Friday, 2. December 2022

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Key topics in German labor law: From Abfindung (severance pay) to Zeugnis (work certificate)

What you always wanted to know about German labor law but never dared to ask

Last week I went to the Mediamarkt to buy a new television. – Wait a minute, what does that have to do with labor law? Patience, we’ll get to that in a minute. – The helpful (or maybe just sales-oriented) employee there talked a lot about LCD, OLED, QLED, and other technical stuff I had next to no idea about. Why should I? I’m a lawyer, not a television expert. Probably many of you feel the same way when lawyers, especially those specializing in employment law, talk about notice of termination, social selection, disguised employment or transfer clauses. These are technical terms from an area, namely labor law, with which most non-lawyers have nothing to do or, at most, only marginally.

In the following I would like to explain key terms of German labor law briefly and, hopefully, concisely. – From A to Z, but that only applies to the German terms.

1. Severance pay (Abfindung)

Many think: If you get a dismissal from your employer, you should sue for the highest possible severance pay. – But this is not correct in this form.

a) What is severance pay anyway?

A severance payment is a payment that an employee receives from the employer upon termination of the employment relationship as compensation for the loss of the job.

b) Is the employee entitled to a severance payment?

As a rule, no. Apart from exceptions, there is no legal entitlement to severance pay. At most, claims to severance pay can arise from social plans, collective bargaining agreements or the individual employment contract, but this is rather rare. Such claims are most likely to exist in the context of social plans.

As a rule, employees cannot sue for payment of severance pay. Rather, one must or can take legal action against the validity of a termination by the employer and try to achieve a settlement with severance pay by this means (see below).

On the other hand, it is very difficult for an employee to obtain a severance payment if the employee wishes to leave the company of his or her own accord. This is only possible if the employer is convinced that it would be better for the company if the employee left as quickly as possible. But something like this requires a lot of negotiating skill on the part of the employee or his or her attorney.

c) Do dismissal protection proceedings often end with a severance payment?

Yes, absolutely. The reason is as follows: It is often legally unclear whether or not a dismissal issued by the employer is legally valid. In the conciliation hearing before the labor court, the judge usually points out to the parties that the outcome of the case is uncertain and that it may take a long time before legal clarification is achieved. It can take 6 to 12 months to reach a verdict in the first instance. If an appeal or even an appeal on points of law (=2nd appeal) then follows, both parties will not know where they stand for years.

How much better it is to reach an amicable agreement in the form of a settlement at the conciliation hearing, which is usually just a few weeks after the notice of termination has been issued.

Such a settlement often means that the employment relationship is terminated by mutual agreement in return for payment of a severance package. For these purely practical considerations, the payment of a severance package is therefore the rule. – Malicious tongues also say: the labor court urges the parties to reach a settlement with severance payment primarily because this saves the judges a lengthy procedure and the need to write a judgment. A quick termination of proceedings also looks good in the case statistics, and these play a not insignificant role in the question of whether a judge is promoted or not. But these are just rumors, of course.

d) And how much is the severance pay usually?

The amount of severance pay is always a matter of negotiation. A settlement with severance pay is only reached if both parties, i.e. employer and employee, agree on it. The court can urge the parties to reach a settlement, but it cannot force them to do so.

The amount of the settlement depends on how the parties assess their chances of success in the process. A rule of thumb is often: the severance payment is half a gross monthly salary per year of service. So if someone was employed by a company for 10 years and last earned €3,000 gross per month, the severance payment would be €15,000 gross.

However, as already mentioned, the decisive factor is the chances of success of the action for protection against dismissal. If the employee’s chances of success are low, for example because there is no protection against dismissal at all, then he or she cannot expect a severance payment in the amount of the rule of thumb. If, on the other hand, the dismissal is obviously unfounded, the employee has been employed at the company for a very long time and has poor chances of finding another job on the labor market, for example due to his age, the severance payment should be significantly higher than according to the rule of thumb. Of course, the financial situation of the company must also be taken into account. – In the end, it is a question of negotiating skill what amount is finally agreed upon.

