Dismissal of Executives in Germany – Only with Severance Pay!

Many executives believe they have no protection against dismissal in Germany. In reality, most executives are protected by the Employment Protection Act (KSchG) just like other employees. The key question is whether you qualify as a “senior executive” (leitender Angestellter) under German law. This distinction often affects severance negotiations more than dismissal protection itself. This guide explains who qualifies as a senior executive, how dismissal rules differ, and why executives often negotiate higher severance payments.

Who is considered an executive?

The first question is: Who is considered an executive (Führungskraft) in the first place? In some companies, it seems like more than half of the staff, at least based on modern “job titles.” Many high achievers with titles like “Senior Manager,” “Directors,” “Vice Presidents,” “Chief X Officers,” and other “Senior Executives” certainly feel like executives. However, for the Works Constitution Act (Betriebsverfassungsgesetz/BetrVG) and the Employment Protection Act (Kündigungsschutzgesetz/KSchG), the law sees it differently. Job titles such as Senior Manager, Director, Vice President or Head of Department do not automatically make someone a senior executive under German law. Courts focus on actual responsibilities, not titles. The most important factor is whether the employee can independently hire or dismiss staff or has significant decision-making authority.

Quick Check: Am I a Senior Executive?

You may qualify as a senior executive (leitender Angestellter) if you:

• independently hire or dismiss employees
• have substantial budget responsibility
• represent the employer in important personnel decisions
• exercise significant management authority

You are often not a senior executive merely because you have a management title.

Leadership tasks as a senior executive

True senior executives have “leadership tasks” (Führungsaufgaben) with significant authority, such as hiring and firing staff independently. Some examples of personal responsibility and qualification as a “true senior executive” (echter Leitender) include:

• Plant Manager: If they can independently manage staff and make high-level business decisions, they are considered a senior executive.
• Supermarket Branch Manager: If they are only allowed to hire and fire assistants, they are not considered senior executives.
• Chief Physician: They are only considered a senior executive if managing personnel is a substantial part of their job. If they mostly work as a treating physician, they are not considered a senior executive.
• Managing Director: Managing directors are not senior executives either, but the Employment Protection Act does not apply to them anyway.

PRACTICAL TIP
Many employers classify employees as senior executives during severance negotiations even though the legal requirements are not met. This can significantly affect dismissal protection and severance negotiations. If your status is unclear, have it reviewed before signing any agreement.

Special Aspects of Terminating Executives

Executives, especially senior executives (leitende Angestellte), generally have protection under the Employment Protection Act (Kündigungsschutzgesetz/KSchG). However, the employer can more easily justify termination based on personal or behavioral reasons due to their special position in the company. The requirements for termination grounds are lower for senior executives. Even behavior outside of work can quickly lead to consequences. For senior executives, a behavioral termination for private matters is easier than for other employees.

1. Unfair Dismissal of executives in labor court

In an unfair dismissal court case, the labor court examines whether the dismissal was socially justified (in other words, “fair”). If the dismissal is deemed invalid, the employment relationship of “normal” employees usually continues. However, that’s different for senior executives: For them, the employer can request to dissolve the employment relationship without providing a reason. In this case:

• The usual case review is omitted.
• Howeever, if the employer requests to dissolve the contract, the employee is legally entitled to severance pay. This does not only increase the chances a severance package – it will increase its size!

2. Higher Severance Pay for Executives

The court determines the amount of severance. Normally, it is half a month’s gross salary for each year of service. However, the severance can be much higher depending on the situation. For older employees with long service, it is capped at 12 or 18 months’ salary.

If the employee is not classified as a senior executive, the employer must justify the request to dissolve the contract. In these cases, the parties may negotiate a much higher severance. It’s advisable for executives to have their senior executive status reviewed by an employment law expert.

3. Senior Executives not protected by Works Constitution Act

Senior executives (leitende Angestellte) are not protected by the Works Constitution Act (Betriebsverfassungsgesetz/BetrVG). This means the employer does not need to consult the works council before the dismissal of executives. Instead, an executive committee (Sprecherausschuss) must be involved (if one exists). This can affect the validity of the termination, as failing to consult the correct body may result in the termination being invalid, or it could lead to a higher severance payment in a settlement. Can be an important argument when negotiating a settlement!

4. No Waiting Period for Unemployment Benefits for Executives

Senior executives do not usually face a waiting period (Sperrzeit) for unemployment benefits when they agree to a termination settlement with severance pay.

PRACTICAL TIP
Executives often negotiate severance packages that exceed standard market levels. Besides salary and length of service, employers frequently consider confidentiality obligations, non-compete clauses and reputational concerns when negotiating executive exits.