Termination of employment contracts in Germany

Practical Guide

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Is “employment at will” a general principle of your country or do you usually need grounds for a termination of an employment contract?

It is not. The employer has to comply with the respective notice period and usually also needs grounds for the terminations. At least, if the employment relationship has already existed for a certain time and the workplace is of a certain size. Substantive grounds are required, if an employer or an employee wants to terminate the employment relationship without the respective notice period.

If there is a general concept of “dismissal protection”, is it limited to certain requirements (e.g. size of company/workplace, length of service)?

Yes, general protection against dismissal is -according to the KSchG (German Act on Dismissal Protection)- only provided, if more than 10 employees (full-time) are employed in a company and if the employee has already been employed there for more than six months.

In addition, dismissal protection may be granted under certain circumstances or for specific employees without any reference to the length of service, e.g. in case of pregnancy.

If a termination is deemed to be invalid, is “reinstatement (including backpay)” or “payment of damages” the general remedy?

Form a legal point of view an invalid termination leads to reinstatement, as a judge -usually- does not have the authority to end the employment relationship in return for a severance payment. Only under rare circumstances an employer may apply for the dissolution of the employment relationship by the Labour Court, which then may determine a compensation award. Despite lower requirements for employees, such an application is -from an economic point of view- usually no option for them.

Nevertheless, in practice, a termination agreement is usually agreed upon between the parties in case of a (threatening) reinstatement judgement. But the amount of the severance payment is at the full discretion of the parties.

If “payment of damages” is the general concept, what is the basis of its calculation/the maximum amount the employee may receive?

As there is no entitlement to it, as set out before, it is regularly difficult to make an exact forecast of the amount. However, an amount between half a month and a month salary per year of service is often the starting point for negotiations between the parties.

The afore mentioned compensation award of the Labour Court may lead to a payment up to 12, in exceptional cases up to 18 monthly salaries.

May the right to terminate in some cases forfeit, (e.g. right to terminate forthwith) if not executed timely? If so, what is the respective timeframe?

Yes, it may forfeit 14 days after the reason for termination is known to the respective party. In practice, however, the calculation often leads to difficulties due to the disputed start of knowledge. Despite this deadline company may take the necessary time to investigate the case until the relevant facts are deemed to be “known” to them.

Has a termination to be delivered in writing or may the delivery of an oral/email/facsimile termination without an original signature be sufficient as well?

The terminated employee must receive a signed notice. Neither an email nor a fax is sufficient.

May a termination be successfully rejected due to the lack of a formal proxy of the company’s statutory representative (e.g. its managing director) or may internal authorization generally be sufficient?

Yes, the termination can -usually- be rejected and would therefore be invalid. However, the rejection -with reference to the lack of a formal proxy- has to be immediate.

Is the any general formal procedure with regard to the employee (e.g. obligatory meeting with the employee) before a valid termination may be issued?

Usually not. An exception would be a termination, which is solely based on a suspicion of misconduct. In this case, the employee must be heard on the suspicion before the termination is issued. Other exceptions may arise due to collective agreements or in cases related to several employees such as mass dismissals.

Is there any statutory body that needs to be dealt with before a valid termination may be issued? If so, what is the usual timeframe?

Basically not. In some cases, however, termination without prior official approval is generally excluded. For example, in the case of an employee's pregnancy or in the case of a severe disability. The approval procedure may well take several weeks or months.

Is there -usually- an employee representative body that needs to be dealt with before a termination may be issued? If so, what is the usual timeframe?

A works council is not mandatory but can already be set up from a workplace size of just 5 employees. If this is the case, the works council must be heard before the termination is announced. In the case of an ordinary notice of termination, the works council has 7 days, in the case of an extraordinary notice of termination 3 days to comment. If the notice of termination is given before this statement has been made or the deadline has been elapsed, it is invalid. Again, additional procedures may apply in cases related to several employees such as mass dismissals.

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