1. The typical case: Ordinary termination
By issuing ordinary notice of termination, the employer ends the employment relationship as soon as the notice period has expired. This notification period is governed by law, or regulated in the employment contract or a collective bargaining agreement. Given today’s shortage of skilled labor, managers strive to retain their employees for as long as possible. Section 622 (5) sentence 3 and (6) of the German Civil Code (BGB) permits a mutual extension of the notice period, provided that the agreed notice period for the employee to terminate the employment relationship is not longer than that for termination by the employer. However, the Baden-Württemberg State Labor Court indicated the limitations of this law in the middle of last year: The court ruled that prohibiting the ordinary termination of the employment relationship for a total of 37 months is unlawful.
2. Employees with complete or partial protection against termination
Various laws govern which employees cannot be dismissed, or may only be dismissed under specific conditions:
- According to Section 15 (3) of the German Part-Time and Temporary Employment Act (TzBfG), for example, the ordinary termination must be agreed in the individual fixed-term contract or in the collective bargaining agreement.
- Section 17 of the Maternity Protection Act stipulates that pregnant women may not be dismissed. Termination is only permissible in rare and exceptional cases, and with the approval of the authorities, for example if an employee commits criminal acts at the company.
- Section 18 of the Federal Parental Allowance and Parental Leave Act imposes restrictions regarding parental leave.
- Accordingly, relatives serving as caregivers also receive protection, in particular against dismissal by their superior for a maximum of twelve weeks before the announced start until the end of their caregiver leave in accordance with Section 5 of the Home Care Leave Act.
- News from the European Court of Justice regarding protection against dismissal for the severely disabled: The severely disabled receive greater protection in accordance with the German Social Code, Ninth Book. However, up until now this excluded the first six months of the employment relationship. In a recent ruling, Luxembourg judges decided that employees with a severe disability may only be dismissed under specific conditions, even during their probationary period.
- Employers may only issue ordinary notice of termination to trainees during their probationary period. Once this period has expired, extraordinary notice of termination is only possible with due cause until completion of their vocational training.
- Members of the works council, data protection officers, as well as immission control and waste management officers also enjoy special protection against dismissal.
- Neither the previous owner of the business nor the new owner may use a transfer of business to justify termination, as set forth in Section 613 a (4) BGB.
3. When is a reason for termination required?
Whenever the Employment Protection Act applies, the company must justify the termination of the employment contract. The following conditions apply:
- The employee has worked for the company for more than six months.
- The company has more than ten employees.
The Employment Protection Act only applies if both conditions are fulfilled. In other cases, ordinary termination is possible without due cause, provided that the dismissal is not immoral, discriminatory, and does not violate a superior principle of law.
4. The legislator distinguishes between three reasons for termination
Termination may only ever be the last resort. As such, employers first have to take less severe measures, such as issuing a caution or transferring the employee to another position. Employment protection legislation differentiates between the following reasons justifying ordinary termination:
Termination due to personal reasons: This includes examples such as termination of the employment relationship due to the loss of a driver’s license if the employee is then unable to perform their job, e.g. a truck driver. In practice, these cases often include dismissals due to illness if an employee is physically or mentally no longer able to perform the job. However, this is subject to strict conditions: In accordance with Section 167 (2) of the German Social Code, Ninth Book, the company must first carry out a company integration management program (bEM) in order to remedy the employee’s inability to work. The Federal Labor Court recently ruled that companies must repeat the bEM program if an employee has been continuously or repeatedly unable to work for a period of more than six weeks within one year of the conclusion of the first bEM program.
Termination due to conduct: This becomes an option if an employee violates the company’s code of conduct regulations, commits criminal offenses or violates obligations arising from the employment contract by being absent from work without a reason, for example. The Baden-Württemberg State Labor Court recently confirmed the dismissal of a police physician who compared the Protection against Infection Act to the national socialist Enabling Act. Civil service employees have a special duty of loyalty to the constitution and the government bodies (LAG Baden-Württemberg, Ref. 10 Sa 66/21).
Termination for operational reasons:
This form of termination must fulfill three prerequisites:
- The employer does not have a permanent need to continue employing the staff member. It does not matter whether this is due to internal or external reasons. There are merely differing standards of legal review: In the case of termination due to internal reasons, the labor court only examines whether the decision is obviously non-objective or arbitrary. In the case of termination due to external reasons, the existence of these reasons may also be verified.
