Dismissal for misconduct: Requirements and examples

An employer can terminate an employee for “misconduct” if the employee has seriously violated his contractual duties. Misconduct can occur in different areas – for example, in work performance (such as persistent lateness). However, the legal threshold for a valid conduct-related dismissal is high, and in almost all cases a prior written warning is required. This article explains the legal requirements, the effects on unemployment benefits and severance pay – and what you should do if you receive a dismissal for misconduct.

Key takeaways:

• High bar: Courts require a serious and culpable breach plus a prior warning in most cases, a negative prognosis, and a proportionate employer response. Without these, dismissal for misconduct is often invalid.
• Warning first (usually): A valid warning must precisely describe the breach and consequences. It can be skipped only if no behavior change is expected or the breach is obviously intolerable (e.g., theft).
• Balancing of interests matters: Judges weigh severity, tenure, past conduct, and alternatives. Many misconduct dismissals fail because milder measures (warning, transfer) were possible.
• Severance is negotiable: There’s no automatic right to severance, but employees often negotiate a package if the dismissal looks shaky and the parties prefer to settle.
• Invalidity: The courts apply strict standards. Without a serious culpable breach, a proper warning, and a fair balancing of interests, a dismissal for misconduct is usually invalid – especially in the case of summary (immediate) dismissal.

What is a dismissal for “misconduct”?

A dismissal for misconduct is one of the three dismissal types allowed under the German Protection Against Dismissal Act (Kündigungsschutzgesetz, KSchG). Roughly 20 % of all terminations fall into this category. Unlike a business-related dismissal (economic reasons) or a capability-based dismissal (e.g., lasting illness), a misconduct dismissal is based on behaviour the employee could have avoided.

In short:

• Capability-based: employee disturbs operations but cannot act differently.
• Misconduct-based: employee disturbs operations although they could act differently.

Requirements for a lawful dismissal for misconduct

The Protection Against Dismissal Act (KSchG) applies only if the employee has at least six months’ service and the company employs more than ten people (no “small business exemption”). If the Act applies, the employer must prove all of the following:

1. Serious breach of contractual duty the employee is responsible for.
2. Negative future prognosis (risk of repetition).
3. Prior warning (Abmahnung), unless an exception applies.
4. No milder measure available (e.g., transfer, final warning).
5. Interests weighed in favour of the employer (proportionality test).

Failing one element usually makes the dismissal invalid. In more detail: 

Serious breach of duty

Courts group breaches into four areas:

• Performance (lateness, unexcused absence, refusing tasks, sustained underperformance)
• Workplace order (disruptive behavior, harassment, alcohol at work depending on role/risk)
• Trust (theft, fraud, time-keeping fraud)
• Ancillary duties (duty to report sickness, confidentiality, conflict-of-interest rules)

Underperformance (“low performance”). Employer dissatisfaction alone is not enough. The employer must show a significant, blameworthy deviation from comparable colleagues over a representative period. If the employer cannot prove “can but won’t,” dismissal is likely to fail.

Performance-related breaches

Dismissals for performance-related breaches are quite common. Typical examples include unjustified absence, failing to show up for work, repeated lateness, or general underperformance (“low performance”). These breaches are usually clear-cut: not showing up or being late again and again is an obvious violation of contractual duties. If it happens often enough, it will eventually count as “serious.” But that alone does not make the dismissal valid. Courts still examine whether the employer issued a proper warning, weighed the interests of both sides, and considered milder measures.

Things become more complex with alleged low performance. Mere dissatisfaction with the employee’s output is not enough. A misconduct-based dismissal requires a concrete and provable breach of duty. The employer must show that the employee could have performed better but did not. If the employer cannot prove this, the employee has strong chances of winning a dismissal protection claim in court.

Example: Low performance case: An assembly worker produced 35 % more defective parts than comparable colleagues over nine months. The employer warned him twice with concrete error statistics. Only after no improvement occurred did the court accept dismissal as proportionate. In most cases, however, employers fail to show such detailed evidence, and the dismissal is overturned.

Performance Improvement Plans (PIP)

Performance Improvement Plans (PIPs) are now a common step before employers try to dismiss someone for “low performance.” On paper, a PIP is a support tool: it sets specific targets the employee is supposed to meet within a fixed timeframe. In reality, many companies use PIPs to build a written record that can later be used to justify termination. If the goals are missed – even when they were unrealistic – the employer often treats the PIP as “proof” of poor performance.

A sudden negative review plus a PIP is usually a red flag that the employer is preparing a dismissal, not offering help. Failing a PIP alone is not enough for a valid misconduct dismissal, because the legal threshold is much higher. But in court, a PIP can still be used as evidence unless you challenge it early. Important to know: employees cannot be forced to sign or “agree” to a PIP. Refusing to sign does not count as misconduct.

