Termination of an employment contract in Germany: What are your rights?

Can your employment contract be terminated without a reason? What does it mean when you sign a termination agreement? How much time do you have to find a new job or take legal action? Carina Senf from Rotwang Law answers some of the most important questions about dismissals in Germany.

Losing your job is never easy. But being immersed in an unfamiliar legal system, facing contracts and documents in dense, complicated German, and struggling to find legal advice in your native language all combine to make it an even more stressful experience.

To help you effectively handle the situation and get clued up on your rights in the case of having your employment contract terminated, here are answers to some of the most important questions. 

What is the difference between ordinary and extraordinary termination?

One of the first things you need to know about termination of employment contracts in Germany is that there are two primary types of dismissal: ordinary and extraordinary terminations:

• Ordinary termination terminates an employment relationship in accordance with statutory or contractual regulations. The notice period and formal regulations must be observed. 
• Extraordinary dismissal requires an important reason. If such an important reason exists, the employment relationship can be terminated immediately - without notice.

If you have received a termination without notice, it is best to contact a lawyer immediately, because rapid action is particularly important here. As a rule, extraordinary termination also means a blocking period for unemployment benefits and can threaten one's financial stability. 

What requirements does an employer need to comply with when terminating a contract?

It’s always important to check whether certain legal requirements for terminations have been fulfilled by your company.

For instance, the termination must be signed by hand, by a person authorised to give notice. This is usually the managing director. The notice of termination can be delivered personally, placed in your mailbox or sent by registered mail. If your employer has only given you the notice verbally, or sent it to you by text message or email, the notice is invalid. 

As a rule, the statutory notice period applies, as stipulated in Section 622 of the German Civil Code (BGB). The statutory notice period varies according to how long the employee has worked for the company. However, employers and employees may agree on different, longer notice periods in the individual contract. If the employee is on probation, notice of termination can be given by either party during this time with a much shorter notice period - but at least two weeks.  

Can you be terminated "with no reason"?

If you work for a small company or are still in the first six months of your employment (known as the “waiting period”) you have no statutory protection against dismissal. Your company only needs to comply with the statutory notice period and other formal requirements.

However, if you work for a company with more than 10 employees and have already completed the first six months of employment, then there must be a valid reason for the termination - although the employer does not have to state the reason when giving notice of termination.

Legally approved reasons for termination

Labour law provides that ordinary notice of termination may be given for operational, personal and behavioural reasons:

• An operation reason might mean that the company is restructuring or outsourcing to maintain operations.
• A personal reason means the employer sees the reason for the termination in the employee’s character (for instance, they might be constantly absent due to illness, in a way that the company cannot reasonably be expected to accept).
• A behavioural reason usually revolves around the employee’s conduct, for instance, if they have been accused of something like theft or harassment.

It is particularly important to seek advice from an employment law attorney if an employee is terminated for reasons of conduct, as this could result in the entitlement to unemployment benefits being forfeited or only starting to run after a blocking period.

All of these reasons have to fulfil very high legal requirements in Germany in order for the termination to be considered permissible. In many cases, the dismissed employee may be able to fight the termination on these points by proving in a court of law that the employer hasn't complied with requirements.

In any case, the following always applies: Report to the employment agency immediately after receiving notice of termination, and seek legal advice. 

Am I entitled to severance pay?

In order to circumvent notice periods, employers sometimes offer severance payments to dismissed employees. Contrary to what many believe, there is usually no legal entitlement to severance pay. As tempting as these offers may seem at first glance, they can have a negative impact, sometimes blocking the recipient from receiving unemployment benefits and presenting tax disadvantages.

Companies also often use severance payments as part of the termination agreement, and make the severance pay conditional on not taking the case to the labour court. By accepting the payment, you often waive your right to contest the dismissal. You could choose to play your own negotiating position to get a better offer.  

What should I look out for in termination agreements?

On top of offering you a sometimes substantial severance package, termination agreements are often used as a means of exerting pressure on employees in other ways.

Sometimes they are combined with a changed (shorter) notice period, or sometimes they are intended to encourage the employee to leave the company voluntarily. In the case of older employees who could be subject to a long notice period, the termination agreement is sometimes intended to circumvent this notice period.

Even if you feel pressured when your employer presents you with a termination agreement, you should act prudently. After all, once you have signed, there is no turning back. 

What happens to my Blue Card in the event of termination?

For employees who have received an initial temporary residence permit with the Blue Card for the purpose of taking up gainful employment, further questions arise when employment relationships are terminated. If you have an EU Blue Card, you are obliged to notify your local Foreigners’ Office if your employment is terminated.

For the time being, your residence permit remains valid. The Foreigners’ Office may, at its own discretion, set a subsequent time limit for you to find a new job. This is usually six months.

If you have paid in for the qualifying period (usually six months), you usually are entitled to employment benefits while you search for a new job - except in certain circumstances, for instance in the case of extraordinary terminations.

If you are in possession of the Blue Card and have been dismissed with short notice, for you it is often a question of "more time" and not "more money". That is why it is best in this situation to seek legal advice.

In need of legal advice following a termination? Rotwang Law specialises in employment law in Berlin, and is experienced in advising clients who have EU Blue Cards and need legal representation in termination situations. Your first consultation call is free. In addition to German, they can advise you in English, Spanish, Portuguese and Arabic.