Employment law in Germany: clarity on termination, contracts and more.

Whether you are starting your career, changing jobs or starting a new job in Germany, many legal questions arise in connection with your employment contract. What is employment law, who is protected by employment law, what are the rights and obligations of employees and employers, how is the employment relationship terminated and when does protection against dismissal apply?

Questions about legal advice and the enforcement of rights in court are also important. This article provides an initial overview of employment law in Germany and offers further links for more details on specific topics.

The most important facts at a glance:

• Labour law in Germany regulates the rights and obligations of employees and employers (individual labour law). In addition, there is collective labour law. It regulates the relationships between the parties to collective agreements (trade unions/employers’ associations) and the parties within a company (works councils/employers).
• Essentially, employees, i.e. persons who perform work in accordance with instructions in return for remuneration, are protected.
• Contents of an employment relationship: The most important provisions are set out in the employment contract, collective agreement, law or works agreements. If there are several provisions, the more favourable one applies.
• Termination of the employment relationship: Employees can terminate their employment in writing at any time without giving reasons. If there is protection against dismissal (6 months and more than 10 employees), the employer must prove the reasons for dismissal in court in the case of dismissals for personal, behavioural or operational reasons. An employment relationship can also be terminated by mutual agreement by means of a termination agreement.
• Legal advice: There is no obligation to seek legal advice in labour law. Specialised lawyers in labour law and trade unions can provide legal advice.

Areas of German employment law

Employment law in Germany regulates the rights and obligations of employees and employers. Employment law covers regulations from the job interview to the conclusion of an employment contract, the execution of the employment relationship and its termination. This part of employment law is known as individual employment law.

A second part of labour law in Germany is collective labour law. On the one hand, it regulates the relationships between the parties to collective agreements. These are the trade unions for employees and the employers’ associations for employers. The main task of the parties to collective agreements is to conclude collective agreements. These are binding agreements between the parties to collective agreements that establish further rights and obligations for employees and employers. Negotiations are first held between the two sides, e.g. on the remuneration of employees in a particular industry. If the parties to the collective agreement cannot reach an agreement, the trade union can call a strike. Employers can lock out employees. The principle of industrial action is that the stronger party prevails. The result of industrial action is usually the conclusion of a new collective agreement with new rights and obligations for employees and employers.

Another part of collective labour law is the relationship between works councils and employers. Works councils are elected by the employees in a company. They represent the rights of employees and are involved in hiring, transfers, classification and dismissals. Works councils conclude works agreements which, in addition to the employment contract, establish further rights and obligations for employees and employers. If negotiations fail, e.g. on the regulation and payment of overtime, an agreement can only be reached through a binding decision by a company conciliation committee. There is no industrial action.

Only employees are protected

In principle, labour law in Germany only protects employees. An employee is a person who is obliged to perform work for another person in return for remuneration. The employee is bound by instructions, i.e. they are not free to organise their work or determine their working hours themselves. The employer’s right to issue instructions may relate to the content, performance, time and place of the work (Section 611a of the German Civil Code (BGB)).

In the event of a dispute, the labour courts decide who is an employee. They assess all the circumstances of the individual case and then decide only on the individual case by means of a judgement.

Exceptions: In some cases, persons similar to employees are also protected. These are self-employed persons who are not personally but economically dependent. They are also comparable to employees in terms of their need for protection.

The following are not protected: self-employed persons and freelancers.

Important provisions of labour law in Germany

If an employee in Germany wants to check what rights and obligations they have in an employment relationship, they must bear in mind many provisions:

• The starting point is the employment contract: this usually contains provisions on the work to be performed, remuneration, working hours, etc.
• In addition, there are collective agreements: these apply, among other things, if the parties to the employment contract are members of a trade union and an employers’ association. The parties to the employment contract can agree on their applicability in the employment contract. Finally, a collective agreement can also be declared ‘generally binding’. It then automatically applies to all employees in a specific region/industry.
• There are many laws and regulations: Laws are made in Germany by the Bundestag/Bundesrat (legislature). Regulations are made by ministries or authorities.
• The case law of the Federal Labour Court (BAG) and the European Court of Justice (ECJ) play a very important role in Germany. If there are undefined legal terms, such as whether a dismissal is ‘socially justified’, the court interprets these terms and develops their content and requirements.

