U as in unfair dismissal protection
How does legal protection against unfair dismissal protect me?
Employees do not need a special reason to terminate an employment relationship. Employers, on the other hand, usually need a special reason for terminating an employment relationship in order to be able to issue a legally effective notice of termination. The Termination Protection Act (Kündigungsschutzgesetz, KSchG) regulates in which cases a termination by the employer is effective and prohibits employers form issuing an unfair dismissal.
Probationary period, waiting period
In order for the protection against unfair dismissal under the Dismissal Protection Act to apply, the employment relationship must have existed for at least six months. This is regulated in § 1 (1) KSchG:
“Termination of the employment relationship towards an employee whose employment relationship has existed in the same establishment or enterprise without interruption for more than six months is legally invalid if it is socially unjustified.”
In the first six months of the employment relationship, therefore, the employer can terminate an employment relationship without having to comply with the requirements of the Dismissal Protection Act. In employment contracts, a so-called probationary period is defined for a maximum of the first six months of the employment relationship, during which the employment relationship can be terminated within a shorter notice period. The probationary period is governed by § 622 (3) of the German Civil Code:
“During an agreed probationary period, for a maximum of six months, the employment relationship may be terminated with two weeks’ notice.”
Company scope of application
Moreover, general protection against dismissal only applies in establishments that employ more than ten employees. An establishment (“Betrieb”) is a work organizational unit with uniform management and does not have to be identical with the company or firm. When calculating the number of employees, vocational trainees are not being counted; part-time employees are being counted at half or three-quarters, depending on the extent of their employment.
Social unlawfulness of the termination
If the Dismissal Protection Act applies, a dismissal is only legally valid if there is social justification. § 1 (2) sentence 1 KSchG determines at what point this applies:
“The termination is socially unjustified if it is not due to reasons that lie within the person or behavior of the employee or are due to urgent operational requirements that stand in the way of the employee’s continued employment in this business.”
Thus, the termination is only socially justified if there is a reason for termination that makes continued employment impossible. In this context, the employer must evaluate whether the termination is proportionate, meaning that the termination may only be the last resort.
No absolute grounds for termination
In case of termination circumstances always depend on the individual case. There are no situations in which a termination is justified in any case. The employer can therefore never be sure whether a termination will be recognized as justified by the labor court.
The requirements for a termination in an individual case differ according to the three different reasons for termination:
In the case of a termination for operational reasons, the possibility of employment ceases because the employer no longer wishes to continue the business in its previous form. Since the employer’s will is the starting point for the termination, particular care must be taken to ensure that proportionality is maintained. The decision alone to terminate employment relationships is not sufficient for this.
Since the employer can decide within the scope of its entrepreneurial freedom how he or she wishes to run his or her business, the court does not review whether an entrepreneurial decision is economically reasonable or necessary in the case of a termination for operational reasons. However, the employer must demonstrate and prove that he or she has made such a decision and that a position has to be cut as a result of this decision. Since termination may only be the last resort, the employer must examine whether it is possible to continue employing the employee in another vacant position, even if this requires a change in the employment contract or retraining or further training.
If there is an urgent operational reason for termination, the employer must make a social selection when choosing the employees that are to be terminated. This is regulated in § 1 (3) Sentence 1 KSchG:
“If an employee has been dismissed due to urgent operational requirements within the meaning of paragraph 2, the dismissal shall nevertheless be socially unjustified if, in selecting the employee, the employer has not taken into account or has not sufficiently taken into account the employee’s length of service, age, maintenance obligations and severe disability;”
Thus, the employer may not freely choose to whom to give notice, but he or she must in his selection take into account the length of service, age, maintenance obligations and severe disability of the comparable employees and give notice to the employees he or she considers least vulnerable.
In the case of termination for personal reasons, the reason for termination lies within the individual of the employee, namely in his or her personal characteristics and abilities. If the employee is no longer able to perform the duties to which he or she has committed him or herself under the employment contract, the employer may terminate the employment relationship by giving notice of termination for personal reasons.
Most cases of termination for personal reasons relate to illnesses of the employee. However, the decisive factor is whether further prospective long periods of absence are to be feared in the future. Also in cases where the employee loses the driver’s license that is needed for the employment relationship, a person-related dismissal can be pronounced. Age in itself is not a reason for dismissal for personal reasons.
