A contract of employment can be terminated by the employer or the employee. Both parties have to observe the statutory notification periods. Termination of employment requires written form (paper form). Electronic termination (e.g. via email) is not possible. The German Employment Protection Act (Kündigungsschutzgesetz) establishes certain rules for terminations, especially with regard to specific justifying reasons.
The Employment Protection Act only applies to companies with a staff of more than ten employees and with respect to continuous employment relationships of more than six months in the same company. If these conditions do not apply, employers generally have a right to terminate employment contracts within statutory notice periods.
Reasons for Termination
Where the Employment Protection Act is applicable to an employment relationship (see above), a termination by an employer must be justified by one of the following reasons:
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Termination for personal reasons (e.g long-term illness with a negative prognosis or an alcohol or drug addiction with no reasonable prospect of successful treatment)
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Termination for conduct-related reasons (e.g. repeated lateness for work, unjustified refusal to perform certain work, criminals acts or violence at work)
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Termination for operational reasons (especially if the employee’s job is rendered dispensable due to changes in the business organization such as plant closure, restructuring or insufficient work due to a shortage of orders)
However, a termination must always remain an option of last resort. Less severe options, such as redeployment of the employee, have to be considered prior to termination. A termination for conduct-related reasons generally requires a prior written warning.
In the case of terminations for operational reasons, the business decision to cut back jobs under these circumstances is only limited reviewable by labor courts. Before terminating an employee for operational reasons, the employer is obliged to apply certain social criteria in order to determine which employees are to be terminated.
Exemptions
Employees essential for the company (with special knowledge, skills, achievements or to secure a balanced personnel structure) can be exempted from the social criteria assessment.
Notification Periods
When terminating permanent contracts of employment, certain notice periods are required by law. The determination of the minimum statutory period depends on whether the employee or employer is seeking to terminate the contract.
Employer and employee usually agree on a probation period of up to six months, during which either side may terminate the employment with only two weeks notice. In other cases, an employee must submit a notice with a minimum notice period of four weeks, effective either on the 15th or end of a calendar month.
For the employer, the minimum notice period depends on the duration of employment. After the probationary period of a new employment contract has ended, the initial notice period is four weeks to the 15th or to the end of a calendar month. This continuously increases in several steps to seven months after 20 years of job tenure in the same company.
Individual notice periods
Individual notice periods can be agreed upon, but these must comply with minimum statutory notice period requirements. Notice periods for the employee must not be longer than for the employer. Every notice of termination must always be issued in writing - notice of termination in electronic form is insufficient.
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.
Unlawful working
Immediate termination is only effective if the terminating party terminates the employment relationship within two weeks after obtaining knowledge of the reasons.