2. Warning (Abmahnung)

A warning is not yet a termination, but often the first step in that direction. A termination for behavioral reasons, i.e. a termination due to misconduct on the part of the employee, usually requires that the employee has been properly warned at least once beforehand. What does such a proper warning look like?

a) The warning must make it sufficiently clear what (mis-)behavior the employer is not ready to tolerate. If the warning is about tardiness, it must or should state exactly when the employee was late and by how many minutes or hours. General terms such as “poor performance” are not sufficient. Rather, the warning must state precisely what poor performance the employer is accusing the employee of.

b) The warning must also make it clear to the employee that the employer considers the respective behavior to be a violation of the duties under the employment contract. Vague formulations such as “We do not like the fact that …” would certainly be counterproductive and insufficient in this context. The warning is intended to point out to the employee that his or her conduct is in breach of the contract or is considered by the employer to be in breach of the contract.

c) Above all, however, it must be clearly recognizable from the warning that the employee must expect concrete consequences under labor law, in particular termination, in the event of repetition.

d) A warning does not necessarily have to be in writing, but can also be issued verbally. There is no legal requirement for a written warning. From the point of view of evidence, however, a written warning is recommended in any case, at least in text form. I recommend that the employer have the employee confirm receipt of the warning in writing.

3. Notice of termination with the option of altered conditions of employment/Change Notice (Änderungskündigung)

a) Definition and purpose

While a “normal” notice of termination aims to end the employment relationship (so-called Beendigungskündigung), with a notice of termination with the option of altered conditions of employment,  the employer aims to change the working conditions, i.e., for example, a reduction in working hours and/or remuneration.

b) Statutory regulation

Section 2 of the Termination Protection Act defines or describes it as follows:

“If the employer terminates the employment relationship and, in connection with the termination, offers the employee the continuation of the employment relationship under altered working conditions, the employee may accept this offer subject to the proviso that the change in working conditions is not socially unjustified.”

A change notice is therefore the combination of termination and offer of continuation of the employment relationship under changed conditions. The latter must be described as precisely in the notice of change as in an employment contract.

c) How does an employee react?

As a rule, the appropriate reaction of the employee to a notice of change is to accept the offer of change with reservations and then to have it reviewed in an action for protection against change before the labor court as to whether the changes desired by the employer are objectively justified. If they are not, the employment relationship is continued under the old conditions. If, on the other hand, the employer’s request for change is justified, the new working conditions apply. During the proceedings, an amicable agreement in the form of a compromise is of course also possible.

By accepting the offer of change with reservations, the employee avoids losing his or her job (entirely). By having the offer of change reviewed by the court, he ensures that he will not be forced to do anything that he is not legally obligated to do.

4 Termination Agreement, Settlement Agreement (Aufhebungsvertrag/Abwicklungsvertrag)

a) Definition

Termination is a unilateral declaration by the employer or employee to terminate the employment relationship. A termination agreement, on the other hand, is the (mutual) agreement between the employer and the employee to terminate the employment relationship. If such a mutual agreement is reached after the employer has already given notice of termination, it is also referred to as „Abwicklungsvertrag“ ( winding-up agreement, literally translated). Otherwise, there is practically no difference between a termination agreement and a winding-up agreement.

b) Written form

Just as with a termination, a termination agreement must be in writing in accordance with § 623 of the German Civil Code (BGB). To be on the safe side, a winding-up agreement should also be concluded in writing.

c) Content, subject matter

The subject matter of a termination agreement is primarily the termination of the employment relationship at a certain point in time. This mutually agreed termination creates legal certainty. It avoids the uncertainty as to whether or not termination would be unlawful. This is usually advantageous for both parties.

As a rule, the employment relationship is terminated against payment of a severance package. The amount of this can be freely agreed – see also the article on “Severance pay”. However, the payment of severance pay is not mandatory. If, for example, there is an allegation of a serious breach of the employment contract by the employee, which could possibly also justify termination for cause with immediate effect, the agreement can also be that the employment relationship is only terminated “for operational reasons” and in compliance with the ordinary notice period, but then without severance payment.

