A termination during short-time-work (Kurzarbeit) in Germany is generally – legal! There is a widespread misconception that your employer cannot fire you during “short-time-work” (Kurzarbeit). Wrong. Provided that there are (new operational, personal or behavioral) reasons for dismissal, a termination can very well be legal, even if you are receiving short-time work compensation. Terminations for personal or behavioral reasons are possible at any time, regardless of whether you are on short-time or not. Operational layoffs, on the other hand, are subject to further, stricter requirements. For operational layoffs, the employer must adequately justify and explain the loss of the job for both external and internal reasons.
What is “short-time-work” (Kurzarbeit)?
The COVID-19 pandemic has generated renewed interest in short-time work programs—the state-sponsored work-sharing schemes aimed at saving jobs. Germany’s short-time work program, Kurzarbeit, is widely considered to have worked just fine during the Covid crisis. The main features of Kurzarbeit are the reduction of employees’ working hours instead of laying them off. Under Kurzarbeit, the government normally provides an income “replacement rate” of 60 percent (more for employees with children).
In other words, an employee receives 60 percent of his or her pay for the hours not worked, while receiving full pay for the hours worked. So, for example, a worker would only experience a 10 percent salary loss for a 30 percent reduction in hours. Kurzarbeit is widely regarded as an excellent crisis management tool, protecting workers’ income and therefore supporting aggregate demand. Also, companies retain firm-specific human capital, while avoiding the costly process of separation, re-hiring, and training.
(When) Are operational layoffs legal during short-time work?
There is a widespread misconception that a termination during “short-time” in Germany is not possible and employees enjoy protection against dismissal during short-time work. In general, an employer can terminate employees during short-time work. Operational layoffs, but also personal or conduct-related layoffs are possible:
- Personal and behavior-related terminations are possible at any time
- Operational layoffs, on the other hand, are subject to further conditions.
The reason for this is that short-time work is possible only in the event of a temporary loss of work. Operational layoffs are legal in the event of a permanent loss of work. Hence, termination for operational reasons is possible during short-time work, when a temporary loss of work becomes permanent. It is, however, more difficult to argue in court. We believe that the courts would regard many redundancies during short-time work to be ineffective.
Why are redundancies during short-time work often ineffective?
The employer must adequately justify and explain the termination during “short-time” in Germany for both external and internal reasons. According to case law, the short-time work that has already been ordered is an indication of a temporary reduction in the need for employment. However, redundancies for operational reasons are only legal in the event of a permanent loss of work.
If the employer wishes to terminate the employment relationship during short-time work due to “external” circumstances, he must prove that his original forecast for short-time work did not come true. The employer must prove new circumstances that now speak for a permanent loss of jobs. That’s not that easy. If the termination for operational reasons during short-time work is justified with the same reasons for which short-time work was ordered, it is ineffective. Even if you want to accept the termination, this also affects the amount of the severance payment. Termination during “short-time” in Germany
Burden of proof in the event of termination during short-time work
However, it is possible for the employer to prove that the requirements for termination during “short-time-work” in Germany are fulfilled. However, this can be the case, for example, if additional orders break away and it is not possible for the employee to continue working. Another reason could be the closure of entire areas of the company or a relocation of operational activities to another location. Such a reason also exists if the employer assigns departments or orders to external companies. But it depends on the exact circumstances of the individual case.
What should you do if receive a termination notice during short-time work?
In case of a termination during “short-time” in Germany, you need to act quickly: You may have to file an action for protection against unfair dismissal with the labor court within three weeks. You should carefully examine any offer from your employer and seek advice from an employment lawyer. A first opportunity to check your claims is here:Check severance pay