Employment contracts in Germany
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How To Terminate an Employee (And What Not To Do)?

When terminating an employee, it is crucial to handle the process in a professional and fundamental manner. It's not only essential to know what steps to take during the termination, but also to understand how to approach the sensitive task.

In Germany, terminating an employee's contract is subject to strict labor laws and regulations aimed at protecting the rights of employees. If an employer wants to terminate an employee, they must follow certain legal procedures. Please note that labor laws may evolve, and it's essential to consult with legal experts or local authorities for the most up-to-date information. Here are the general steps an employer must take to terminate an employee in Germany:

  1. Notice Period: Generally, an employer must provide a notice period before terminating an employment contract. The notice period duration depends on the employee's length of service with the company and is typically specified in the employment contract or collective bargaining agreement. The minimum notice periods under German law are as follows:

    • Two weeks if the employment has lasted for less than two years.
    • One month if the employment has lasted between two and five years.
    • Two months if the employment has lasted between five and eight years.
    • Three months if the employment has lasted between eight and ten years.
    • Four months if the employment has lasted ten years or more.

    In some cases, an employer may be able to terminate an employee without notice if there is a valid reason, such as gross misconduct.

  2. Termination Grounds: Termination must be based on valid grounds allowed by law, such as the employee's poor performance, business-related reasons (e.g., downsizing or restructuring), or personal reasons (e.g., long-term illness or misconduct). The employer must be able to justify the reason for termination if it is challenged.

  3. Termination Letter: The termination must be communicated in writing, preferably via a signed and dated termination letter. The letter should clearly state the reason for termination and the effective date of termination. The managing director must sign it and send it to the employee or hand it out in person. The notice period must be observed. Terminations via email are legally not allowed and have no legal effect.

  4. Dismissal Protection: Some employees are protected against arbitrary dismissal, particularly those who have been employed for a certain period or work in companies with a specific number of employees. For employees protected under the Dismissal Protection Act (Kündigungsschutzgesetz), there are additional requirements that the employer must meet to terminate the contract lawfully.

  5. Consultation with Works Council: If there is a works council representing the employees, the employer may need to inform and consult with them before terminating an employee.

  6. Severance Pay: In some cases, an employee may be entitled to severance pay, especially if the termination is deemed unfair or if it is specified in the employment contract or collective bargaining agreement.

  7. Social Security and Tax Considerations: Employers must also comply with social security and tax regulations when terminating employees, including providing necessary paperwork and information to relevant authorities.

 It's crucial for employers to adhere to these legal requirements to avoid potential legal challenges or labor disputes. Again, it's advisable to consult with a legal professional or employment expert familiar with current German labor laws for specific guidance in a particular situation.

Types of termination of employment

In Germany, various types of terminations of employment can be effective for different parties involved. These terminations are subject to specific legal requirements and may have distinct implications for both the employer and the employee. Here is a reformulated overview of the types of terminations and their effectiveness:

  1. Regular Termination (Effective for the Employer and Employee): A regular termination is a common form of termination that can be initiated by either the employer or the employee. It requires adherence to the applicable notice periods specified in the employment contract or collective bargaining agreement. The termination is effective for both parties and marks the end of the employment relationship.

  2. Termination Without Notice (Effective for the Employer): Termination without notice can be carried out by the employer under exceptional circumstances, such as severe misconduct by the employee. The employer must have a valid reason for immediate termination, and it is subject to scrutiny by the labor courts. If the termination is deemed valid, it is effective for the employer, while the employee's employment ends abruptly.

  3. Dismissal Protection Act (Kündigungsschutzgesetz) Cases (Effective for the Employee): Employees who are protected under the Dismissal Protection Act have additional legal rights and can challenge their termination if they believe it is unjustified. In such cases, the termination might not be effective for the employee until it is confirmed as valid by the labor courts.

  4. Termination by Mutual Agreement (Effective for Both Parties): Employers and employees can agree to terminate the employment contract by mutual agreement. This method avoids potential disputes and legal challenges. The termination becomes effective for both parties when they sign the mutual termination agreement.

  5. Termination During Probation Period (Effective for the Employer): If an employee is still within the probationary period, the employer can terminate their employment without needing a specific reason. This type of termination is effective for the employer and ends the employment relationship with immediate effect.

  6. Termination Due to Business Reasons (Effective for the Employer): In cases of business-related terminations, such as restructuring or downsizing, the employer can terminate employees based on operational needs. The effectiveness of these terminations is for the employer, while employees lose their jobs due to business reasons.

  7. Termination During Parental Leave (Effective for the Employee): It is generally prohibited to terminate an employee while they are on parental leave. If an employer attempts to terminate an employee during this time, the termination is not effective, and the employee retains their employment rights.

It's essential to remember that the effectiveness of each termination depends on strict compliance with German labor laws and regulations. Employers must follow the legal procedures carefully to avoid potential legal challenges and ensure a fair and lawful termination process. Employees, on the other hand, have the right to seek legal recourse if they believe their termination was unjust or unlawful.

 What to not do when you terminate an employee in Germany?

  1. Don't Terminate Without a Valid Reason: Make sure you have a legitimate reason for terminating the employee, such as poor performance, misconduct, or restructuring. Arbitrary or discriminatory terminations can lead to legal issues.

  2. Don't Terminate Without Notice (Except for Immediate Termination): In most cases, you must provide notice before terminating an employee. Immediate termination without notice is only allowed for severe misconduct, such as theft, violence, or a serious breach of trust.

  3. Don't Terminate While Employee is on Protected Leave: It is unlawful to terminate an employee while they are on certain types of protected leave, such as maternity leave, parental leave, or sick leave.

  4. Don't Retaliate or Discriminate: Do not terminate an employee in retaliation for asserting their legal rights, whistleblowing, or engaging in protected activities. Also, avoid any form of discrimination, including age, gender, race, religion, or disability-based discrimination.

  5. Don't Ignore Works Council Involvement: If your company has a works council, involve them in the termination process. Ignoring the works council's role can lead to legal complications.

  6. Don't Skip the Consultation Process: In some cases, you may need to consult with the employee before finalizing the termination decision. Skipping this step can result in legal issues.

  7. Don't Forget to Document Performance Issues: Proper documentation is crucial in any termination process. Keep detailed records of performance issues, disciplinary actions, and the reasons for termination.

  8. Don't Make Promises You Can't Keep: Avoid making promises to the employee during the termination process that you cannot fulfill. For example, promising a positive reference when you can't provide one.

  9. Don't Delay Payment of Final Dues: Ensure that all outstanding payments, such as salary, accrued vacation days, and any severance pay, are made on time and in compliance with the law.

  10. Don't Violate Privacy: Respect the employee's privacy rights during the termination process. Avoid discussing sensitive details about the termination with other employees or outsiders.

  11. Don't Neglect Providing a Written Reference: If the terminated employee requests a written reference, ensure that it is accurate and fair, even if it is a simple confirmation of their employment details.

  12. Don't Use Coercion to Obtain Resignation: Forcing an employee to resign under duress is illegal and can be challenged in court.

Remember, labor laws and regulations can be complex, and they may change over time. To ensure a smooth and legally compliant termination process, seek advice from legal professionals or human resources experts familiar with German employment law. Being transparent, fair, and respectful throughout the termination process can help maintain a positive employer brand and reduce potential legal risks.