Long-term illness – when can employees be dismissed?

Dismissal due to illness = dismissal due to personal reasons

If the company is subject to the German Employment Protection Act (KSchG), dismissals are only possible because of

• justified operational reasons (dismissal due to operational reasons),
• the employee’s conduct (dismissal due to conduct-related reasons) or
• personal reasons (dismissal due to personal reasons).

In the case of “dismissal due to illness”, the dismissal itself is for personal reasons because the illness cannot be controlled by the employee, unlike in the case of misconduct, for example.

3-stage examination in the event of dismissal due to illness

However, a dismissal due to illness is only lawful if it is socially justified (Section 1 (2) of the German Employment Protection Act (KSchG)). It is important to distinguish between different cases.

According to the case law of the Federal Labor Court, a dismissal in the event of long-term illness is socially justified if

1. there is a negative prognosis for recovery, the illness is expected to last more than 24 months,
2. the negative prognosis significantly impairs operational interests and
3. reconciling the interests indicates that this impairment is unacceptable for the employer.

Long-term mental illness

A legal dispute before the Schleswig-Holstein Higher Labor Court (LAG Schleswig-Holstein, decision dated January 10, 2024, Ref.: 3 Sa 74/23) addressed one such dismissal due to illness. After a relatively short period of employment, an accountant repeatedly fell ill for brief periods in autumn 2021 due to mental health problems and then suffered long-term illness starting in December 2021. In the summer and autumn of 2022, the employer offered her company integration management (BEM), which she declined, citing her ongoing illness.

Dismissal due to illness & protection against wrongful dismissal

As a consequence, the employer gave her notice of dismissal due to personal reasons and illness. The works council had been consulted and the necessary approval obtained. However, the works council was only informed in the consultation letter that the employee’s illness represented a significant operational impairment as her duties could not be compensated for within the company on a long-term basis.

Only once the case had been taken to court did the employer explain that a temporary replacement for the position to bridge the period of absence was impossible due to the current labor market situation and the job’s specific duties.

Dismissal not socially justified

The employee won the case before the Higher Labor Court. The court determined that the dismissal was invalid for two reasons:

1. The dismissal was not socially justified. The employer had failed to adequately explain why the operational impairment could not be prevented by temporarily hiring a substitute for the position for two years. Although it is conceivable that it would be impossible or unreasonable for employers to fill a position “orphaned” due to illness on a temporary basis, the employer would have had to provide a detailed explanation of the reasons. For example, why the attempt to hire temporary replacement for the position had been unsuccessful or why the job requirements made a temporary replacement impossible.
2. The works council had not been consulted properly (Section 102 (1) sentence 3 of the Works Constitution Act (BetrVG)) and the works council’s approval therefore rendered invalid. When consulting the works council, the employer should provide detailed reasons explaining why only a permanent internal replacement would fulfill the operational requirements. Only then would the works council had been able to form an accurate opinion on the dismissal due to illness.