Executives (leitende Angestellte) do not have protection against termination. A widespread misconception. Executives have a closer relationship with their employer, due to their position and responsibility. Therefore, the requirements for their dismissal are slightly less strict. However, tthey are still entitled to protection under German employment law. Additionally, severance packages for executives can differ significantly from those of regular employees. Most importantly: very few employees who believe they are “executives” are actually classified as such under German law. This blog post will clarify who qualifies as an executive, explain the special rules that apply to their termination and legal protection, and offer some tips on how to avoid disadvantages when your employment ends.
Contents
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Who Counts as an Executive Employee?
In general, Executive Employees (leitende Angestellte) are considered regular employees under labor law. They are subject to social security and can bring claims in labor court. However, their protection against termination is somewhat weaker than that of other employees. They have more responsibility and, in some cases, are also held accountable for their behavior outside of work because of their trust-based role in the company.
But not every employee with a managerial role is automatically an “executive,” even though many employers might claim otherwise. For example, department heads or team leaders are often not classified as Executive Employees (leitende Angestellte), even if they are paid above union scale.
Defining “Executive Employee” Under Different German Frameworks
The classification of an executive varies under the Works Constitution Act (BetrVG) and the Employment Protection Act (KSchG). Both laws have slightly different criteria for determining who qualifies as an executive:
- Under the Works Constitution Act (BetrVG), an executive is someone who can hire and fire employees independently, holds significant representation rights (e.g., power of attorney), or regularly handles important business matters.
- Under the Employment Protection Act (KSchG), the definition is stricter. Only individuals who act similarly to CEOs or plant managers, and can hire and fire employees independently, are considered executives under this law. The job title in your contract is irrelevant—what matters is your actual decision-making power.
Decision-Making Power Under the Employment Protection Act
When it comes to termination, the Employment Protection Act (KSchG) is key. Courts closely examine whether the employee truly has the decision-making authority required to be classified as an executive. This authority must cover a significant number of employees and form a major part of the job. It also must not be too restricted by frequent consultation with other decision-makers.
For employees who don’t meet these high standards of decision-making, the full protection of the Employment Protection Act applies.
For those few who are genuine executives under the KSchG, the following rules apply.
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Special Rules for Executive Employees’ Protection Against Dismissal
Even “genuine” executives enjoy basic protection under the Employment Protection Act (KSchG). However, employers can more easily terminate them for personal or behavioral reasons. Because of their special role in the company, the threshold for what counts as grounds for dismissal is lower. For example, off-duty behavior may have more significant consequences. It is much easier to justify dismissing an executive for conduct in their personal life than it is for a regular employee.
- Breaches of trust carry more weight: Executives have heightened duties of care and confidentiality.
- No protection under the Works Constitution Act: Executives are not covered by the Works Constitution Act, meaning that the employer does not need to consult the works council before dismissing them. Instead, if there is one, the “speakers’ committee” must be involved. Failing to consult this committee can invalidate the dismissal.
Employer’s Request to Dissolve the Employment Relationship
In a legal dispute over wrongful dismissal, the employer can request that the employment relationship be dissolved. Normally, if the court finds the dismissal was unjustified, the employment relationship continues. However, for executives, the employer can request the dissolution of the employment relationship without needing to justify it. There is no need to prove that continuing the employment would be unreasonable.
Termination of Executives: Right to Severance Pay
If the employer requests the dissolution of the employment relationship, the executive is entitled to severance pay. The amount is set by the labor court and usually amounts to half a month’s gross salary for each year of employment. Depending on the case, this amount can vary and is capped at 12 or 18 months’ salary for older employees with long tenures.
If an employee is not classified as an executive, the employer must justify any dissolution request. In such cases, severance pay can be significantly higher if the parties settle. Therefore, it is advisable for employees to have their executive status reviewed by a labor law expert.
No Risk of Unemployment Benefits Suspension
Executive employees generally do not risk a suspension of unemployment benefits if they accept a severance package in a termination agreement. Otherwise, the employer could terminate their employment and request a dissolution, increasing the risk for the employee.
Summary
While executive employees do have protection against dismissal, their unique role and responsibility in the company place them in a special position.
- The requirements for dismissing them are lower.
- In a legal dispute over wrongful dismissal, it is easier for the employer to remove them from the company.
Severance payments and other rules vary significantly from those for regular employees. In borderline cases, executives should consult a labor law expert to clarify the extent of their dismissal protection and status.
Calculate severance pay now free of charge
- Calculate potential severance payment amount
- Strategy for negotiating a fair severance payment
- Find suitable lawyers for labour law