- The company cannot provide the staff member with another position.
- The employer must comply with the social selection criteria and take into account criteria such as duration of employment at the company and age.
5. No fundamental entitlement to severance pay
Employees are not fundamentally entitled to severance pay unless the works council and the employer have negotiated severance pay in a social plan. In addition, in the event of termination due to operational reasons, the employer has the right to offer the employee a severance package if they forgo legal action against termination in accordance with Section 1a of the Employment Protection Act (KSchG).
6. Observe the General Equal Treatment Act
HR managers also have to comply with the discrimination prohibition from the General Equal Treatment Act (AGG). This is reviewed by the labor courts on a regular basis.
7. Caution with ordinary termination: When is a caution not required?
If an employee’s voluntary conduct becomes a problem, employers first have to issue a caution as a warning to the employee. Exceptions apply when
- either their behavior cannot be expected to change in the future despite the caution
- or their behavior represents such a serious violation that tolerating the incident even the first time is objectively and obviously unreasonable for the employer.
8. If multiple employees are made redundant: Check mass dismissal!
If multiple employees have to be dismissed within a short period of time due to operational reasons, HR managers need to examine whether the conditions for a mass dismissal pursuant to Section 17 of the Employment Protection Act (KSchG) apply, and whether the employment agency has to be informed. This not only covers dismissals, but also severance agreements.
9. The exception: extraordinary termination
Extraordinary termination without notice represents the exception. Given that this ends the employment relationship immediately, it is subject to special requirements: An important reason why it is unreasonable to continue to employment contract until the end of the notice period must exist. At the end of last year, the Mecklenburg-West Pomerania State Labor Court ruled that an employee who takes an unauthorized holiday or is absent from work without excuse may be terminated without notice. This applies even if they may have been entitled to time off (Ref. 5 Sa 88/21). According to the judges of the Mecklenburg-West Pomerania State Labor Court, threatening something such as “Then I’ll simply take a sick leave” if an employee is not assigned their desired shift can also justify an extraordinary termination without issuing a caution. However, the reconciliation of interests could also favor the employee if the threat is based on a conflict between employees, or if the employee has already reacted by resigning on their own, meaning that the employment relationship will end soon.
10. Caution in the case of extraordinary termination
The same rules govern whether a caution is necessary in the case of extraordinary termination as in the case of ordinary termination. These are explained in number 7.
11. Works council involvement
If the company has a works council, it must always be involved before the notice of dismissal is given in accordance with Section 102 of the Works Constitution Act (BetrVG). The employee can only be dismissed after the works council has stated its position or the corresponding deadline has expired. However, employee representatives cannot prevent the dismissal through their vote.
12. Formal requirements
According to Section 623 of the German Civil Code (BGB), termination may only be issued in writing with an original signature and not via fax or digitally, such as by e-mail. Notice of extraordinary termination must clearly state that the employment relationship is being terminated extraordinarily and without notice. In the case of ordinary termination, HR managers must comply with the respective notice period. Reasons need not be stated. Instead, a legally recognized reason for termination needs to exist only at the time of termination of the employment relationship. It is important to remember that companies must inform the employee of their obligation to register with the Employment Agency.
13. Fewer than ten employees? The Employment Protection Act does not apply
Companies with fewer than ten employees are regarded as small businesses, so the Employment Protection Act does not apply. As such, managers at small businesses have an easier time dismissing employees. Nevertheless, rules such as the prohibition of discrimination in accordance with the General Equal Treatment Act (AGG) or the formal requirements still apply.
14. The Federal Labor Court strengthens employers’ rights regarding sick leave after termination
HR departments often face the problem of employees taking sick leave for the remainder of their notice period, at the same time as or immediately after they have given notice or received notice. In a recent ruling, the Federal Labor Court reinforced employers’ rights: The evidential value of a certificate of incapacity could be called into question if the duration of the certified inability to work corresponds to the duration of the notice period. In a case like this, the employee would be required to provide other proof of their inability to work as a result of illness. If they are unable to do so, they are not entitled to continued payment of wages in the event of illness.
Termination of employment relationship results in major changes to an employee’s life. Legislators address this through strict legal conditions, while also simplifying the situation for small businesses with fewer than ten employees. Careful documentation is essential: Has a caution been issued? Is the extraordinary termination without notice clearly stated? Has the works council been involved? Has the notice of termination been verifiably received?