Heussen Rechtsanwaltsgesellschaft mbH | Schalast & Partner Rechtsanwälte mbB

Forums For Adjudicating Employment Disputes

Labour Courts (Arbeitsgerichte) have exclusive jurisdiction for most of the claims arising from an employment relationship regardless of the value of the matter in dispute and especially concerning the termination of employment agreements. Civil Courts in general have jurisdiction for claims of managing directors and management board members.

The Main Sources Of Employment Law

In Germany, employment law is not governed by one single “Employment and Labour Law Act” but by many different laws (national and European), individual contracts, collective bargaining agreements, employers/works council agreements and common practice. Some of the most important national statutes are the Federal Leave/Vacation Act (Bundesurlaubsgesetz), the Act for Continued Remuneration during sickness and holidays (Entgeltfortzahlungsgesetz), the Dismissal Protection Act (Kündigungsschutzgesetz), the Works Council Act (Betriebsverfassungsgesetz) and the Collective Bargaining Agreements Act (Tarifvertragsgesetz). Even though German law is based on the idea of codification, an “Employment and Labour Law Act” is still missing and many gaps of the existing regulations are filled by case law, especially by the highest German Labour Court (Bundesarbeitsgericht).

National Law And Employees Working For Foreign Companies

German labour law is based on the idea of workers protection (Arbeitnehmerschutzrecht). Usually, the parties to an agreement can choose what law/jurisdiction shall govern their contract. There is an exception concerning employment contracts. As a general rule in employment contracts, the parties cannot choose the applicable law and/or the jurisdiction if from the employee’s perspective those laws would be inferior to German law.

Therefore, the law of the place of employment will always govern the agreement.

National Law And Employees Of National Companies Working In Another Jurisdiction

Minimum standards comparable to German statutes have to be guaranteed to an employee if he is assigned to work in another country within another jurisdiction.

Data privacy

The Federal Data Protection Act must be observed in conjunction with the GDPR. Without consent only necessary data may be collected and only stored until the purpose is fulfilled. Furthermore, the employer is also subject to information and disclosure obligations. employees who regularly handle personal data must sign a separate written obligation to comply with the data protection requirements under the General Data Protection Regulation (GDPR).

Legal Requirements As To The Form Of Agreement

In general, under German law written agreements are not required for an employment relationship to become effective. However, certain substantial requirements need to be fixed in a written agreement and handed to the employee no later than one month after the beginning of the employment. In order to be effective any fixed term of an employment relationship must be in writing.

Mandatory Requirements
  • Trial Period
  • Any probation period for an employment shall be no longer than 6 months. It is not mandatory and has to be agreed upon between the parties. A trial period can reduce the notice period for a termination to a minimum of 2 weeks’ notice period.

  • Hours Of Work
  • Working hours are limited to 8 hours per day/48 hours per week (Monday – Saturday). The daily working hours can be extended to 10 hours provided that 8 hours per day on average are not exceeded over a period of 6 calendar months/24 weeks. Certain exceptions apply. Work on Sundays or public holidays is possible for certain industrial sectors (e.g. police, emergency rescue, catering etc.) or with special permit by competent authority.

  • Special Rules For Part-time Work
  • In principle, an employee can request that the contractually agreed working hours will be reduced if he/she works for the company for more than 6 months and the company has more than 15 employees. In companies with more than 45 employees part-time work can also be requested for a limited period between one and five years (temporary part-time). The employer can dismiss the motion because of a conflict with urgent operational reasons or when a significant number of employees have already claimed temporary part-time work.

  • Earnings
  • The statutory minimum wage for the calendar year 2021 is EUR 9,50 gross per hour and will increase to EUR 10,45 as of 01.01.2022.

    Collective bargaining agreements may also provide for higher minimum salaries in certain circumstances; in such cases the agreed higher rates remain unaffected by the new statutory minimum wage.

