Dismissal for personal reasons: conditions, deadlines and entitlement to severance pay

Employers in Germany usually need a special reason to issue a “fair dismissal” – in other words, a legally effective notice of termination. One group of such specific reasons are “personal reasons”, where the employee is no longer able to fulfill the contractual duties, based on the employee’s personal abilities, etc. “Personal reasons” are cases of not being able to provide the contractual duties, not “not wanting” to provide it. Dismissals for personal reasons are quite rare: only about 3% of terminations are for personal reasons. No surprise, because the bar for employers is quite high. This blog article explains requirements and deadlines, as well as a possible entitlements to severance pay, in case of unfair dismissals for personal reasons.

Key points:

• Dismissal for personal reasons is subject to very strict conditions.
• The employee must no longer be able to fulfill their contractual obligations due to personal characteristics.
• Examples of this are illness or lack of aptitude on the part of the employee.
• Further requirements are a negative prognosis, a negative impact on employer operations, and the ultima ratio principle including a weighing of interests.
• There is no general legal entitlement to severance pay, but employees are often willing to pay generous severance packages if odds in a lawsuit against unfair dismissal are in favor of the employee.

What are “personal reasons” for termination?

Personal reasons are those that lie within the person of the employee. For a personal dismissal, there must therefore be a reason that relates to the characteristics and circumstances of the employee himself. The employee must no longer be able to fulfill his or her contractual obligations as a result of the loss of his or her personal, professional or physical qualifications. It is important that the employee cannot control the circumstances leading to the loss of the required qualities and abilities. If the behavior is controllable, only a dismissal for behavioral reasons is possible, for which other conditions apply. Furthermore, it does not matter whether the employee is at fault for the personal reason.

Possible reasons for a personal dismissal could be, for example:

• Illness of the employee: This includes long-term illnesses, frequent short-term illnesses and reduced employee performance due to illness. If an employee is unable to work for a long period of time or repeatedly at short notice due to illness, this may constitute a personal reason for dismissal. Dismissal may also be justified if an employee’s long-term health is no longer sufficient to fulfill the contractually agreed services.
• Lack of aptitude: The employee is no longer capable of doing his or her job, for example, as a result of the withdrawal of a professional license or permit (such as a medical license, a pilot’s license or a truck driver’s license). A lack of work permits for foreigners or insufficient language skills can also constitute such a lack of aptitude.
• Prevention: The employee is unable to perform his or her work, e.g. due to a prison sentence of several years.
• Refusal: The employee refuses to work due to an unavoidable conflict of conscience and belief. Conflicts of conscience and belief as a reason for termination. For example, if an employee in a slaughterhouse, who, due to newly acquired religious beliefs, rejects the killing of animals and can therefore no longer fulfill his professional duties.

Requirements and deadlines for a dismissal for personal reasons

For the employer to terminate the contract for personal reasons, they must meet the requirements and observe the notice period.

Requirements for a dismissal for personal reasons

In order for a dismissal for personal reasons to be effective, it must fulfill the following conditions:

Personal reason, negative prognosis & negative impact on operational interests

• Existence of a personal reason: There must be a personal reason why the employee can no longer fulfill his or her contractual obligations. Illness, lack of aptitude, prevention and refusal can constitute such a reason.

• Negative prognosis: This means the employee will probably be unable to work in the future as well. The employee’s ability to work must therefore not be impaired only temporarily.

• Negative impact on operational interests: Furthermore, the employer must experience an impairment of operational interests. For example, when an employee repeatedly has long periods of sick leave, it regularly delays projects and requires hiring additional workers. The resulting additional costs and organizational difficulties significantly impair the company’s economic situation.