Other important points to agree on: Payment of outstanding remuneration (e.g. commission, Christmas bonus), release from work in the period between the conclusion/signing of the termination agreement and the termination date, vacation compensation, work certificate, return of company car or other items if applicable, post-contractual non-competition clause if applicable, confidentiality, etc.

d) Blocking period for unemployment benefits (Sperrzeit beim ALG)

The conclusion of a termination agreement can lead to a blocking period for unemployment benefits (blocking period due to giving up the job and causing unemployment). The employer should inform the employee of this circumstance in writing, and the employee should seek legal advice regarding the details.

A blocking period can usually be avoided by the parties agreeing to terminate the employment relationship “at the instigation of the employer and for urgent operational reasons” during the conciliation hearing in the context of dismissal protection proceedings – or by means of a settlement recorded by the court outside the hearing within the meaning of Section 278 (6) of the German Code of Civil Procedure (ZPO). The content of such a settlement essentially corresponds to the content of an out-of-court termination agreement.

e) Rescission or revocation

A termination agreement can only be subsequently challenged under very narrow conditions. Revocation is generally not possible. Both parties are therefore well advised to think through the individual provisions in the termination agreement carefully and not to sign the agreement in haste.

5. Fixed-term employment contracts (Befristungen)

a) Definition

Normally, employment contracts are – or at least were in the past – concluded for an indefinite period of time. If you want to terminate them, you have to give notice. There are time limits for this, and often the employee also enjoys protection against dismissal under the Dismissal Protection Act.

However, no notice of termination is required if the employment contract is entered into for a specific period of time from the outset, i.e. if it is limited in time. In this case, it ends automatically on expiry of the term without the need for notice of termination. There is then also no protection against dismissal. On the one hand, this is bad for the employee, but on the other hand it should lead to more new hires.

b) Types of fixed term employment

A fixed term can be calendar-based, for example “for a period of one year” or “until 31.12.2020”. In addition, there is the so-called purpose limitation, for example for the period in which another employee is on maternity or parental leave. As already mentioned, fixed-term employment contracts expire at the end of the period for which they were entered into. An employment contract with a fixed purpose ends when the purpose has been achieved, but at the earliest 2 weeks after the employer has informed the employee in writing that the purpose has been achieved, e.g. the other employee is healthy again or has returned from parental leave.

Furthermore, a distinction is made between fixed-term contracts without an objective reason and fixed-term contracts with an objective reason. Such an objective reason is, for example, the substitution of another employee or a fixed term for testing purposes (see in detail § 14 of the Part-Time and Fixed-term Employment Act).

c) Admissibility

Fixed-term contracts are problematic because they circumvent the protection against dismissal to a certain extent. Therefore, there are limits to their permissibility. The calendar-based limitation of an employment contract without an objective reason is only permissible up to a duration of 2 years. However, it is permissible to initially limit the contract to 6 months and then to extend it later, but the limitation may only be for a total of 2 years and there may be a maximum of 3 extensions. A fixed-term contract is not permissible if an employment relationship has already existed with the same employer. Why is this so? Because the legislator wants to promote new hires.

d) Special Provisions

Special provisions apply if the employee has reached the age of 52 at the start of the fixed-term employment relationship (Section 14 (3) Part-Time and Fixed-term Employment Act). Deviations from the above regulations may also result from a collective agreement. There are also special provisions for fixed-term employment contracts with scientific and artistic staff. This is governed by the Act on Fixed-Term Employment Contracts in Science (Wissenschaftszeitvertragsgesetz).

e) Written form

Fixed-term employment contracts must be concluded in writing (Section 14 (4) Part-Time and Fixed-term Employment Act). Otherwise, an unlimited employment relationship is created.

f) And what are chain employment relationships (Kettenarbeitsverhältnisse)?

A chain employment relationship or a chain fixed-term employment relationship is understood to be the stringing together of several fixed-term employment contracts. Such a procedure may be an abuse of rights. This would result in an unlimited employment contract.

The problem of abuse of rights in the case of chain fixed-term contracts actually only arises in the case of fixed-term contracts for objective reasons. This is because calendar fixed-term contracts without a material reason may not exceed a period of 2 years by virtue of the law.