  • Holidays/Rest Periods
  • Every employee is entitled to a statutory minimum of 4 weeks paid vacation. Often, individual contracts or collective bargaining agreements grant more vacation days of up to 6 weeks per year. Disabled employees are entitled to an additional 5 vacation days per year. Statutory daily and weekly rest periods have to be observed.

  • Minimum/Maximum Age
  • Persons under the age of 15 cannot be employed (with certain exceptions). There is no maximum age for employees; however, the statutory old age pension will generally be paid after turning 67.

  • Illness/Disability
  • Employees continue to receive their remuneration for a period of 6 weeks in cases of inability to work due to sickness. Employees have to inform the employer of their sickness immediately and have to submit a respective medical certificate stating the expected duration of their absence after 3 days.

    Disabled persons have special rights under German law, e.g. the right of employment in accordance with their ability to work and extra vacation days. Depending on the number of disabled employees in a company, a representative body for disabled employees can be elected. Before the dismissal of a disabled employee a certain authoritative body has to be asked for its permission. The permission will usually be granted if the termination of the employment is not associated with the disability of the employee.

  • Location Of Work/Mobility
  • The normal place of work is usually stated in the employment agreement. Mobility clauses can be included but must be enforced reasonably. The employer must reimburse any travel expenses for temporary visits to other workplaces.

  • Home-Office and Protective Measures
  • The place of work is to be contractually agreed and may also provide for work from the home office in whole or partially and for a limited period of time. However, compliance with the regulations for computer workstations, occupational safety and data protection must be observed. For inspection and monitoring by the liable employer, a right of access must be agreed, as well as the bearing of costs for the equipment of the workplace and consumption costs if the employee works entirely from the home office.

    In general, there is no right to work from home. Only in relation to the Covid-19 Pandemic there is a temporary right to home office work unless bared by urgent conflicting operational reasons. Furthermore, the employer has to take technical and organisational measures to make a reduction of operational contacts possible. If operational contacts are urgently required and physical distancing can’t be practiced, other measures must be taken by the employer, like ventilation measures or handing out medical face masks.

  • Pension Plans
  • Pension plans are not mandatory but very common. If a pension plan exists certain legal requirements have to be observed.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
  • German law grants several different rights such as paid time off with regard to pregnancy/ maternity (6 weeks before and 8 weeks after childbirth), paternity and adoption. Any mother or father can claim parental leave for up to 3 years for each child. The main obligations of the employment relationship will be suspended during parental leave. Employees cannot be terminated during pregnancy and parental leave without prior permission of a certain authoritative body. Under certain provisions different rights and possibilities to change the employment agreement apply. The employer and the employee can f.e. agree upon a weekly working time up to 30 hours during parental leave. Under certain conditions, concerning e.g. the enterprise size and the duration of the employment relationship, part-time work can be claimed by the employee.

  • Compulsory Terms
  • Within one month of commencing employment the employer must fix certain compulsory provisions in a written employment agreement: name and address of employer and employee; commencement date; for fixed term agreement the duration of the fixed term; place of work; short description of the scope of duties of the employee; amount and contents of remuneration; agreed working hours; number of annual vacation days; notice period for termination of the agreement; a general reference to any applicable collective bargaining agreements and/or works council agreements.

  • Non-Compulsory Terms
  • Beyond the compulsory terms the parties are free to agree upon any other provisions as long as they do not conflict with any applicable laws.

Types Of Agreement

All employment relationships are based upon a contractual agreement between employer and employee – whether or not it is written down. There are different types of agreements: full-time, part-time, fixed term or for an unlimited period of time. For certain types of agreements some special rules need to be observed. Regardless of the type of agreement all employees have the same rights, i.e. no employee shall be discriminated against because he/she is on a fixed term or a part-time contract.


Any employment relationship has an implied duty for the employee to keep confidential any company and trade secrets learned during the term of the employment. Furthermore, the parties can agree upon an express rule for secrecy/confidentiality in the agreement which may last even after the employment relationship has ended. To make company and trade secrets that are not declared in the agreement identifiable for the employee, secrecy measures must by applied by the employer and there has to be a legitimate interest to keep the information secret in accordance with the act on the Protection of Business Secrets.