Breaches of workplace rules

A disruption of workplace order usually concerns behaviour toward colleagues or customers, such as bullying or consuming alcohol at work. Courts apply strict standards here as well. Case law examples on breaches of workplace rules include: 

• Disrespect toward colleagues: An employee repeatedly stated in video calls that he would handle his supervisor’s “nonsense tasks” however he wanted, or the supervisors should “just do them themselves.” The court accepted this as a breach of duty.² 
• Serious insults toward customers or colleagues: These can amount to a substantial violation of contractual duties and often justify dismissal. In one case, the Higher Regional Court of Düsseldorf upheld a dismissal after an employee called his boss a “lazy pig.”³ Even in workplaces with a rough tone, such remarks can be risky.
• But not every insult leads to a valid dismissal: A salesperson called a customer a “stupid bum.” Because the situation was tense and the employee apologised immediately, the court rejected the dismissal as disproportionate.⁴
• Insult in affect: An employee severely insulted a co-worker, but the court still found the dismissal invalid because the employee showed remorse, acted in the heat of the moment, and had a long, unblemished record.⁵

Off-duty behaviour is irrelevant (mostly)

Conduct outside the workplace generally does not count as a breach of workplace rules. Courts are very employee-friendly here, even in extreme cases. Courts have ruled several times that even Nazi slogans are not automatically grounds for dismissal.⁶ Only if the employer can prove that the behaviour disrupts workplace peace or violates loyalty obligations can a dismissal be justified. Criminal relevance alone does not matter; what counts is whether there is a breach of contractual duty.

However, courts are much stricter in ideology-driven organisations and in the public sector, especially for civil servants, who must also behave in line with constitutional values off duty.

Breaches of trust

Typical breaches of trust include fraud or theft against the employer, even for very small amounts, or time-sheet manipulation. In the well-known “Emmely” case, a cashier redeemed a deposit voucher worth €1.30 that did not belong to her. The Federal Labour Court classified this as a serious breach of duty because it destroyed trust, regardless of the low value.⁷

No dismissal for misconduct without a prior warning

As a rule, an employer cannot dismiss an employee for misconduct without issuing a prior formal warning. A misconduct dismissal without a warning is invalid. For a warning to serve as a legal basis for a later dismissal, it must itself be valid. That means it must clearly describe the breach, demand future compliance, and threaten dismissal in case of repetition. The warning must also relate to a breach that is comparable to the later dismissal. Otherwise, it cannot be used as justification.

A warning often functions as the employer’s “first step” toward dismissal. Employees should therefore never ignore a warning. Always have it reviewed by a lawyer or union representative. If it is defective, you can (and should) demand that it be removed from your personnel file in writing.

Exceptions: dismissal without warning

A misconduct dismissal without warning is only valid in two narrow situations recognised by the Federal Labour Court:

• No behavioural change expected: If it is already obvious that the employee will not change their behaviour even after a warning (e.g., the employee openly states they will continue the same conduct), a warning is pointless.
• Extremely serious breach: If the misconduct is so serious that even one incident is objectively unacceptable, the employer does not have to issue a warning. This typically applies to theft, physical assault, or serious insults at the workplace.

Balancing the interests of employee and employer

Judges weigh both sides. Factors for the employee can include: clean record, long tenure, age, dependents, minor damage, employer contribution to the conflict. Factors for the employer can include: financial loss, process disruption, risk of repetition, protection of colleagues/customers, reputational harm. Even with a breach, dismissal can be disproportionate if a warning or transfer would have sufficed.

Even if the employee committed a serious breach and received a valid warning, the dismissal must still be proportionate. Courts weigh employer and employee interests by considering:

Factors in favour of the employee

• Previously clean record
• Long years of service
• Age
• Family responsibilities
• Partial employer fault

Factors in favour of the employer

• Financial loss
• Disruption of operations
• Risk of repetition
• Duty to protect other employees
• Reputational damage

In practice, this balancing step is often decisive. Many misconduct dismissals fail because a court finds them disproportionate.

Examples of dismissal for conduct-related reasons:

The balancing of interests is crucial for the validity of a dismissal for misconduct. Examples from the case law of the labor courts that illustrate the importance of balancing interests include:

Termination due to theft

A cashier (“Emmely”) was dismissed without notice because she had redeemed two deposit slips worth €1.30 that did not belong to her. Coincidentally, this happened after she had participated in strike action. Although a breach of duty had occurred, the Federal Labor Court ruled that the dismissal was disproportionate. In weighing the interests, the employee’s long service of 31 years and otherwise impeccable conduct carried greater weight than the breach. As a result, the dismissal was deemed invalid.

