Employee termination in Germany: Legal framework for employers

Dismissing an employee in Germany is a complex and highly regulated process. German labor law provides robust protections for employees, ensuring that terminations are fair and justified. The process requires adherence to strict legal guidelines, including the involvement of the works council, providing valid reasons for termination, and following prescribed notice periods. In this guide, we outline the key steps involved in dismissing an employee in Germany.

The legal framework for dismissing employees in Germany is one of the most stringent in Europe, primarily governed by the Dismissal Protection Act (Kündigungsschutzgesetz), which is designed to protect employees from unjustified terminations. This law applies to companies with more than 10 employees, and only under specific circumstances can a dismissal be considered lawful. For instance, dismissals must be based on one of three valid legal reasons: personal reasons, behavioral reasons, or operational reasons.

Personal reasons relate to situations where an employee is no longer physically or mentally able to fulfill their job duties. An example of this would be long-term illness, where the employee is unable to work for an extended period, and no reasonable adjustment can be made to accommodate them. However, even in these cases, dismissal can only occur after the employer has explored other options such as part-time work or redeployment to a different role.

Behavioral reasons involve misconduct, such as repeatedly arriving late to work, ignoring company policies, or demonstrating a pattern of underperformance. A concrete example is when an employee has been given multiple formal warnings but continues to neglect their duties or violate company rules. In such cases, the employer must first issue clear written warnings (Abmahnung) before considering dismissal. Without a documented warning process, the dismissal could be ruled invalid by a labor court.

Operational reasons are related to the company’s economic situation or restructuring needs. For example, if a company is undergoing a merger, downsizing, or automating roles, certain positions may become redundant. In these instances, the employer must prove that the dismissal is necessary for business reasons and cannot be avoided by transferring the employee to a different position within the company. Additionally, employers are required to adhere to a social selection process (Sozialauswahl), which takes into account factors like age, length of service, family responsibilities, and disability when determining who to dismiss.

Another key aspect of the legal framework is the role of the works council (Betriebsrat), which has a significant influence on the dismissal process. In companies with an active works council, the employer is legally required to inform and consult the council before any dismissal takes place. For example, if an employer fails to involve the works council when dismissing an employee, the dismissal can be deemed null and void. Although the works council cannot veto a dismissal outright, their opinion must be considered, and the employer must justify their decision.

Furthermore, for dismissals to be valid, they must be made in writing, as oral dismissals are not legally binding under German law. Failure to provide a written termination notice could result in the dismissal being overturned in court.

For more detailed guidance on German dismissal laws and employee rights, refer to resources such as the German Federal Ministry of Labour and Social Affairs or the German Labour Court System. These institutions provide extensive information on legal requirements and offer support to both employers and employees during the dismissal process.

In summary, the legal framework in Germany places a strong emphasis on fairness and justification in dismissals. Employers must carefully navigate these laws, ensuring they follow correct procedures to avoid legal disputes, as German labor courts tend to favor employees when procedures are not strictly followed.

In Germany, there are three main types of dismissal that employers can initiate, each with its own specific legal requirements and consequences: ordinary dismissal, extraordinary dismissal, and termination by mutual agreement. Understanding these distinctions is crucial for employers to avoid legal complications.

Ordinary Dismissal (Ordentliche Kündigung)

An ordinary dismissal is the most common type of termination and involves ending the employment relationship while respecting the required notice period. The reason for dismissal must fall under one of the three legally recognized categories: personal reasons, behavioral reasons, or operational reasons. For example, if an employee consistently fails to meet performance targets despite receiving training and warnings, the employer might dismiss them for behavioral reasons.

Notice periods for ordinary dismissals are regulated by the German Civil Code (BGB) and depend on the length of service of the employee. For instance, after two years of service, the minimum notice period is one month, but this increases with tenure, reaching up to seven months for employees with more than 20 years of service. Employers must ensure that they comply with these statutory notice periods, or longer periods if stipulated in the employment contract or collective bargaining agreements.

For more details on notice periods, refer to the German Civil Code.

Extraordinary dismissal (Außerordentliche Kündigung)

An extraordinary dismissal, also known as immediate dismissal, occurs when the employment relationship is terminated without any notice period. This type of dismissal is only valid in cases of serious misconduct that makes it unreasonable for the employer to continue employing the individual. The German labor law is strict about what constitutes grounds for immediate dismissal. Examples include theft in the workplace, severe harassment, fraud, or physical violence towards colleagues.