In contrast, there are no such statutory time limits for fixed-term employment contracts with a material reason. On the contrary, the wording of the law permits the succession of fixed-term employment contracts with a material reason without further ado. The only limit here is the (unwritten or general) prohibition of abuse of rights. When such an abuse of rights exists is determined by case law. As things stand at present, for example, a total term of employment of 6 years with a total of 9 extensions does not regularly constitute an abuse, but a term of more than 8 years and more than 12 extensions do. However, these are ultimately only indications, and – as is so often the case in employment law – it always depends on the specific individual case.

g) Possibility of legal action, judicial review

If the employee is of the opinion that a fixed-term contract is invalid, he or she can file a fixed-term control action or an action for the removal of a fixed term. In the course of these court proceedings, it is then determined whether the fixed-term employment relationship is legally effective or not. If the fixed term is invalid, then an unlimited employment relationship exists, which can only be terminated by notice of termination. Alternatively, the employer and the employee can, of course, agree by way of a settlement to terminate the employment relationship entirely in return for a severance payment. But this would be a matter of negotiation.

6. Transfer of undertakings, businesses or parts thereof (Betriebsübergang)

As a specialist attorney for labor law, one has to deal with the topic of transfer of businesses both on the employer’s side and on the employee’s side.

If one represents the employer, it is often a matter of structuring a planned transaction in such a way that the legal consequences of Section 613a of the German Civil Code (BGB) (transfer of business) are avoided as far as possible. And the employee often wants to know from his lawyer whether – contrary to the employer’s notification – a transfer of business may have taken place after all and what he should do in such a case.

It is therefore worthwhile to take a closer look at the topic of “transfer of business”.

a) Definition

The following example is an introduction: If Mr. Meyer, who owns all shares in Meyer GmbH, sells these shares to Mr. Mueller, then there is no transfer of business within the meaning of Sec. 613a BGB. Meyer GmbH is and remains the owner of the business. The employees remain employees of Meyer GmbH and their employment contracts continue to apply unchanged. In this constellation, therefore, Section 613a BGB is not required and does not apply. Professionals would say: Section 613a BGB does not apply in the case of a so-called share deal.

If, on the other hand, Meyer GmbH sells its tangible and intangible assets to Mueller GmbH, the situation is quite different. In this case, the employees of Meyer GmbH would suddenly be employed in a company which no longer has any operating assets. In this constellation, therefore, there is a need for a statutory regulation. This statutory regulation is § 613a BGB, which essentially stipulates that in such a case the employment relationships are also transferred to the acquirer (in the example, Mueller GmbH).

According to the law, a transfer of business within the meaning of § 613a BGB occurs when a business (or part of a business) is transferred to another owner by means of a legal transaction.

b) Overall view, individual criteria

Since the wording of the law does not provide much guidance on the question of whether a business has been transferred, extensive case law has developed in this regard.

Based on the type of business (production business or service business), the courts focus on whether the acquirer takes over the tangible and/or intangible assets of the business, i.e., business equipment, machinery, vehicles, premises, patents, know-how, customer relationships, orders, etc. The following may also be relevant: Does the acquirer change the work organization or not? Does he continue the activity immediately or is there a temporary interruption?

According to (recent) case law, the takeover of an (important) part of the workforce can also be an indication of a transfer of an undertaking, namely if the undertaking has few operating resources and is essentially characterized by its workforce (for example, cleaning or security services). This quickly leads to a transfer of operations, even if the acquirer brings along his own cleaning equipment and does not take over anything from the “predecessor”.

The decisive factor is not a single criterion alone, but rather an overall view of all circumstances and an evaluative consideration. This makes the legal assessment in individual cases sometimes difficult, but on the other hand also opens up structuring possibilities for the companies involved in the transaction and their lawyers.

c) Practical cases

A transfer of business can occur both in the case of a company purchase (asset deal) and in the case of outsourcing of individual operating departments, for example the canteen or logistics (warehouse). Merely a “pure succession of functions” is not sufficient.

