Termination due to illness in Germany – is this even legal?

Many employees need to take an (extended) sick leave, or are absent due to health problems, at some point in their careers. In these cases, many fear that they will be dismissed because of their illness. But when is an employer legally permitted to terminate an employment contract due to illness in Germany? In our article, we explain when dismissal due to illness is legally permissible and what your rights are. Read on to find out everything you need to know about workplace integration management (BEM), your entitlement to severance pay and unemployment benefits, and useful advice on how to protect yourself against dismissal due to illness.

When is termination due to illness permissible?

Dismissal due to illness
A dismissal due to illness is a termination for personal reasons, where the employee is unable to fulfill their contractual duties because of their health condition.

Under the Protection Against Dismissal Act (KSchG), such a dismissal is only valid if the following conditions are met:

• negative health prognosis,
• significant operational impairment,
• balance of interests in favor of the employer.

Dismissal can also occur during sick leave, with company integration measures (BEM) taken into account. Typical cases involve frequent short-term illnesses or long-term illnesses. A dismissal is only valid if the employee is permanently unable to perform their contractual obligations.

Under what conditions is dismissal due to illness lawful?

An employer cannot simply dismiss an employee because they are ill. According to case law, three conditions must be met in order to terminate an employment contract due to illness.¹

1. A negative health prognosis means that it must be foreseeable that the employee will be unable to work for more than six weeks per year in future.
2. Significant operational impairment: The employer must prove that absences lead to significant operational or economic burdens (e.g. high replacement costs).
3. Balancing of interests: The employer’s interests must outweigh the employee’s interest in continuing the employment relationship.

Example: A craftsman who is unable to do physical work permanently following an accident, and who is not suited to office work, could be dismissed on these grounds.

A negative prognosis has been given

A negative health prognosis exists if it is expected that an employee will be absent for more than six weeks per year due to illness in future. This prognosis must be supported by medical reports. Therefore, the decisive factor is whether the illness is ongoing or worsening to the extent that the employee will be permanently unable to perform their work.

The following are examples of illnesses with a typically negative prognosis:

• Chronic illnesses such as slipped discs and long-term lung diseases.
• Mental health conditions such as depression.
• Frequent short-term illnesses that recur repeatedly.

Disruption to work processes or an economic burden

• Absences must disrupt operational processes (e.g., idle machines, overworked colleagues).
• An economic burden alone can justify dismissal.
• Frequent short-term illnesses are costly because employer continues to pay wages for the first six weeks (health insurance covers only afterward).
• If total absences exceed six weeks per year due to repeated short-term illnesses, dismissal may be justified.

Balancing interests in favour of the employer.

Ultimately, the employer must consider the interests of both parties. They may only terminate the employment relationship if their reasons for doing so outweigh the employee’s reasons for continuing it.

The factors in favour of the employee are:

• Length of service
• Age
• Social vulnerability due to illness, age or accident.

The employer can only effectively terminate the employment relationship when the weighing of interests leads to the conclusion that the considerable burdens caused by the illness are no longer reasonable.

Further reasons for dismissal on the grounds of illness being invalid

Furthermore, a dismissal on the grounds of illness is invalid if:

• the works council has not given its consent (if applicable).
• There are formal errors, for example:
  • Verbal dismissal
  • Written dismissal without a proper signature
  • Incorrect notice periods

Special dismissal protection rights for certain groups, such as pregnant women and severely disabled persons, have not been observed.

What is the role of workplace integration management (BEM)?

If an employee is unable to work for more than six weeks in any given year, their employer must carry out a Workplace Integration Management (BEM) process to examine ways of helping them return to work. However, the employee is under no obligation to participate in this process.

Important points regarding BEM:

• The employer must work with the employee, and with the works council or representative for disabled employees, if applicable, to clarify how the incapacity to work can be overcome.
• Participation in BEM is voluntary: the employee can refuse to take part.
• If no BEM is carried out, this can be interpreted in the employee’s favour in dismissal protection proceedings. However, this does not invalidate the dismissal. Please note that if an employee rejects BEM, they cannot later use the fact that it was not carried out by the employer to their advantage in dismissal protection proceedings.

Is a warning necessary when an employee is dismissed due to illness?

In principle, no, because in the case of dismissal due to illness, the employee is not accused of any ‘controllable’ misconduct. Due to their illness, they simply do not (or no longer) have the personal aptitude and/or ability required to perform their duties. Therefore, according to case law, prior warning is not necessary.

What applies if you are sick during the probationary period?

The situation is different during the probationary period. Less strict dismissal rules apply, since statutory protection against dismissal only comes into effect after the probationary period has ended. During this period, an employer can dismiss an employee without giving reasons. This means that illness, even if only short-term, can lead to dismissal. During this period, dismissal due to illness is generally possible with 14 days’ notice.

Is there any severance pay if you are terminated due to illness?

There is no legal entitlement to severance pay. However, employers often offer it voluntarily to avoid an unfair dismissal claim. A frequently used formula is:

Severance pay = ‘factor’ × gross monthly salary × years of employment.

Example: For a monthly salary of €4,000 and 10 years of service, a ‘factor’ of 0.75 would result in severance pay of €30,000. Depending on the individual circumstances, and the negotiating skills of your solicitor, you may be able to negotiate a higher amount.

What options are available to employees who are dismissed due to illness?

If you are dismissed due to illness, you should consult a lawyer who specialises in employment law. It is important to act quickly, as a claim for unfair dismissal must be made within three weeks of receiving the dismissal. An expert in employment law should carefully check whether the dismissal due to illness is valid. Even if you are not interested in continuing to work for the company, invalidating the dismissal will definitely affect the amount of severance pay you receive.

In summary, you should follow these five steps:

1. Check the termination letter for any formal errors, such as a missing signature or an incorrect notice period.
2. Gather all relevant documents and medical evidence relating to the three conditions mentioned above.
3. Bring an action for unfair dismissal. This must be done within three weeks of receiving the dismissal.
4. Seek advice from a lawyer who specialises in employment law, a trade union, or the works council.
5. Consider whether continued employment or a severance payment could be negotiated in the event of an invalid dismissal.

The consequences of dismissal due to illness on unemployment benefits

As a general rule, employees can receive unemployment benefits immediately after being dismissed due to illness, provided that all the other requirements are met. However, a waiting period may be imposed if misconduct is proven (e.g. pretending to be ill).

Frequently asked questions (FAQ)

1. Federal Labour Court – 2 AZR 582/13 ↩︎