Reasons for termination under German employment law

When can an employer legally dismiss an employee in Germany? Our article explains the main reasons for termination, how the German Protection Against Dismissal Act (Kündigungsschutzgesetz, KSchG) works, and what employees should know if they receive a notice of termination. We outline the three legally recognised categories of dismissal and show what you can do if you believe the termination is unfair.

Key takeaways

• There are three main reasons for termination in Germany: personal, conduct-related, and operational.
• The Protection Against Dismissal Act (KSchG) applies if you have worked for more than six months in a company with more than ten employees.
• Personal reasons relate to the employee’s abilities or situation, e.g. long-term illness or loss of licence.
• Conduct-related reasons require a breach of contractual duties, usually after a warning.
• Operational reasons arise when jobs are cut due to business changes.
• You only have three weeks to challenge a dismissal in court. Miss the deadline and the termination becomes legally valid.

When does the Protection Against Dismissal Act apply?

You benefit from full protection against unfair dismissal if the KSchG applies. Three conditions must be met:

1. You must be an employee.
2. The employment must have lasted more than six uninterrupted months.
3. The employer must usually employ more than ten people (part-timers count proportionally).

If these requirements are met, the employer needs a valid reason for termination. If not, the bar is lower, but employers still may not dismiss arbitrarily.

Overview of legally recognised reasons for termination

German law distinguishes three categories:

• Personal reasons: linked to the employee’s situation or abilities, e.g. illness, loss of work permit, imprisonment.
• Conduct-related reasons: based on controllable behaviour, e.g. theft, refusal to work, repeated lateness.
• Operational reasons: caused by business decisions, e.g. restructuring, insolvency, site closure.

For summary dismissal, the employer needs an exceptionally serious reason that makes continued employment unacceptable.

Personal reasons for termination

Here, the employee is unable to perform the job, not because of misconduct but due to personal circumstances. Typical examples:

• Long-term illness with no realistic prospect of recovery
• Loss of a required driving licence
• Permanent lack of qualification that cannot be remedied
• Imprisonment

The key feature: the employee cannot influence the situation.

Special case: termination due to illness

Dismissal due to illness is possible, but the legal requirements are strict. It is a case of termination for personal reasons, as the reason for dismissal – illness – lies in the employee’s person. To assess the lawfulness of a dismissal due to illness, cases are categorized into different groups: long-term illness, recurrent or frequent short-term illnesses, or reduced performance caused by illness.

For a dismissal due to illness to be valid, three conditions must be met:

1. “Negative prognosis”: The employee is unlikely, due to their illness, to fulfill their contractual duties in the future.
2. Operational disruption: The impairments caused by the employee’s health condition must lead to significant operational disruptions or economic burdens for the employer.
3. Balancing of interests: In weighing the employee’s interest in keeping their job against the operational and economic burdens on the employer, the employer’s interests must prevail.

These requirements are deliberately demanding, as protecting employees in vulnerable situations is essential. Dismissals must not be issued lightly – they are only justified if the disadvantages for the employer are unreasonable. Special protection rules for (severely) disabled employees or those with equivalent status must also be observed, as they enjoy enhanced dismissal protection.

Detailed information on the conditions and deadlines can be found in our article on dismissal due to illness.

Conduct-related reasons for termination

A conduct-related dismissal requires a breach of contractual duty that the employee could have avoided. Common examples:

• Repeated absence without excuse
• Refusal to perform agreed work
• Ongoing poor performance despite warnings
• Alcohol or drug use at work
• Mobbing or harassment
• Theft or fraud
• Breach of data protection or trade secrets

In most cases, employers must issue a formal warning (Abmahnung) before terminating, unless the violation is extremely severe.

Operational reasons for termination

A dismissal for operational reasons is valid only if:

1. The employer has a real business decision that eliminates the job.
2. There are no alternative positions available.
3. A social selection (Sozialauswahl) has been carried out, comparing employees by age, tenure, disability, and maintenance obligations.

Typical operational causes:

Internal (within the company)

• Restructuring or rationalisation
• Outsourcing or relocation abroad
• Shutdown of departments or full closure
• Permanent reduction of workforce

External (market-driven)

• Loss of orders or customers
• Declining revenue
• Withdrawal of financing
• Budget cuts

Summary dismissal (immediate termination)

A dismissal without notice (or summary dismissal) ends the employment with immediate effect. It is only valid if:

• There is a serious breach of duty, making even one more day of employment unreasonable.
• The employer terminates within two weeks of learning the facts.

Typical triggers: criminal offences at work, serious harassment, violence, or massive breaches of trust. Courts review summary dismissals very strictly, and many fail when challenged.

Frequently asked questions (FAQ)