Dismissal for “operational reasons” in Germany – what you need to know

A termination for “operational reasons” in Germany is generally possible, if the job position of the employee who is terminated is abolished. However, there is a relatively high bar with several criteria that need to be met. For example, it is a requirement that the employer cannot continue to employ you at another, similar job position. Also, an employer must determine which employees will be made redundant as part of a “social selection” process. Exemptions may apply to very small SMEs. Also, there is special protection for certain groups of employees. Last, but not least: Employers will often offer a severance payment with the termination in the event that the employee does not file a lawsuit against unfair dismissal.

What is a termination for “operational reasons”?

A dismissal for operational reasons is the most common type of termination in Germany. Around two-thirds of all employees who lose their job in Germany do so for “operational reasons”. For example, because a department has been closed or work processes have changed.

A termination for “operational reasons” occurs when the employer terminates an employment relationship due to the loss of the job position. Within the scope of the Protection against Unfair Dismissal Act (Kündigungsschutzgesetz – KSchG), an employer can terminate employment only for “operational reasons” if the job position exists no more and the employee cannot continue to work in another position. If this affects several comparable employees, the employer must select the employees he wants to terminate according to certain social criteria (the so-called “social selection”).

When making such social selections, the employer must take sufficient account of relevant criteria. Criteria include the length of service, age, any maintenance obligations, and any severe disability of the employee. The employer must inform the employee of the reasons that led to the social choice made.

When does the Employment Protection Act apply?

The Dismissal Protection Act creates special protection against dismissal. There are two requirements:

• Waiting period: The employment relationship must have existed in the same company for more than six months without interruption.

• Company size: The law on protection against dismissal only applies to companies with more than ten employees.

When is a dismissal for operational reasons permissible?

If the Dismissal Protection Act is applicable, the employer may only give notice if the downsizing is operationally necessary and the specific job position has been eliminated. Examples include the closure of businesses and branches. Valid reasons can be a restructuring of relevant work processes or a drop in orders.

The employer must explain to the labor court to what extent his entrepreneurial decision has led to the permanent loss of the job. However, the labor court only reviews whether the decision is obviously irrelevant, unreasonable or arbitrary.

A mere reference to expiring orders and the lack of follow-up orders is not enough to justify a permanent loss of jobs. Rather, the employer must use its order and personnel planning to show in detail why the order situation not only fluctuates in the short term, but also why the forecasts are bad.

What should you do in the case of a dismissal for operational reasons?

If you have received a termination for operational reasons, it is first important that you act quickly. You can only bring an action for protection against unfair dismissal at the labor court within three weeks. Your employer may have offered you a severance package so you wouldn’t sue. In any case, a lawyer should check the prospects of success of your lawsuit (or any offers from your employer). In any case, either your job or at least a relevant sum of money may be at stake! You can use our severance payment calculator to check your entitlements for the first time.