Dismissal for personal reasons: Requirements, examples & severance pay

Dismissal for personal reasons is one of the three types of dismissals recognized under the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz). Personal dismissals are relatively rare: only about three percent of all employees are dismissed on personal grounds. However, the consequences for those affected are often particularly severe, as dismissals for personal reasons include terminations due to illness. The employer must prove strict requirements for such a dismissal. This article outlines the requirements and gives examples for such a dismissal.

Requirements for a dismissal for personal reasons

A dismissal for personal reasons (or dismissal for incapacity) is one of three types of dismissals under the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz). The most common case is the dismissal due to illness, which we cover in a separate article.

Here we discuss other examples of a dismissal based on personal reasons, such as poor performance based on a lack of professional qualifications, the loss of a required drivers license or imprisonment etc.

The employer must prove strict requirements before a dismissal based on personal reasons is valid:

• Negative prognosis: The employee cannot fully or partially perform the job due to physical, psychological or professional limitations. The employee has no control over the loss of the necessary ability. If the inability to perform is controllable by the employee, the employer might be able to dismiss the employee based on misconduct.
• Operational impact: The employee’s incapacity must significantly disrupt business operations or create unreasonable costs, such as overtime, production losses, continued wage payments or replacement staff.
• Balancing of interests: The employer’s interest (smooth running of the business operations, no unreasonable additional costs etc.) must outweigh the employee’s interests (length of service, age, family situation, job prospects).
• Ultima ratio principle: The employer may only dismiss as a last resort. Before the dismissal, the employer must consider less severe options such as reassignments, workplace adjustments or Workplace Integration Management programmes (BEM).¹

General requirements

In addition to the Unfair Dismissal Protection Act (KSchG), the employer must prove further general requirements:

• If there is a works council, the employer must consult the works council before dismissing an employee on personal grounds. A dismissal without the proper involvement of the works council is invalid.
• In addition, the provisions of special protection requirements (e.g. disabled persons), persons on parental leave, works council members, trainees or pregnant women, must be observed.

Examples of dismissals due to personal reasons

Here are a few examples:

• Illness of the employee: You can find more information on this in our article ‘Dismissal due to illness’.
• Lack of aptitude means that the employee cannot perform the work, because of the withdrawal of a professional license. Examples: withdrawal of a doctor’s license, pilot’s license or a truck driver’s license; no work-permit of a non EU-foreigner.
• Membership in a terrorist organization: An employer dismissed an employee on personal grounds, because the employee was under suspicion of being a member of a terrorist organization (“Gefährder”). The court ruled that the dismissal was invalid. Criminal conduct outside work may justify doubts regarding the employee’s capacity for the job. But the employer must prove (1) specific misconduct (criminal offense, active advocacy of anti-constitutional goals) as well as (2) the resulting incapacity to perform the job. General security concerns alone are not sufficient.² The same applies to a membership in anti-constitutional parties, such as the NPD.³
• Imprisonment: The employee is unable to perform their work due to a prison sentence of several years.
• Student assistants and working students: Many companies employ students. For this type of employment, the employee must be registered at a university. If a student drops out of the studies or graduates, the employment relationship can end for personal reasons. According to Federal Labour Court (BAG), employers can rely on the loss of student status as a personal reason.

Severance pay and a dismissal for personal reasons

There is no legal entitlement to severance pay in the event of dismissal for personal reasons. However, employers are often willing to pay severance pay voluntarily. Reasons: the requirements for a valid dismissal are strict and the litigation risk is high. The higher the likelihood of losing a case, the higher the willingness to pay severance pay.

Frequently asked questions (FAQ)

1. Section 167 Social Security Code (SGB) IX ↩︎
2. LAG Niedersachsen 12.03.2018, 15 Sa 319/17 ↩︎
3. BAG 12.05.2011, 2 AZR 479/09 ↩︎