A well-known case illustrating extraordinary dismissal occurred when an employee at a supermarket was dismissed for allegedly stealing a small amount of money from the register. The case eventually went to the German Federal Labor Court, which ruled that even small acts of dishonesty can justify immediate dismissal, emphasizing the importance of trust in the employment relationship.

However, for an extraordinary dismissal to be valid, the employer must act quickly—within two weeks of becoming aware of the misconduct. This short timeframe ensures that the dismissal process is not drawn out, allowing both parties to resolve the issue promptly.

More information on the rulings of extraordinary dismissals can be found at the German Federal Labor Court.

Termination by mutual agreement (Aufhebungsvertrag)

A termination by mutual agreement is a contractual arrangement where both the employer and the employee agree to end the employment relationship. This type of dismissal is often used when the employer wishes to avoid a potential legal dispute or wants to offer the employee a smoother exit with a severance package.

For example, during corporate restructuring or downsizing, an employer might offer employees a severance package to voluntarily terminate their contracts. This can be more cost-effective and legally safer for the employer than pursuing dismissals for operational reasons, which could otherwise be challenged in court. Termination by mutual agreement also allows the employee to negotiate the terms of their exit, such as receiving severance pay, which is typically calculated based on half a month's salary for each year of service.

However, employees need to be cautious when accepting these agreements, as they may risk losing unemployment benefits if the Federal Employment Agency (Bundesagentur für Arbeit) views the agreement as a voluntary resignation. To avoid this, employees should ensure the agreement states that the termination was initiated by the employer, not voluntarily.

The dismissal process in Germany is highly structured and requires employers to follow strict legal procedures to ensure that terminations are valid. A failure to adhere to these steps can result in the dismissal being challenged in court and declared invalid. Below is a step-by-step breakdown of the dismissal process in Germany, with specific examples to illustrate each stage.

1. Written notice requirement

In Germany, dismissals must always be provided in writing. Oral dismissals, or even dismissals communicated via email, are not legally valid under German labor law. For example, if an employer verbally informs an employee that they are dismissed, this does not count as an official termination, and the employee would still be considered employed. The written notice must include clear details about the termination, including the reason (in cases of personal or behavioral dismissals) and the effective termination date.

This requirement is specified in Section 623 of the German Civil Code, which makes written dismissal notices mandatory. Employers who fail to meet this requirement risk the dismissal being invalidated in labor court.

2. Involvement of the works council

If the company has a works council (Betriebsrat), it must be consulted before any dismissal takes place. The works council is notified in writing and given an opportunity to express their opinion on the proposed termination. For instance, if an employer wants to dismiss an employee for repeated tardiness, they must first inform the works council, providing details of the employee's behavior and any previous warnings issued. The works council has up to one week to respond. While the council’s opinion is not legally binding, it must be considered, and their involvement is a critical procedural step.

Failing to consult the works council can render the dismissal null and void. In a notable case, the German Federal Labor Court ruled that an employer's failure to involve the works council prior to dismissing a long-term employee made the dismissal unlawful. As a result, the employee was reinstated.

3. Valid reason for dismissal

For a dismissal to be lawful in Germany, it must be based on a valid legal reason. These reasons fall under three categories: personal reasons, behavioral reasons, or operational reasons. For example, if an employee is dismissed for personal reasons, such as chronic illness, the employer must demonstrate that the employee can no longer perform their job duties and that no reasonable accommodations can be made. This might occur if an employee is unable to work for more than six months and there is no prospect of recovery.

In the case of dismissals for behavioral reasons, such as persistent lateness or misconduct, the employer is usually required to issue prior written warnings. Only after the employee has failed to correct their behavior following these warnings can dismissal be considered. For example, an employee who regularly violates company policies despite receiving multiple formal warnings could be dismissed for behavioral reasons.

For operational reasons, such as business downsizing or restructuring, the employer must prove that the dismissal is necessary due to economic conditions and that the position is genuinely redundant. A German auto manufacturer, for instance, might need to reduce its workforce due to falling demand for certain models. In such cases, the employer must explore whether the employee can be transferred to another department before deciding on dismissal.

