🇩🇪 Terminations Overview for Germany

Henning Wandsleb
Henning Wandsleb
  • Updated

Oyster policy is denoted in purple.

Statutory

The employer cannot dismiss pregnant women even during a probation period without prior permission of the state labor administration, as long as the employee has provided notice of the pregnancy within two weeks of notice of termination.

The Dismissal Protection Act applies if:

  1. A business establishment has generally more than ten employees; and
  2. The employee has worked in the same company or business establishment for six months without interruption.

Grounds for Termination

In Germany, a termination without legally justifiable grounds may be considered a wrongful dismissal. Employees may only be terminated for cause, which only includes the following reasons:

  1. Personal reasons (employee illness that prevents him or her from performing his or her duties and has a negative impact on the business);
  2. Conduct (a willful or severely negligent breach of the employment agreement); or
  3. Business reasons (redundancy, which must be proven and weighed against the employee’s personal situation, or another “compelling” business reason, such as reorganization of the business).

An employment contract can be immediately terminated (without notice) for serious cause. Serious cause implies that, considering all the circumstances of the individual case and considering the interests of both of the contracting parties, the terminating party cannot be expected to continue the employment relationship to the end of the ordinary notice period or to the agreed end of the employment relationship.

Furthermore, such termination notice must be served within a period of two weeks after the terminating party became aware of the cause that justifies the dismissal. German labor courts have ruled that a valid termination based on inappropriate conduct requires a prior warning by the employer and continued inappropriate conduct after the warning.

The employee has the option to challenge their dismissal. In such a case, they have to file a complaint with the competent labor court within three (3) weeks from receipt of the termination notice. If the labor court decides to set the dismissal aside, the employee is entitled to reinstatement and continued remuneration by the employer. In practice, most cases are settled against payment of severance.

If a Works Council exists, the employer must consult it before any termination, even though termination is possible if the Works Council rejects the proposed termination.

Termination of pregnant women, parents on parental leave, or disabled employees needs prior approval from respective authorities. In addition, the employer must consult the disabled employee's representative from the state Integration Office before terminating employment of a disabled employee.

If an employee is considered an executive (leitende Angestellte) he or she is subject to separate termination provisions. This means that the executive may be terminated without cause, although the employer must provide a termination application and severance pay.

German employment law does not recognize the concept of “pay in lieu of notice.” The employer (and the employee) must instead abide by the statutory or contractually agreed notice period. However, under certain conditions (sufficient reason or agreement with the employee), the employer may release the employees from the duty to work on continued pay of remuneration until the end of the notice period.

Every dismissal must be in writing and signed by a person who has the authority to represent the employer.

Severance

For non-executive employees, there is no obligation to pay severance compensation if the notice of termination given by the employer can be justified in line with employment law, except when termination is caused by operational changes in a business that has a Works Council. The employer must give a reason for the termination of non-executive employees even when the termination is accompanied by a severance pay offer.

In Germany, severance is paid if:

  1. The employment contract creates an entitlement to severance;
  2. The employer indicates in the notice of dismissal that the dismissal is based on operational grounds and offers compensation;
  3. The worker does not file a complaint against the dismissal within 3 weeks' time (often the employee waives his or her right to file this complaint in the termination letter);
  4. The parties agree on a severance payment to settle a termination dispute; 
  5. A court finds that a termination is invalid (socially unjustified) but that continued employment would be intolerable for either party; or 
  6. A social plan concluded with the works council in connection with a collective redundancy provides for severance payments.

Severance is calculated as half a month’s wage for each year of the employment relationship. The maximum payment stipulated by law is equal to twelve (12) months' salary. This rises to fifteen (15) months' salary for employees aged fifty (50) or older, with at least fifteen (15) years of continuous service, and to 18 months' salary for employees aged at least fifty-five (55) and with at least twenty (20) years of continuous service.

As to severance agreement content, there are no particular clauses given in the German Civil Code, Labor Codes, or Dismissal Protection Act. However, a collective bargaining agreement might obligate the inclusion of certain clauses in a severance agreement. Additionally, it is not permissible to waive claims from collective bargaining agreements in a separation agreement.

The following clauses can be included in a typical separation agreement:

  1. Termination date;
  2. Severance payment;
  3. Outstanding bonus payments and treatment of other benefits upon termination;
  4. Release from duty to work by offsetting any holiday claim;
  5. Confidentiality;
  6. Letter of reference;
  7. Return of company documents and work items; and
  8. Settlement clause.

The court can only stipulate severance pay for an illegal termination if employment continuation is unreasonable for the employee or employer. In this case, payment can be up to 12 months’ salary.

Oyster does not have a collective bargaining agreement in place in Germany.

In the event of a dismissal by the employer based on operational grounds, the employer may (and in practice often will) offer the employee severance pay in the notice of dismissal provided the employee does not make a claim for unfair dismissal in the employment court.

Employment law in Germany offers great protection to employees, especially once they have a continuous six months of employment. Termination of an indefinite employment contract is possible; however, there needs to be a justified reason as noted above.

Customary

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Best in Class 

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