Insourcing is also problematic, i.e. when an activity outsourced to an external service provider (e.g. logistics, cleaning, catering) is taken over again by the main company itself. In this case, Section 613a of the German Civil Code (BGB) quickly becomes an issue in the drafting of contracts between the companies involved and should be taken into account accordingly. It can be quite expensive if an entire workforce has to be taken over unplanned because § 613a BGB stipulates this.

d) Legal consequences

The primary legal consequence of a transfer of an undertaking is that the employment relationships are transferred to the acquirer of the undertaking. This takes place in the form in which they existed with the previous employer at the time of the transfer.

e) Right of objection

However, employees have a right of objection, i.e. they may object to the transfer of their employment relationships to the business acquirer. The period for exercising the right of objection is one month. In this case, they remain employees of the previous employer. Exercising the right of objection therefore does not constitute termination of the employment relationship by the employee, but has the effect (only) that he/she remains with the old employer and does not transfer to the new one.

Although Section 613a (4) of the German Civil Code (BGB) states that termination of the employment relationship by the previous employer or by the new owner “due to a transfer of business” is invalid, objecting employees must often nevertheless expect termination for operational reasons. This is because the transferor of a business regularly ceases or significantly reduces its activities, and in this case it may then also issue terminations for operational reasons in accordance with the general rules. An objection on the part of the employee must therefore be well considered.

f) Duty to inform

The previous employer or the new owner must properly inform the employees affected by a transfer of business. The details are set out in Section 613a (5) BGB.

Great importance should be attached to proper information. Why? Only proper information sets in motion the one-month period for exercising the right of objection. If the information is incorrect, the employee can still object to the transfer of his employment relationship much later than one month after the transfer of the business. A time limit is then only set by the so-called forfeiture.

g) And what about collective bargaining agreements?

In short: very complicated. It depends on whether and how the employee, previous employer and/or new employer are bound by collective bargaining agreements. The details can be found in Section 613a (1) sentences 2 and 3 BGB and in general principles of collective bargaining law. But this should be looked at more closely in the individual case.

7. Managing directors (Geschäftsführer)

a) Definition

When lawyers speak of the “managing director”, they mean the managing director of a GmbH, i.e. the legal representative body of this company (§ 35 GmbH Act). Not everyone who is referred to as a “member of the management” in corporate practice is therefore actually a managing director in the legal sense.

b) Appointment, dismissal

The GmbH managing director is appointed and dismissed by the shareholders’ meeting. Both must be entered in the Commercial Register. However, as the lawyers say, the entry in the commercial register is not constitutive, but only declaratory. This means that the register should always properly reflect who is and who is not a managing director. However, the position of managing director does not depend on the entry in the commercial register. On the other hand, third parties can generally rely on the accuracy of the commercial register.

c) Position of executive body (Organstellung) and service contract (Dienstvertrag), in particular dismissal/termination

To a certain extent, the managing director stands at the interface of corporate law and employment law or service contract law. A distinction is made between the position of the executive body under company law, which is established by the appointment on the one hand. And the service or employment relationship on the other. The latter is established by the conclusion of a managing director contract.

The same applies to termination. On the one hand, there is the termination of the executive position by the dismissal of the managing director under company law or by his resignation from office. However, this does not terminate the service or employment relationship. In order to terminate the latter, the managing director’s contract must be terminated.

If a GmbH wishes to part with its managing director, two things must therefore happen: Firstly, he must be dismissed from his position as a corporate body under company law, and secondly, the service or employment contract must be terminated. Both measures follow different rules. For example, the dismissal of the managing director as a representative body of the GmbH is in principle possible at any time (Sec. 38 GmbH Act). The employment contract, on the other hand, can only be terminated without notice at the end of its term or in compliance with the contractually agreed notice period or for good cause. It is therefore quite possible that a GmbH managing director can be dismissed immediately but not terminated until a much later date.

d) Is the managing director an employee at all?