Even in the case of a person-related dismissal, the employer must do everything reasonable to avert the dismissal. If the termination is based on the employee’s incapacity to work due to illness, the employer must prove that a company integration management program has been carried out and has examined how the employment relationship can be continued despite the restrictions due to illness.
Reason for termination can also lie within the conduct of the employee. The purpose of the termination is not to punish the employee for past conduct, but to prevent further breaches of duty.
For a conduct-related dismissal, violations of the work obligation are taken into account (e.g. unexcused absences), violations of behavioral obligations (e.g. violations of alcohol bans or insulting colleagues), unauthorized actions and criminal offenses or the violation of secondary obligations (e.g. late sick leave notifications). Whether the breach of duty was committed intentionally or negligently is irrelevant; a negligent breach of duty can also justify termination for reasons of conduct.
However, it is essential for the employer to weigh up whether his or her interest in terminating the employment relationship outweighs the interest of the employee in continuing the employment relationship. The social situation of the employee is also taken into account, i.e. how long the employment relationship has lasted, the age of the employee, how many maintenance obligations he or she has and whether he or she is severely disabled.
Since termination may only be the last resort, the employer must also consider whether a milder remedy than termination is available, such as a written warning, transfer or continued employment under changed (possibly worse) conditions if the misconduct would no longer have an effect in another position. Often, a written warning is also required as a milder means before a termination for conduct-related reasons. A written warning is a written notice from the employer to the employee in which the employer points out that the employee has violated his or her contractual obligations and that he or she must expect measures under labor law in the future if the behavior is being repeated. By a written warning, the employee is warned of possible consequences and can change his or her behavior accordingly.
Particularly in the case of conduct-related terminations, an extraordinarily large number of different constellations are conceivable; as usual in employment law, it always depends on the specific individual case.
Further grounds for ineffectiveness of the termination
Letter of termination
Pursuant to § 623 of the German Civil Code (BGB), a notice of termination may only be given in writing:
“The termination of employment relationships by notice of termination or termination agreement must be in writing to be effective;”
An oral notice of termination or a notice given by e-mail or WhatsApp is invalid. This also applies to notices of termination on the part of the employee.
Even if the employer can only effectively terminate an employee with a reason for the termination according to the KSchG, the reason for termination does not usually have to be stated in the notice of termination. However, if the employee asks the employer for the reason of the termination, the employer must state the reason.
Works Council Hearing
If there is a works council in the establishment, it must be consulted before a termination, §102 paragraph 1 Works Council Constitution Act (Betriebsverfassungsgesetz, BetrVG):
“The works council must be heard before any dismissal. The employer must inform it about the reasons for the termination. A notice of termination issued without hearing the works council is invalid.”
The reasons for the termination must be stated in the process. The works council can then comment on the termination. In a subsequent termination dispute, the employer can only refer to the reasons for termination on which it has consulted the works council.
A change notice or a termination during the probationary period is also invalid if the employer has not consulted the works council prior to the termination. The works council can object to the termination, but the employer is not prevented from terminating the employment even after the works council has objected.
Ordinary and extraordinary termination
In the case of termination, a distinction is made between ordinary and extraordinary termination.
In the case of extraordinary termination (also “termination without notice”), no notice period must be observed. The employment relationship ends immediately with the notice of termination. In return, the requirements for the reason for termination are considerably higher. Extraordinary termination is only justified if, taking into account all circumstances of the individual case, continued employment is not reasonable even for the duration of the notice period.
The extraordinary notice of termination must be given within two weeks after the person giving the notice has learned of the reason entitling him or her to the extraordinary notice of termination. Within this period, the employer must also consult the works council.
It also applies to extraordinary terminations that there are no reasons for termination that justify termination with absolute certainty. It always depends on the individual case.
Dismissal with the Option of Altered Conditions of Employment
Since a termination which completely ends the employment relationship as such, may only ever be the very last resort, the employer must check whether a milder measure might also be taken in consideration. It often turns out that the employment relationship could continue by altering the working conditions, for example by agreeing on a new place of work or reduced working hours. Since the employer cannot simply alter the working conditions under the current contract, the employee’s consent is required. If the employee does not agree to alternated conditions in the employment contract, the employer can issue a so-called dismissal with the option of altered conditions of employment .