Dismissal for making a private phone call

An employee made private phone calls during working hours, even though this was prohibited in the company. The dismissal without notice was overturned by the Federal Labor Court because the conduct was not serious enough to justify immediate termination of the employment relationship – without a prior warning. The dismissal was invalid.

Company computer during working hours for private purposes

An employee used the company computer during working hours for private purposes (online games, emails). Although he violated a clear company rule, the court found that a warning would have been sufficient in this case. The dismissal was invalid.

Dismissal for beeing late to work

1. An employee was repeatedly late for work without excuse because he had to take his children to school. The dismissal was considered invalid because no warning had been issued and the employer had not considered any alternatives (e.g., changing working hours). The dismissal was invalid.
2. A 59-year-old employee of a security company was late for work a total of four times – in 17 years. He had already received warnings for this – and then the termination notice. In the subsequent unfair dismissal case, the Berlin Labor Court ruled that the termination was invalid.

Dismissal for insults

1. A salesman called a customer a “stupid bum.” Despite the gross insult, the court considered the dismissal unjustified because the situation was tense and the employee immediately apologized. The termination was invalid.
2. An employee severely insulted a colleague. Nevertheless, the court declared the termination invalid because the employee showed remorse, the insult was made in the heat of the moment, and the employee had a long and unblemished employment record.

Severance pay in cases of dismissal for misconduct

Unlike dismissals for operational reasons, a dismissal for misconduct is usually based on behaviour attributable to the employee. Therefore, there is generally no automatic entitlement to severance pay.

However:

• Many dismissals for misconduct fail in court.
• Once the labour court rules the dismissal invalid, the employment relationship is legally “restored”.
• At that point, severance becomes a matter of negotiation, not a legal right.

In practice, both sides often prefer a settlement (Vergleich) instead of continuing the employment relationship – especially if the dispute has escalated. In such cases, the usual rules for calculating severance apply, but the final amount depends heavily on negotiation tactics.

Sometimes employers offer severance even without litigation if they realise the dismissal is unlikely to hold up under the Protection Against Dismissal Act (KSchG). In this scenario, strategic negotiation is crucial to “maximise the payout”.

Bottom line: Even in misconduct cases, employees often have good leverage to negotiate severance – especially if the dismissal is legally weak.

Dismissal for misconduct: Sanction period (benefit suspension)

Even after a misconduct-based dismissal, employees are in principle entitled to unemployment benefit (ALG I).
However, the Employment Agency (Agentur für Arbeit) will typically impose a sanction / waiting period (Sperrzeit) of up to 12 weeks if it concludes that the employee caused their unemployment through misconduct.

A 12-week Sanction period (with benefit suspension) means:

• No benefits paid during this period
• Benefit period reduced accordingly
• Up to three months’ income lost

You can avoid the blocking period if:

• You successfully challenge the dismissal (e.g. via a Kündigungsschutzklage). Reminder: The lawsuit must be filed within three weeks after receipt of the dismissal letter.
• The court declares the dismissal invalid or The employer withdraws the allegation of misconduct in a settlement

Special case: Dismissal w/o notice (“fristlose Kündigung”) for misconduct

A dismissal for misconduct can also be issued without notice (i.e., with immediate effect – in German: “fristlose Kündigung”). This immediately terminates the employment relationship – no notice period, no continued salary.

Consequences for the employee:

• Instant loss of job and income
• Almost certain 12-week blocking period for unemployment benefits
• Damage to reference / CV / reputation

Because this is such an extreme measure, the legal threshold is very high:

• The employer must show that even one more day of employment is unbearable.
• The breach must be particularly serious (e.g. theft, fraud, falsifying sick notes, assault, sexual harassment, refusal to work).
• A proper balancing of interests must still be carried out.
• A warning may be dispensable, but only in extreme cases.

What to do if you receive a dismissal for misconduct

If you receive a dismissal for misconduct, act fast:

1. Check the three-week deadline: A dismissal becomes legally valid if you do not file a lawsuit (Kündigungsschutzklage) within three weeks.
2. Contact a specialist lawyer immediately: A labour law attorney can assess whether the dismissal is valid, whether severance is negotiable, and how to remove the risk of a Sperrzeit.
3. Preserve all evidence: Warnings, emails, performance reviews, witness statements, time records – everything may matter later.
4. Do not sign anything without legal advice: Employers often push for “quick” settlements or waivers, which may cost you severance or benefits.
5. File the claim: Most dismissal protection lawsuits are resolved within 1–3 months and employees have good chances of success.

Frequently asked questions (FAQ)