Termination (labour law)

Termination (labour law) - Kündigung (Arbeitsrecht)

November 03, 2023

Notice of termination can be given by either party. However, it is much more difficult for the employer than the employee, as the employer needs a reason for termination. Within the contractually agreed or statutory periods, the employee can always give notice of ordinary termination without cause and of termination without notice for good cause in accordance with Section 626 I of the German Civil Code (BGB). The employer also needs a reason for ordinary termination.

Reasons for termination

Recognised reasons for ordinary termination are operational, personal and behavioural reasons. Reasons for dismissal for operational reasons include turnover losses, restructuring and plant closures. Dismissals for personal reasons are based on the person concerned. This is the case if the employee is no longer able to perform the assigned work adequately due to his or her abilities and characteristics. This can regularly also be the case due to illness. For example, if the employee is unable to work for a very long period of time or is frequently ill for a short period of time.

For dismissal due to illness, certain conditions must be met. Firstly, there must be a negative prognosis for the future. The employee's condition is therefore not expected to improve. In addition, the absence of the employee's work performance will damage the company's operations or its finances. Finally, the interests of the employee must be weighed against those of the employer, taking into account the employee's age, length of service and any maintenance obligations.

In the case of dismissal for conduct-related reasons, there must be misconduct in the form of a breach of duty from an objective point of view. This misconduct must also have occurred culpably, i.e. intentionally or negligently, as well as in the operational relationship. A breach of duty occurring in private is not sufficient. Examples include repeated unexcused absences or repeatedly faulty work without exhausting personal capabilities. In most cases of dismissal, especially for personal and behavioural reasons, a balancing of interests will be necessary. Above all, the employer must consider whether there is no milder remedy available instead of dismissal. Before a dismissal, it must always be checked whether a warning is possible, which must precede a possible dismissal.

If one of the parties wants to terminate without notice, there must be an important reason according to section 626 I BGB. The reason must be so substantial that further adherence to the contract is simply unreasonable. The hurdle here is very high. According to the wording, a case-by-case consideration of the interests of both parties is necessary. Exemplary reasons, however, are unauthorised self-suspension, insulting the employee/employer or colleagues, committing criminal offences such as theft at the workplace, deliberate poor performance or continuous refusal to work.

Drawing up a notice of dismissal

A notice of termination, no matter from which side it comes, must always be in writing according to section 623 BGB. Notices of termination sent by e-mail, fax or expressed verbally are not valid. In addition, in accordance with the written form requirement in section 126 I BGB, the notice of termination must be signed in person by the person who issued it. If the written form requirement is violated, the termination is invalid. A letter of termination, regardless of which side, should in any case contain the full addresses of the sender and the addressee, the date on and at which notice is given and a heading or in the subject line the literal note "Termination" or "Termination of employment" so that the message is unambiguous. Although the employer needs a reason for termination, this reason for termination does not have to be stated by the employer in the termination letter. The situation is different when an employer gives notice to an employee who is protected under the Maternity Protection Act (MuSchG). In this case, the reason for termination must be stated in accordance with section 17, subsection 2, sentence 2 MuSchG. Omitting the reason is advantageous for the employer in many cases, as this avoids mistakes and, if different reasons exist, a tactical selection and justification is possible even later. This is particularly true if, following a dismissal, legal proceedings are brought as a result of an action for protection against dismissal filed by the employee. However, the employee can ask for the reason for the dismissal. A corresponding claim is derived from the employment relationship as a so-called collateral duty. In the case of dismissal for operational reasons, the employee also has a right to know the reasons that determined the social selection that was made.

Receiving notice of dismissal - what now?

If an employee receives notice of dismissal, the first thing to do is to remain calm. Many dismissals can be successfully challenged. If the employee does not wish to continue the employment relationship, a severance payment and the issuing of a favourable employer's reference can usually be obtained in the case of invalid dismissals. Within three weeks of receiving the notice of termination, an action for protection against dismissal can be brought before the competent labour court pursuant to section 4 sentence 1 of the Dismissal Protection Act (KSchG). Dismissals of pregnant women, persons on parental leave or persons with severe disabilities who do not have the consent of the competent authority are invalid. If the employer had no knowledge of the pregnancy, the employee must prove the pregnancy to the employer within 2 weeks. Proof of severe disability is possible within 3 weeks after receipt of the notice of termination. Legally, the action for protection against dismissal is intended to restore the employment relationship. Section 4 sentence 1 (KSchG) speaks of the aim of establishing that the employment relationship was not terminated by the dismissal. However, since both parties often do not want the employment relationship to continue, in practice there are negotiations about the possibility of an amicable settlement. In economic terms, this involves paying a severance payment to compensate for the loss of the job. Another possibility is to apply for the termination of the employment relationship. This can be considered in exceptional cases. According to sections 9, 10 KSchG, it is possible to apply for the labour court to dissolve the employment relationship and order the employer to pay severance compensation. However, this is usually only possible if the dismissal is invalid and the employee cannot reasonably be expected to continue the employment relationship, section 9 (1) KSchG. A prerequisite for this, however, is that the Dismissal Protection Act is applicable at all.

Time limits for termination of employment contract

The law (section 622 (1) BGB) sets a notice period of at least four weeks to the 15th of a month or the end of the month. The only exception is for employees in the probationary period, where a statutory notice period of two weeks is provided (section 622 (3) BGB). However, the parties to the employment contract are free to agree on longer notice periods. The statutory period cannot be shortened, only extended. If nothing contrary has been agreed, the statutory periods apply. If the employer terminates the employment contract in accordance with the statutory periods, these periods are extended with the length of service in accordance with section 622 (2) BGB. If the employee gives notice, however, he is not bound by these.

2 years of service: 1 months’ notice to the end of the calendar month.

5 years of service: 2 months' notice to the end of the calendar month.

8 years of service: notice period of 3 months to the end of the calendar month

Length of service 10 years: notice period of 4 months to the end of the calendar month

12 years of service: 5 months' notice to the end of the calendar month

Length of service 15 years: 6 months' notice to the end of the calendar month

Length of service 20 years: 7 months' notice to the end of the calendar month.

In a few individual cases, a shorter notice period than required by law may be agreed. For example, if an employee is only temporarily employed as a temporary worker and this does not exceed a period of 3 months (section 622 (5) sentence 1 no. 1 BGB).

Residual leave and holiday compensation

Leave must in itself be taken in nature, but if this is no longer possible by the time the employee leaves the company, he or she is entitled to payment of the leave days under section 7(4) of the Federal Leave Act. If the employee is dismissed without notice and leaves the company immediately, this does not invalidate the holiday entitlement; here too, the employer must pay out any holiday entitlement. If ordinary notice is given, the employee is entitled to payment of his salary until he leaves the company. If notice is given without notice, the termination immediately stops the entitlement to wages. If notice has been given by the employer and the employee feels that the notice is invalid, an action for protection against unfair dismissal can be brought to establish that it is invalid, so that if the action is successful, the wage claim would continue.

Our services:

• Review of terminations for their effectiveness

• Preparation of termination agreements

• Drafting legally effective notices of termination

• Representation in dismissal protection proceedings before the labour court

• Outplacement counselling