If the employee finds several applicable provisions in the employment contract, collective agreement or law, the principle of favourability applies in German labour law. This means that the provision that is more favourable to the employee always applies.

Contents of an employment relationship in Germany

The rights and obligations of employees and employers are sometimes very extensive. Here is an overview of the most important points:

Form of the employment contract

An employment contract can be validly concluded either verbally or in writing. The German Employment Evidence Act (Nachweisgesetz) stipulates a written form requirement. If this is not complied with, the employment contract is nevertheless valid. The provision serves only to inform the employee about the content of the employment contract.

Obligation to work

The employee must perform the work specified in the contract. The employer may determine the content, place and time at its reasonable discretion if the working conditions are not already specified in the employment contract, works agreement, collective agreement or by law (Section 106 of the Trade Regulation Act).

Working hours

Working hours are governed by the employment contract, collective agreement or works agreement. The Working Hours Act (ArbZG) specifies the maximum working hours permitted by law: The working hours on working days may not exceed eight hours. In exceptional cases, they may also be ten hours if the average does not exceed eight hours within certain periods. Further regulations can be found in the ArbZG. Note: There is currently a debate as to whether there should only be a maximum weekly working time of 48 hours in future.

Time recording

The employer is obliged to record any working time of employees that exceeds the working time on working days (Section 16 ArbZG). This serves as a control measure for the employer and as proof of work performed for the employee. How working hours are recorded depends on the employment contract or the company’s systems.

Obligation to pay remuneration

The employer must pay the employee for their work (Section 611a of the German Civil Code, BGB). What is to be paid is determined by the employment contract or collective agreement. In addition, there has been a statutory minimum wage of currently £12.82 since 2015 (Minimum Wage Act, MiLoG). This is adjusted at regular intervals by a commission at national level. It is set to rise to £14.60 by 2027.

Payment of remuneration in the event of illness

If an employee is unable to work through no fault of their own due to illness, they are entitled to continued payment of their remuneration for up to six weeks (Section 3 of the Continued Remuneration Act, EFZG).

Annual leave

An employee is entitled to a statutory minimum of 20 days’ holiday per calendar year if they work a five-day week (Section 3 of the Federal Leave Act (BUrlG)). In addition to this minimum entitlement, additional holiday entitlement may arise from the employment contract or collective agreement. The employee must be paid during their holiday as if they had worked.

Employment

Upon termination of the employment relationship, the employee is entitled to a reference. This covers the existence and duration of the employment relationship. At the employee’s request, the reference must also cover their performance and conduct (Section 630 of the German Civil Code (BGB)).

Fixed-term

There are also fixed-term employment contracts.

These can be limited to a specific period or a specific purpose. Upon expiry of this limitation, the contract ends automatically without the need for termination. A fixed term must meet certain requirements. This is regulated in the Part-Time and Fixed-Term Employment Act (Part-Time and Fixed-Term Employment Act (TzBfG)). The fixed term must be specified in writing.

Termination of the employment relationship by notice

An indefinite employment relationship in Germany can be terminated by notice or by a termination agreement. Here is just a brief overview. Further information can be found in the articles marked in orange:

Types of notice

Both employers and employees can give notice:

• There are ordinary notices. Here, the employment relationship ends upon expiry of an agreed notice period.
• There are extraordinary (termination without notice) dismissals. In this case, the employment relationship ends with immediate effect.
• There are terminations for change. With this type of dismissal, the employer does not aim to terminate the employment relationship, but to change the working conditions.

Termination by employees

In Germany, employees can terminate their employment at any time subject to the notice period. An employee does not need to give reasons for termination. However, the termination must be made in writing, i.e. it must be sent to the employer in paper form with a handwritten signature or handed over to the employer (Section 623 of the German Civil Code (BGB)). Termination via WhatsApp or email is invalid. If the employee wishes to terminate the employment relationship without notice, they must have good cause, i.e. there must be serious misconduct on the part of the employer (Section 626 BGB).