Ownership of Inventions/Other Intellectual Property (IP) Rights

The Act on Employee’s Inventions (Arbeitnehmererfindungsgesetz) stipulates what happens to the ownership of IP rights during the term of an employment relationship. The parties may agree upon different regulations in the employment contract.

Pre-Employment Considerations

Job advertisements must be compliant with the Equal Treatment Act and the job application process must be compliant with data protection regulations. Pre-employment medical check-ups are only permissible under special conditions. Background Screenings are restricted and require prior written consent of the candidate.

Hiring Non-Nationals

Only non-nationals with a valid residence and work permit are eligible to be employed in Germany. The permit(s) have to be obtained by the employee at the German embassy/consulate in the non-national’s home country or (under certain circumstances) at the local Aliens Department in Germany. In general, all nationals of the European Union and the EEA do not require a visa and are automatically entitled to work in Germany. Among others, the Brexit related Trade and Cooperation Agreement provides special regulations for UK citizens.


Hiring Specified Categories Of Individuals

With regard to hazardous activities certain restrictions apply for pregnant women, children and disabled persons. They are all protected by special laws.

Outsourcing And/Or Sub-Contracting/Temporary Agency Work

German law provides special rules for the sub-contracting of workers from another employer. The lease of employees may only be carried out on a temporary basis and it should not exceed 18 months. The lessor is obliged to grant the leased employee the same essential working conditions including remuneration, that apply for a comparable employee of the client. An employer who professionally leases out his employees to other companies requires a special permit. If the lessor is not in the possession of such a special permit an employment relationship between the client and the leased employee will be deemed to exist. Furthermore, the lease of employees without permit is punishable by a fine. Special regulations apply for lease of employees within the group.

Outsourcing generally has the effect that all employees of the outsourced part of the company are automatically transferred to the new company – including their employment agreements with all rights and duties.

Changes To The Contract

Within the scope of the employment agreement and its interpretation the employer has the right to give instructions to the employees. Significant modifications have to be executed by a dismissal with the option of altered conditions of employment or by consent of the employee. The employee can file a claim against the altering dismissal in order for the Labour Court to verify whether the altered conditions of the employment agreement are reasonable for the employee.

Change In Ownership Of The Business

For an asset deal, German law states that all employees are automatically transferred to the new employer on the same terms and conditions of their employment agreement. The new owner of the business may not change the employees’ contractual provisions for a period of one year. These rules also apply if only one part of a business is sold via an asset deal to a new owner.

Dismissals due only to the change in ownership are not permitted. All employees affected by the change in ownership have to be informed of the change and its consequences for them in writing by the new or the old owner prior to the change.

Works councils – in certain cases of old and new owner – have to be involved in the proceedings of the change according to the rules under German law. The works councils have to be informed in detail about the planned changes prior to the execution of the changes. In certain cases the employer has to discuss with the works council and find a way how to compensate the employees for the consequences the changes may have for the employees, e.g. agreement on severance payments if the changes cause a reduction of work force.

Social Security Contributions

Statutory social insurance (including pension insurance, unemployment insurance, health insurance, long-term care insurance and employee accident insurance) is mandatory for most employees. Besides the contributions for employee accident insurance which are borne by the employer alone, the employer and employee each pay half of the social security contributions. The employee’s part of the contribution is automatically deducted from his monthly gross salary.

Accidents At Work

Employers have the obligation through several laws to ensure the employee’s safety while working for the employer. German law requires all employers to contribute to the statutory accident insurance that covers every employee. Contributions vary depending on the number of employees and the type of business.

Discipline And Grievance

With regard to equal treatment/discrimination complaints of employees, each employer has to appoint an internal ombudsman. For all other issues the works council is the authoritative board for grievance proceedings.