“Last resort” principle & Weighing of Interests

• “Last resort” principle: Due to the grave consequences for the employee, a termination must always be the employer’s last option. Therefore, before an employer terminates a person’s employment, they must examine whether they can consider a milder alternative. For example, the assignment of the employee to another equivalent or lower-rated vacant position represents a milder measure. If necessary, the employer must prepare the employee for the new job through reasonable retraining or further training.
• Weighing of interests: Furthermore, the interests of the employer and the employee must be weighed against each other. On the part of the employer, it depends on how strongly the employee’s absence affects the company’s operations and how great the financial burden is for the employer. The operational processes are affected, for example, by machine downtime, production losses or overburdening of the remaining employees. The financial interests are affected, for example, by overtime worked by the other employees or by the costs incurred by replacement staff. On the employee’s side, it depends, among other things, on how long the employment relationship has existed, whether the employment relationship has been trouble-free so far, what the employee’s financial and family obligations are and how good the chances of finding employment on the labor market are. Only if the balance of interests falls in favor of the employer, a dismissal for personal reasons can be lawful.

Consultation with the works council and special protection against dismissal

In addition, if a works council exists, the employer must inform it of the dismissal for personal reasons before the dismissal. A dismissal without the involvement of the works council is invalid. In addition, the regulations of the special protection against dismissal, for example for severely disabled persons, persons on parental leave, works council members, trainees or pregnant women, must be observed.

Notice period applies

If an employer wishes to terminate an employee for personal reasons, they must observe the notice period. When the employment contract includes a notice period, the length of the notice period is based on the employment contract. If a collective agreement or a company agreement governs the employment relationship, the employer can derive the notice period from these agreements. If there is no such agreement which specifies a notice period, the employer must apply the statutory notice periods.

Is a dismissal for personal reasons effective without a warning?

As a rule, no prior warning is necessary for a dismissal for personal reasons. This is because the employee has no control over the circumstances leading to the dismissal for personal reasons. An accident, an illness or a change of religious beliefs – these are all situations in which the employee is neither intentional nor negligent. So: No warning required.

This makes sense. The purpose of a warning letter is to point out a specific misconduct to the employee. In this way the employee is given the chance to change this behavior. In the case of personal dismissals, however, there is no misconduct because the employee’s behavior cannot be controlled. The employee cannot change his situation by adjusting his behavior. Therefore, a warning letter usually makes no sense and is only necessary in the case of a behavioral dismissal.

However, there are exceptional circumstances in which a warning letter in connection with a dismissal for personal reasons could make sense. Such a scenario can arise when it comes to remediable obstacles to performance, such as insufficient language skills. In such cases, the employer can demand that the employee make up for his or her lack of skills. Also, if an employee with an alcohol problem refuses therapy, a warning letter makes sense.

If the employee does not comply with this request, it may lead to termination. The logic here is that the employee had the chance to improve their work performance but failed to meet expectations. In this case, the employer must issue a warning letter to inform the employee of misconduct and allow for correction.

Severance pay and unemployment benefit

There is no legal entitlement to severance pay in the event of “fair” dismissal for personal reasons. The payment of a severance package would be a voluntary benefit of the employer. However, most dismissals for personal reasons are not “fair”.

By submitting a dismissal protection suit at the labor court, the employee can have the “”fairness” of the dismissal examined. If the dismissal protection suit has good chances of success, the employer often agrees to a severance package.

With the payment, the employer wants to prevent a court defeat or at least avoid a long and expensive legal dispute. In this case, it makes sense to consult a specialist lawyer in labor law. This person can help you negotiate a “fair” severance package and get the best deal for you! In return for the payment of the negotiated severance package, the employer terminates the employment relationship, and the employee waives their claim for unfair dismissal or withdraws any claim that has already been filed. Please note the three-week deadline for filing an unfair dismissal claim.

The Federal Employment Agency typically imposes a blocking period for unemployment benefits only if the employee is “at fault” for their dismissal. In dismissals for personal reasons, employees rarely cause their dismissal intentionally, and the employer usually does not impose a blocking period in these cases. However, as always, it depends on the individual case.

Termination without notice

Only in rare cases can a termination without notice (section 626 of the German Civil Code (BGB)) be justified for personal reasons, if serious circumstances make it necessary to terminate the employment relationship immediately. The employer must have a good cause and carry out a weighting of interests. Additionally, the employer must declare such a termination within two weeks of becoming aware of the relevant reason for termination. Otherwise it is invalid.

For example, the withdrawal of a professional driver’s license could constitute good cause for termination without notice. The legality of such a termination depends on a weighing of interests specific to each case. It is important to note that termination without notice is a severe measure for the employee and comes with high requirements.