individual tasks are automated or accelerated initially. The resulting time savings may nevertheless reduce staffing requirements. The employer must then explain how the remaining workload will change, how the remaining tasks will be allocated, and whether the remaining employees will be able to manage them within their regular working hours.

Options for continued employment

Even where a role is made redundant due to AI, dismissal remains a last resort. Before giving notice of dismissal, it must be assessed whether the employee can continue to be employed in another vacant post within the business or organisation. Consideration must also be given to employment on amended terms, as well as posts for which reasonable retraining or further training is required.

At the same time, the introduction of AI may give rise to new tasks. These include, for example, checking automatically generated results, handling errors and exceptional cases, data maintenance or the technical monitoring of the system. The employer must therefore assess whether the employee concerned can be deployed in such a role.

Dismissal cannot be justified solely on the grounds that the employee lacks the skills to use the new system if they could acquire these through a reasonable training programme. However, an obligation to provide training exists only in conjunction with a specific employment opportunity. The employer is under no obligation to create an additional post or to offer retraining without the prospect of continued employment.

If, during proceedings for protection against dismissal, the employee demonstrates specific possibilities for alternative employment, the employer must explain why such opportunities do not exist or why the necessary training is unreasonable.

Social selection in the event of AI-related job cuts

If only some of several comparable posts are to be made redundant, a social selection process must be carried out in accordance with Section 1(3) of the German Employment Protection Act (KSchG). The decisive factors are length of service, age, maintenance obligations and severe disability. Consequently, it is not necessarily the employee whose current post is directly affected by the technical change who will be made redundant.

Specialised knowledge of the AI system in use may justify the employer’s interest in retaining specific employees. In such cases, the employer must demonstrate which skills will be required in future and why the employee in question possesses them.

A formal certificate is not mandatory for this purpose. Evidence may also be provided through documented project work, involvement in the system’s implementation, areas of responsibility assumed, or training undertaken. The crucial factor is that the operational significance of the skills can be demonstrated in a comprehensible manner.

If AI is used to prepare the social selection process, the final decision must not be made exclusively by automated means. The result must be subject to professional review by a responsible person and, where necessary, be open to amendment. Article 22 of the GDPR protects employees from decisions based solely on automated processing that have legal or similarly significant consequences.

Early involvement of the works council

Where a works council exists, it must be consulted prior to any dismissal (Section 102(1), first sentence, of the Works Constitution Act (BetrVG)). However, this involvement begins even before the actual dismissal takes place. Under Section 90 of the Works Constitution Act (BetrVG), the employer must inform the works council in good time of planned work procedures and processes, including the use of AI, and consult with it on their impact on employees. The system typically enables the monitoring of behaviour or performance, meaning that the right to co-determination under Section 87(1)(6) of the Works Constitution Act (BetrVG) applies.

If the works council is required to assess the introduction or use of AI, the consultation of an expert pursuant to Section 80(3), second sentence, of the BetrVG is deemed necessary. The specific need for external expertise does not then have to be justified separately. The details of the appointment must, in principle, be agreed with the employer.

If the use of AI leads to fundamental changes in the organisation of the undertaking or in working methods, and if this could result in significant disadvantages for the workforce, this may also constitute a change in the undertaking under Section 111 of the Works Constitution Act (BetrVG). In this case, the employer must inform the works council in good time and in full, and consult with it on the measure.

Outlook

AI cannot be cited as a reason for dismissal without further justification. As generative AI often only takes over individual tasks, the employer must set out in concrete terms how the resulting time savings reduce staffing requirements and lead to the elimination of the job in question.