4. Notice period compliance

German law mandates that employers respect the required notice period when dismissing employees. The statutory minimum notice period is four weeks, but this increases with the employee's length of service. For example, if an employee has worked for the company for five years, they are entitled to two months' notice before their employment is terminated. These notice periods are outlined in the German Civil Code and must be strictly adhered to unless the dismissal qualifies as an extraordinary dismissal, where no notice is required.

During this notice period, the employee is typically still expected to fulfill their work duties, unless the employer places them on garden leave (Freistellung), where the employee is relieved of their duties but continues to receive their salary.

5. Social selection process

In cases of operational dismissals, where multiple employees could be affected, German law requires employers to apply the social selection process (Sozialauswahl). This process takes into account factors such as age, length of service, disability, and family responsibilities to determine which employees are most protected from dismissal. For example, a single parent with 15 years of service and a disability would have stronger protections than a younger, single employee with only two years of service.

In a well-known case involving a large German corporation, several employees were selected for dismissal during a round of layoffs. However, the labor court found that the social selection process had not been properly applied, as older employees with longer tenures had been dismissed in favor of younger, less experienced workers. The court ruled that these dismissals were unlawful, and the affected employees were reinstated.

In Germany, the notice period for terminating an employment contract is strictly regulated by law, specifically under the German Civil Code, and must be respected by employers when ending the employment relationship. The length of the notice period typically depends on how long the employee has been with the company, though individual employment contracts or collective bargaining agreements (Tarifverträge) may stipulate longer notice periods.

Standard notice periods

For most employees, the statutory minimum notice period is four weeks, either to the 15th or the end of a calendar month. However, the notice period increases with the employee's length of service. Here's a breakdown based on the number of years an employee has worked for the company:

• Up to 2 years of service: 4 weeks' notice (standard minimum)
• After 2 years of service: 1 months' notice
• After 5 years of service: 2 months' notice
• After 8 years of service: 3 months' notice
• After 10 years of service: 4 months' notice
• After 12 years of service: 5 months' notice
• After 15 years of service: 6 months' notice
• After 20 years of service: 7 months' notice

For instance, if an employee has been with a company for 15 years, the employer must give six months' notice before the termination takes effect. These notice periods ensure that long-serving employees are given ample time to find new employment or make alternative arrangements. It's important to note that these statutory notice periods can be extended by the employment contract, but they cannot be shortened below the statutory minimum.

Probationary period notice periods

During the probationary period (Probezeit), which usually lasts for up to six months, shorter notice periods apply. In most cases, the notice period during probation is two weeks, allowing both the employer and employee to terminate the contract quickly if the job does not meet expectations. For example, if an employee is hired and either party decides the fit isn't right during the probationary period, they can terminate the employment with two weeks' notice, which is significantly shorter than the standard notice periods.

Extraordinary dismissal without notice

In certain cases, an employer may terminate an employee without notice through an extraordinary dismissal (außerordentliche Kündigung). This type of dismissal can only be used in cases of serious misconduct where the employer cannot be expected to continue the employment relationship, even for the duration of a notice period. For example, if an employee is found guilty of theft or violence in the workplace, the employer may have grounds for immediate dismissal without following the standard notice period. However, this is subject to strict legal scrutiny, and the employer must be able to justify the dismissal with solid evidence of misconduct.

One high-profile example involved an employee who was dismissed for stealing a small amount of cash from the company. The case was brought before the German Federal Labor Court, which ultimately upheld the dismissal, stating that even minor theft could justify an extraordinary termination due to the breach of trust between employer and employee.

Deviations in collective bargaining agreements

In industries where collective bargaining agreements (Tarifverträge) are in place, the notice periods may differ from the statutory ones outlined in the German Civil Code. These agreements are negotiated between trade unions and employers' associations and can provide either longer notice periods or additional protections for employees. For example, in the metal and engineering industries, collective agreements often stipulate more favorable terms for employees, such as extended notice periods or enhanced severance packages, especially for older workers or those with longer tenure.

Employee rights during the notice period

During the notice period, employees retain all of their rights under the employment contract. This means that they are entitled to continue receiving their full salary and benefits, including vacation entitlement. In some cases, an employer may place an employee on garden leave (Freistellung), where the employee is released from their duties but still receives their salary. This is often used in cases where the employee’s continued presence in the workplace is deemed unnecessary or undesirable, such as when the termination is due to business restructuring or personal conflict.