Termination by the employer without protection against dismissal

If the employment relationship has not yet lasted six months at the time of termination or if the employee works in a small business (with 10 or fewer employees), the employee does not enjoy protection against dismissal under the Protection Against Dismissal Act (KSchG). This means that the employer can terminate the employment relationship without providing reasons for termination.

If the employer terminates the employment relationship, this termination must also be made in writing and sent to the employee. The termination can only be made by a person with the appropriate power of attorney. If this is not the case, the employee can reject the termination immediately (Section 174 BGB).

Notice periods must also be observed.

Termination by the employer with protection against dismissal

If the employer terminates the employment relationship and (1) the employment relationship has existed for more than six months at the time of termination and (2) the employee works in a company with more than 10 employees, the Unfair Dismissal Protection Act applies. The employer can then only terminate the employment relationship for behavioural, personal or operational reasons. They must also comply with the notice period and the written form requirement.

Employer terminates employment without notice

If the employer terminates the employment relationship without notice, i.e. with immediate effect and without observing a notice period, they must prove the existence of an important reason, i.e. serious misconduct that makes the continuation of the employment relationship until the end of the notice period unreasonable. The termination must be received by the employee within two weeks of them becoming aware of the reason for termination.

Termination by the employer with special protection against dismissal

Certain groups of people enjoy additional special protection against dismissal on top of the existing protection. This serves to provide greater security for vulnerable groups of employees. Termination of employment of these specially protected persons (e.g. pregnant women, parents on parental leave and people with severe disabilities) is usually only permissible under stricter conditions and with the approval of an authority. Special protection against dismissal also applies to employment relationships that have existed for less than 6 months and in small businesses.

Action for protection against dismissal

If an employee in Germany wishes to contest their dismissal by their employer, they must file an action for protection against dismissal with the competent labour court within 3 weeks of receiving the notice of dismissal (Section 4 KSchG).

Entitlement to severance pay

Under German labour law, there is generally no automatic entitlement to severance pay upon termination of employment. Severance pay claims may arise from:

• Section 1a KSchG grants a severance payment claim of 0.5 gross monthly salaries per year of employment in the event of redundancies for operational reasons, provided that the employer has indicated this and no legal action has been taken.
• A severance payment claim may arise from a social plan (agreement between the works council and the employer) or a collective agreement (agreement between the trade union and the employers’ association).
• Most severance payment claims arise from termination agreements that are concluded on the basis of voluntary negotiations between the employee and employer.

Termination of the employment relationship by means of a termination agreement

Labour law in Germany allows for the termination of an employment relationship by mutual consent at any time by means of a written termination agreement between the employee and employer. Such an agreement can have considerable advantages, but also disadvantages. For more information, see the article Termination agreement.

Advice on employment law in Germany

If an employee has a problem relating to employment law, they can contact the following bodies for support or legal advice:

• Works council: The works council can be the first point of contact in the company, even if it is not authorised to provide legal advice. It knows the company well and can refer the employee to a trade union or a lawyer specialising in employment law.
• Trade union: A trade union provides legal advice to its members and represents them in court in the event of a legal dispute.
• The costs of a lawyer are borne by the employee. If the employee has legal expenses insurance, the insurer must provide cover in advance.
• Legal advice centres at the labour court: They are not permitted to provide legal advice. However, the legal advice centre will prepare the relevant claims based on the information provided by the employee. If an employee cannot afford a lawyer, the legal advice centre will also accept applications for legal aid. If this is successful, a lawyer can be appointed.

Labour jurisdiction in Germany

Labour jurisdiction in Germany has three instances:

• The first instance is the labour courts. They are responsible for all labour law disputes. If an employee wishes to have a labour law dispute resolved, they must file a claim with the local competent labour court.
• The second instance is the regional labour courts. These hear appeals against judgments of the labour court of first instance, among other things. Each federal state has at least one regional labour court.
• The third and highest instance is the Federal Labour Court. It is based in Erfurt. The BAG decides on matters in the final instance (legally binding).

Frequently asked questions (FAQ)