Grounds for Termination
Under German law, the employment relationship can be terminated by mutual consent, by expiry of a fixed-term contract or by notice given by one of the two parties. As to the general protection, the freedom of the employer to dismiss an employee is substantially restricted. A termination is justified only if it is based on reasons related to: 1) the person; 2) the conduct of the employee; or 3) urgent operational requirements which preclude the continued employment of the employee in the establishment.
If the dismissals form part of a so-called mass redundancy of a certain scale; e.g. prior notice must be given to the competent employment agency and a violation of this formality will result in dismissals being void. In case of a so-called operational change of business such as the closure of business, collective dismissals additionally require the negotiation of a social plan) and the attempt to negotiate a reconciliation of interests with the works council if the undertaking employs more than 20 employees. Certain alleviations exist during the first four years of a company’s existence
A termination is justified only if it is based on reasons related to: 1) the person; 2) the conduct of the employee; or 3) urgent operational requirements which preclude the continued employment of the employee in the undertaking.
Is severance pay required?
Severance payments are paid at the end of employment in the following cases: 1) the employment agreement provides for a contractual severance payment (which is very unusual); 2) the parties agree upon a severance payment (in or out of court) to settle a termination dispute; 3) the court dissolves the employment against payment of severance if it finds that despite the invalidity of the termination, continued employment would be intolerable either for the employer or the employee; or 4) a social plan concluded with the works council in connection with a collective redundancy provides for severance payments.
Is a Separation Agreement required or considered best practice?
Due to the high standards of protection against dismissal, it is not uncommon for the employment to be terminated by contract between the employer and employee, i.e. a separation agreement. The employer will generally offer a severance payment to induce the employee to accept the termination by agreement.
Remedies for employee seeking to challenge wrongful termination
As there is generally no statutory entitlement to severance payments in Germany, the employee can only claim reinstatement. In practice, most dismissal protection proceedings are settled in exchange for a severance payment.
There is no general legislation covering whistleblowing in Germany. In general, employees are obliged to report any kind of misconduct within the company as part of their ancillary employment duties (so called duties of good faith). In certain business sectors, special legal provisions exist, such as e.g. in the financial services sector. Currently, the law implementing the European Directive on the Protection of Trade Secrets provides for legal protection for whistleblowers if they aim at protecting the general public interest. The law is expected to come into force early in 2019.
Whistleblowers do not enjoy special protection against dismissals but are subject to the general rules, which are rather strict, and are decided on the basis of the question of whether the whistleblowing was “proportionate”, i.e. that the employee should first report a misconduct internally before going public or to authorities.