The question as to whether a GmbH managing director is or can be an employee is answered in different ways. This is due to the following:

The general civil courts, i.e. the Federal Court of Justice (BGH) in the last instance, are responsible for legal disputes concerning the managing director’s position as a corporate body. Labor law issues, on the other hand, regularly belong before the labor courts. Their highest instance is the Federal Labor Court (BAG). And for social law issues, i.e. in particular the question of social insurance obligations, the social courts are responsible, first and foremost the Federal Social Court (BSG). And here it comes: The BGH, BAG and BSG do not agree on the question of whether a GmbH managing director is an employee or not, but in some cases hold different views. As a result, the question of whether a managing director is an employee or not must be assessed separately depending on the area of law. And even within one field of law, for example within labor law, different answers are possible.

e) The qualification of the managing director as an employee in the various areas of law

In any case, the following is certain:

Protection against dismissal: The German Dismissal Protection Act (Kündigungsschutzgesetz) does not, in principle, apply to the GmbH managing director. This follows from Sec. 14 (1) No. 1 KSchG.

Competent court for legal disputes: In principle, legal disputes between the managing director and the GmbH do not belong before the labor courts. This follows from Section 5 (1) sentence 3 of the Labor Court Act. Instead, as a rule, the competent court is the Regional Court, Chamber for Commercial Matters (Section 95 (1) No. 4a GVG).

But be careful: this assessment can change if a managing director is dismissed from his position as a corporate body under company law. Then he is no longer a managing director. The situation with regard to protection against dismissal and court jurisdiction in such a case has already been the subject of many proceedings and should be carefully examined in each individual case.

f) Social security

Social insurance obligation: The social courts regularly regard the so-called third-party managing director as an employee subject to social insurance. A third-party managing director is a person who is the managing director but not at the same time a shareholder of the GmbH. However, the shareholder managing director can also be subject to social insurance contributions. This is the case, for example, if he or she owns less than 50% of the shares in the GmbH and is bound by instructions to the company or another managing director. This must also be examined more closely in each individual case.

g) Vacation, sickness, etc.

Vacation, continued payment in the event of illness, etc.: Only employees within the meaning of the case law of the Federal Labor Court are entitled to paid vacation and continued remuneration in the event of illness. The Federal Labor Court stands between the BGH and the BSG in its assessment of the question of whether a managing director can be an employee. According to the case law of the Federal Labor Court, a managing director is (only) an employee if he cannot decide on the time and place of his work performance on his own responsibility, i.e. if the managing director is quite strongly bound by instructions.

Since the assessment of this question depends on valuations and often cannot be answered unambiguously at the beginning of the contractual relationship, it is advisable to expressly regulate issues such as vacation, continued payment of remuneration in the event of illness, etc. in the managing director’s contract. In this case, what has been contractually agreed applies, so that the qualification under labor law is no longer relevant.

8. Termination (Kündigung)

a) First things first: Written form!

It cannot be said often enough: Every notice of termination must be in writing (§§ 623, 126 BGB). Fax, e-mail or even WhatsApp are not sufficient.

Sounds simple, but take the following, somewhat contrived case:

Employee (AN) works in the small business of the employer (AG). Since the employee is annoyed with the employer, he slaps him two times in front of the whole team, spits on him and insults him. And at the end he rams a pocket knife into his stomach. The employer then says to the employee in a dying voice: “How dare you, I never want to see you here again. You are dismissed”. He is then taken to hospital. He survives. From his hospital bed, he writes to the employee from his cell phone via e-mail and WhatsApp that the employee is hereby dismissed without notice.

Is this dismissal effective?

No, it is not, it is rather invalid because the legal written form of § 126 BGB has not been observed. Fax, e-mail or even WhatsApp are not sufficient.

It does not matter how obviously “justified” a termination may be. If the statutory written form is not observed, then it is invalid.

(By the way: The employee can still raise this objection of the invalidity of the form of the termination after the expiry of the 3-week period, which otherwise applies to the action for protection against dismissal).

b) Receipt of the notice of termination

The notice of termination must be received by the recipient (employer or employee) in due time. Therefore, it does not matter when the employer (or vice versa the employee) sends the letter of termination. The date of the postmark is also not decisive. Rather, the only decisive factor is when the notice of termination reaches the recipient.

An employer’s notice of termination is received by the employee if it has reached the employee’s sphere of influence in such a way that the employee can be expected to take note of it under normal circumstances.

Simple example: If the letter of termination is delivered to the employee’s mailbox on the morning of the last day of the notice period, then the termination has regularly been received in good time. If, on the other hand, the employer does not drop the letter of termination in the employee’s mailbox until 9:00 p.m. in the evening, then it is generally assumed that it was received – late – on the next (working) day.