An example of garden leave can be seen in high-level corporate positions, where executives are often placed on paid leave during their notice period to prevent them from accessing sensitive company information after announcing their departure.

In Germany, certain categories of employees enjoy special protection against dismissal under labor law, making it more difficult for employers to terminate their contracts. This protection is designed to shield vulnerable workers from unfair or discriminatory dismissals, ensuring that they cannot be let go without following specific procedures or obtaining approval from relevant authorities. Below are the key categories of employees with enhanced protection and examples of how these protections are applied.

Pregnant employees and new mothers

Under the Maternity Protection Act (Mutterschutzgesetz), pregnant employees and those who have recently given birth are protected from dismissal from the beginning of pregnancy until four months after childbirth. For example, if an employee informs her employer that she is pregnant, the company is legally prohibited from terminating her contract during this period, regardless of performance or other issues.

In cases of extraordinary dismissals, such as severe misconduct, the employer must obtain prior approval from the relevant State Authority for Occupational Health and Safety (Gewerbeaufsichtsamt). Without this approval, any dismissal of a pregnant employee or new mother is deemed null and void.

A notable example of this protection was seen in a case involving a German retailer that attempted to dismiss a pregnant worker for behavioral issues. The Federal Labor Court ruled that the dismissal was unlawful because the employer had not secured the necessary approval from the State Authority, underscoring the strict enforcement of these protections.

For more information on maternity protection laws, visit the Federal Ministry for Family Affairs.

Employees on parental leave

Employees on parental leave (Elternzeit) are also protected from dismissal during the period of their leave. This protection applies to both mothers and fathers who take time off work to care for their child, typically for up to three years. During parental leave, an employer cannot dismiss the employee unless they obtain prior approval from the authorities, and even then, dismissals are only permitted under exceptional circumstances, such as company insolvency.

For example, if an employee decides to take 12 months of parental leave following the birth of their child, the employer is legally barred from terminating their contract during this time. Even if the company undergoes restructuring, the employee's parental leave status must be considered, and termination can only proceed with government approval.

You can learn more about the rights of employees on parental leave at the Federal Parental Leave and Parental Allowance Act.

Disabled employees

Disabled employees benefit from enhanced protection under the Social Code Book IX (Sozialgesetzbuch IX), which governs the rights of people with disabilities in the workplace. To dismiss a disabled employee, employers must first obtain approval from the Integration Office (Integrationsamt), a government body responsible for protecting the employment rights of disabled individuals. The purpose of this protection is to ensure that disabled employees are not dismissed unfairly or without just cause.

For instance, if an employer wants to dismiss a disabled worker due to restructuring, they must first submit a detailed application to the Integration Office, explaining the reasons for the dismissal and exploring alternative solutions, such as redeployment or role modifications. The office will then review the case and determine whether the dismissal is justified.

An example of this protection in action occurred when a large company attempted to dismiss a disabled employee for economic reasons. The Integration Office rejected the dismissal, citing that the company had not sufficiently explored alternative options, such as transferring the employee to a different department.

Works council members

Employees who are members of the works council (Betriebsrat) have special protections during their term of office and for a period of one year after their term ends. This protection is intended to prevent retaliation against employees who represent their colleagues in disputes with management. Dismissal of a works council member is only permissible in very limited circumstances, such as gross misconduct, and even then, the employer must obtain the consent of the entire works council or seek approval from a labor court.

For example, if a works council member is accused of serious misconduct, such as falsifying documents, the employer must first attempt to secure the consent of the works council before proceeding with dismissal. If the council refuses, the employer must bring the case to a labor court, where a judge will decide whether the dismissal is justified.

For more details on works council rights and protections, visit the German Works Constitution Act.

Employees close to retirement

Employees who are nearing retirement may also have additional protections, particularly under collective bargaining agreements in certain industries. These agreements often stipulate that employees within a few years of retirement age cannot be dismissed, except under extreme circumstances, such as company bankruptcy. This is to ensure that employees who are close to receiving their pensions are not unfairly let go without sufficient financial compensation.

For instance, in the metalworking industry, collective agreements often include clauses that protect employees aged 55 or older from dismissal, providing them with job security as they approach retirement age.