This post was contributed by Annegret Müller-Mundt, Associate at Norton Rose Fulbright LLP (Munich)
In Germany, in principle, either party may terminate an existing employment relationship without reason by complying with the contractual notice period. However, this general rule applies only in the rarest of circumstances because the Act on Protection against Dismissals (Kündigungsschutzgesetz) requires that in most cases there must be an objective reason for the dismissal to be effective. The Act is applicable if an employer employs more than five employees (more than ten, if the employee has been hired after 31 December 2003). Under the Act, an employee who has been employed for at least six months may have his or her employment terminated only if such termination is justified by lack of capability, conduct, or by reason of redundancy.
Dismissal by reason of lack of capability
Lack of capability exists if an employee is prevented from duly performing his or her work based on factors outside the employee’s control. This would be the case, for example, if the employee fell ill for a long period of time without a prospect of imminent improvement.
Dismissal by reason of conduct
A conduct-based dismissal is possible in cases of breach of contract: for example, if the employee commits a criminal offence against the employer or if the employee refuses to perform his or her work. A conduct-based dismissal is often only permissible after the employee has been given a warning regarding a prior similar breach of contract, stating that repeat behaviour may lead to dismissal.
Dismissal by reason of redundancy
Redundancy arises where the job of the affected employee no longer exists for operational reasons and if it is not possible to offer the employee suitable alternative employment. In the case of a redundancy, the employer must compare all employees within a selected group on the basis of certain criteria (length of service in the company, age, obligation to provide maintenance) and terminate the employment only of those employees who require the least “social protection” i.e., have no family, are young enough to find alternative jobs, etc. Due to the very complex issues related to putting this “social protection” selection into practice, these decisions should be reviewed by legal counsel on a case by case basis.
Actions for protection against dismissal
In case of a dismissal, the employee may bring a claim in the labour court in order to review the validity of the dismissal. This must be done within three weeks after receipt of the dismissal notice. After the three-week period has expired, the dismissal is deemed to be “socially justified” and is no longer subject to court review.
In labour court proceedings, the employee may only claim the continuation of the employment relationship, but cannot claim monetary damages. Therefore, the labour court only decides whether the dismissal was effective (in which case the employment relationship is terminated) or not (in which case the employment relationship continues). However, in most cases the parties agree on the termination of the employment relationship in exchange for a negotiated severance payment.