And what if the employer rings the employee’s doorbell and tells him that he has just dropped a letter of termination into his mailbox? – If the employee then immediately takes the letter of termination out of the mailbox, it is still deemed to have been received on that day.

And what happens if the employee replies to the employer that he is watching “Tatort” (CSI) right now and does not feel like emptying his mailbox? – Exciting, isn’t it?

Or let’s take the following example, lawyers like to do this: The employee is eating pizza with his wife at the Italian restaurant at 9:00 p.m.. The employer comes and puts a letter of termination on the employee’s desk. Receipt? – If the employee opens and reads the letter, undoubtedly yes. And if the employee tears the envelope without opening it, with the remark: “Don’t you see that you are disturbing here?”… – Yes, sometimes labor law can be quite amusing!

c) Termination without notice (with immediate effect)

An extraordinary termination without notice is only possible for (good) cause (§ 626 BGB). What constitutes (good) cause is regularly decided on a case-by-case basis. There is extensive case law on this subject.

What is particularly important to me at this point, however, is the following: Extraordinary termination for cause can only be given within 2 weeks. In accordance with Section 626 (2) of the German Civil Code (BGB), this period begins at the point in time at which the party entitled to give notice (i.e. the employer, for example) becomes aware of the facts that are decisive for the termination. If an employer wishes to terminate an employment contract for cause with immediate effect, it is therefore important not to wait too long, otherwise it will be assumed that the cause could not have been so important after all.

d) Is a termination during an employee’s illness permissible?

Some people think that the employer is not allowed to give notice to the employee while the employee is sick. But this is wrong. In fact, on the contrary, it can be said that sometimes the very illness can be a reason for termination.

Let me briefly explain this: Within the framework of ordinary termination, there are behavior-related, person-related and operational reasons for termination. This is stated in Section 1 of the Dismissal Protection Act. A person-related reason for termination is, for example, a long-term illness or many short-term illnesses, whereby the prerequisite for termination in each case is a negative health prognosis. A simple illness is therefore not a reason for termination, but on the other hand does not preclude termination for other reasons.

The employer does not have to wait until the employee is back at work before giving notice. The employer could even visit the employee in the hospital and give him the letter of termination on this occasion – even if this is of course not particularly “caring”.

e) Does protection against dismissal also exist in small companies?

In simple terms, the Dismissal Protection Act does not apply in companies that usually employ 10 or fewer employees. It is therefore necessary to have more than 10 employees, not including trainees. The details can be found in Section 23 of the Dismissal Protection Act. It also states whether and how part-time employees are included in the calculation.

So keep in mind that the Dismissal Protection Act does not apply in small companies with 10 or fewer employees.

If the Dismissal Protection Act applies, any (ordinary) dismissal must be “socially justified”. In other words, the employer needs a reason for termination that lies either in the employee’s behavior or person, or a reason for termination for operational reasons.

If, on the other hand, the Dismissal Protection Act does not apply, i.e. in a so-called small business, then the employer does not generally need a reason for termination. However, the termination must not be retaliatory or otherwise contrary to good faith (§§ 138, 242 BGB) or violate a statutory prohibition (§ 134 BGB). But the requirements for a termination to be against good faith are very high. As a rule, therefore, employees in small companies have a poor chance of defending themselves against a termination.

A possible argumentation approach for the employee lawyer can sometimes be that the employer has several businesses and that the number of employees in the various businesses must be added together. This then opens up some room for negotiation in the conciliation hearing.

f) Is that all there is to the topic of “termination”?

No, no and no again. There are a large number of questions on the subject of termination, which cannot be dealt with in full here. This should be discussed in more detail in the context of a consultation in the individual case.

To be continued

Dr. Wolfgang Gottwald
Rechtsanwalt/Attorney at Law

DR. GOTTWALD
Rechtsanwalt
Attorney at Law

Leopoldstraße 51
80802 München

Tel.: 089/383 293-10
Fax: 089/383 293-13

w.gottwald@kanzlei-dr-gottwald.de