In the case of a change notice, the employer terminates the employment relationship, but at the same time offers the employee to conclude a new employment contract with altered conditions. Consequently there are three possible reactions for the employee:
If the employee rejects the offer, the termination becomes effective and ends the employment relationship. The employee can then take legal action against the termination. If the employee loses the lawsuit, the employment relationship is terminated.
If the employee accepts the offer, the altered terms of the employment relationship shall become effective and the employment relationship shall be continued under the altered terms.
The employee may accept the employer’s offer subject with the provison that the change in employment conditions is not socially unjustified. In this case, the employee can file an action for protection against unfair dismissal against the notice and let the court examine whether the notice was justified. If the labor court finds that the notice was not justified, the employment relationship continues under the old conditions, otherwise the employment relationship continues under the altered conditions. In the case of a conditional acceptance, there is therefore no longer a risk that the employment relationship will be terminated; the employee can thus ask for a judicial review of whether the change notice is justified without the employment relationship as a whole being jeopardized.
Special protection against unfair dismissal
Certain categories of persons enjoy special protection against any dismissal and cannot be dismissed or can only be dismissed under more difficult conditions:
Pregnant women cannot be terminated during pregnancy and young mothers cannot be terminated four months after childbirth if the employer knows of the pregnancy at the time of the termination or learns of it in good time after the termination has been issued.
For the termination of employees who have requested parental leave, the employer must obtain the approval of the Occupational Health and Safety Authority.
The employer must also obtain the approval of the Integration Office before terminating the employment of severely disabled persons or persons treated as such.
Members of the works council, youth and trainee representatives, the election committee and election candidates may also not be dismissed without the consent of the works council.
Time limit for taking legal action against unfair dismissal
After the reception of the notice of termination, it must be challenged within a period of three weeks by means of an action for protection against unfair dismissal; otherwise it is deemed to be justified and becomes effective unconditionally. It is therefore extremely important for employees to seek advice quickly after being dismissed and to decide whether they wish to bring an action for protection against unfair dismissal to court.
Default of Acceptance
Once the notice period has expired, the employment relationship is terminated. However, usually no decision has yet been made on the action for protection against unfair dismissal. This means that at this point it is not yet clear whether the termination has been lawful and effectively ended the employment relationship. Nevertheless, the employment relationship ends for the time being – the employee no longer has to work and the employer no longer has to pay a salary. If the employee wins the unfair dismissal protection proceedings, the employee is not able to make up for the work, but the employer however is obliged to pay extra for the durance of the legal dispute. For this reason, some employers require the employee to continue working after the end of the notice period in a so-called litigation employment relationship.
Settlement and severance pay
The aim of an action for protection against unfair dismissal is always the judicial determination that the employment relationship has not been terminated by the employer’s notice of termination but continues to exist. There is no entitlement to severance pay in German labor law – in contrary to many other countries.
If severance pay is paid as compensation for the loss of a job, this is the result of an agreement between the employee and the employer. In practice, the vast majority of dismissal protection proceedings do not end with a judgment, but with such a settlement. This settlement usually regulates everything that is necessary for the final termination of contractual relations between the parties: leave, return of keys and equipment, a reference letter. The settlement is a good solution to resolve the uncertainty about whether the termination was lawful in a mutually agreeable manner and a face-saving way for both parties.
The starting point for the amount of the settlement is the following so-called rule of thumb: Half a gross monthly salary per full year of employment. What amount the employee and employer ultimately agree on is, of course, always depending on the individual case.
Severance pay is taxable income, but no social security contributions are due. Settlements reached before the labor court are recognized by the Federal Employment Agency and – in contrast to a termination agreement – do not lead to a suspension of unemployment benefits.
The conclusion of the settlement ends the pursuit of the legal action. The settlement is valid immediately and usually cannot be challenged.
Please note: This is a very general overview on the subject of unfair dismissal under german labor law. If you need help in your particular case, please do not hestitate to contact me or book your appointment. I’m happy to help.