Termination of Employment

It may become necessary for an employer to terminate a contract of employment for a variety of reasons.

In the case of a fixed-term contract, the end of the employment period is contractually agreed from the outset. Therefore, this type of contract is a particularly good choice for young companies.

In the case of permanent contracts of employment, certain notice periods are required by law.

After the trial period of a new employment contract has ended, the initial notice period is 4 weeks. This increases to 7 months after 20 years of job tenure in the same company.

Individual notice periods can be agreed upon, but these must comply with minimum statutory notice periods. The determination of the minimum statutory period depends on whether the employee or employer is seeking to terminate the contract:

An employee must submit a notice with a minimum notice period of 4 weeks, effective either on the 15th or on the end of the month.

For the employer the minimum notice period depends on the duration of employment:

Termination of Employment: Notification Periods for Employers

Under exceptional circumstances, an immediate termination of contract may be possible.

Every notice of termination must always be issued in writing; electronic form is insufficient.

Special regulations exist to protect recent mothers, mothers-to-be, and severely disabled persons from unjustified dismissal.

Employment Protection Act

The Employment Protection Act establishes certain rules protecting employees from socially unfair regular dismissals (exceptional immediate dismissals are not governed by the act).

The Employment Protection Act applies only to:

• Continuous employment relationships of more than 6 months in the same company,
• Companies with a staff of more than 10 employees.

If these conditions do not apply, employers generally have an unfettered right to terminate employment contracts within the statutory notice periods set out in the German Civil Code.

The rules on dismissal protection in the act are not applicable to senior executives of a company vested with the power of general representation.

A dismissal is socially unfair if it cannot be justified by:

• Reasons regarding the personal characteristics or conduct of the dismissed employee
• Necessity caused by pressing operational reasons (business reasons)

Dismissal for Personal Reasons

If employees are not physically or mentally suited to their job in the long term, termination is possible if the burden on the company is unreasonable.

Justifiable reasons include long-term illness with a negative prognosis, or an alcohol or drug addiction with no reasonable perspective for successful treatment.

However, employers must first implement reasonable stop-gap measures, such as staff reorganization or the hiring of temporary staff.

Dismissal for Conduct-Related Reasons

A conduct-related dismissal may be founded on significant inappropriate conduct such as:

• Repeated lateness for work
• Refusal to perform certain work
• Repeated unapproved private use of the Internet despite prior prohibition
• Unapproved vacation
• Penal offenses in the course of work,
• "Whistle-blowing"

If such conduct occurs the employer is obligated to issue a written warning to the employee, specifically pointing out the misconduct in question, and stating that any repetition may result in dismissal.

Termination without prior warning is possible in cases of serious infringements (e.g. an infringement of the ban on competition), or where the employee demonstrates that he or she will not adjust his or her conduct in the future.

Dismissal for Business Reasons

Termination for business-related reasons may be permitted if the employee’s job is rendered dispensable due to changes in the business organization such as:

• Plant closure
• Restructuring
• Insufficient work due to a shortage of orders

The entrepreneurial decision to cut back jobs under these circumstances is generally binding for labor courts. However, dismissals may be rendered invalid if the works council raises a justified objection, such as that the employee could reasonably be employed at another workplace within the same company.

Where the Employment Protection Act applies, a social selection procedure has to be applied in order to establish which of a number of employees holding comparable jobs are to be dismissed. "Social criteria" such as job tenure, age, maintenance obligations and disability must be taken into account.

Employees whose continued employment is essential for the company due to their special knowledge, skills, or achievements, or with regard to a balanced personnel structure, are exempt from this social criteria assessment.

Extraordinary ("Immediate") Termination

Immediate termination of employment may be considered in cases of serious misconduct rendering it unacceptable for either party to continue the employment relationship.

It is not sufficient for the termination be regarded as necessary, it must be immediately imperative. Accordingly, the legal period of notice does not apply in these cases.

Exemplary reasons for the employer:

• Continued non-performance of agreed work
• Disturbance of the general working environment
• Theft
• Disclosure of sensitive information
• Non-authorized competitive engagement

Exemplary reasons for the employee:

• Non-payment of wages
• Unlawful working

Immediate termination is only effective if the terminating party dissolves the employment within 2 weeks after the reasons for termination became known.

Other Ways to Terminate Employment

• Termination for Change of Contract: A contract can be lawfully terminated in order to set up a new contract with modified terms and conditions.
• Mutual Agreement (by both parties) A mutual cancellation agreement might require a compensation deal.