In cases of breach of contract due to misbehaviour the employer can issue a warning towards the employee. The warning letter has to follow certain rules set by numerous court decisions. Statutory rules with regard to the warning letter itself do not exist. If the employee repeatedly misbehaves in the same or a similar way the employer may terminate the employment relationship.

Harassment/Discrimination/Equal pay

Equal treatment is a general principle under German law. It has been implemented in its own statute in 2006 (General Equal Treatment Act) following the transformation of a Directive by the European Union. The statute prohibits direct or indirect discrimination or harassment due to race, ethnic background, gender, religion, belief, disability, age or sexual identity. The employer has to compensate the employee for any damages arising out of the discriminating behaviour or harassment of another employee or client if the employer did not take any measures to prevent the discrimination/harassment. If a person did not get employed due to discrimination the employer has to pay damages of three month’s salary that the person would have earned if he/she had been employed. In other cases, the amount of damages is not limited. Applicants are also covered by this law.

The principle of equal pay for equal work is also implemented into German laws, e.g. the Act on Posting of Workers (Arbeitnehmerentsendegesetz) provides that an employer must grant workers posted from other companies or countries the same wages as he pays his own workers according to generally binding collective bargaining agreements.

Compulsory Training Obligations

There are no general training obligations imposed by German law. However, several professions may set up their own standards/requirements.

Offsetting Earnings

A minimum amount of the earnings is protected against offsetting. Above that amount the employer may offset earnings against employee’s debts in cases where the employer has received a certified notice of the employee’s creditor.

Payments For Maternity And Disability Leave

A mother is eligible for paid time off 6 weeks before the childbirth and 8 weeks after it. In these periods the mother will continue to receive her net salary partly paid for by her statutory health insurance, the employer and the federal state. Employees continue to receive their remuneration from the employer for a period of 6 weeks in case of inability to work due to sickness. After that period the employees usually obtain sick pay from their health insurance. Under specific circumstances the employer can reclaim expenses for maternity pay and disability pay from the statutory health insurance companies.

Compulsory Insurance

Statutory social insurance (including pension insurance, unemployment insurance, health insurance, long-term care insurance and employee accident insurance) is mandatory for most employees. Except for the employee accident insurance, the employer and employee share the contributions for the social insurance.

Absence For Military Or Public Service Duties

Where an employee is drafted for military or public service duties or in case the employee voluntarily joins the military the employment relationship is suspended, i.e. the employee has no obligation to work and the employer does not have to pay the employee. After the end of military or public service duties the employment relationship will continue on the same terms and conditions. The employer may not dismiss the employee due to the draft or the voluntary military service. Regulations do not apply to employees joining federal volunteer services.

Works Councils or Trade Unions

It is a constitutional right to establish, maintain and be a member of a trade union. Collective bargaining agreements with a minimum standard of working conditions can be entered into by a trade union and a single employer or a trade union and an employers’ association for certain industrial sectors.

Companies with at least 5 employees have to establish a works council upon request of the employees. Standards for working conditions are usually established between the employer and a works council in a works council agreement. For certain actions of the employer the involvement or approval of the works council is required. For example, the works council has to be consulted prior to any hiring or dismissal.

Employees’ Right To Strike

The right to strike is granted by the German constitution. A strike has to follow certain rules which are not set by a statute but have been developed through many decisions of the highest German Labour Court (Bundesarbeitsgericht). If a strike is not authorized and operated by a trade union and is aimed at improving the conditions of a collective bargaining agreement the strike is illegal.

Employees On Strike

If the strike is legal (see above) an employee cannot be dismissed for the reason of participating in the strike. During a strike the employer does not have to pay those employees joining the strike. They will receive “strike money” from their trade unions if they are a member of the trade union on strike.

Employers’ Responsibility For Actions Of Their Employees

Employers are responsible for the actions of their employees as long as the damages caused are not due to intentional or grossly negligent behaviour of the employees.

Procedures For Terminating the Agreement

The letter of termination must be in writing. The termination must comply with the terms of the contract. In most cases there are certain minimum steps to be followed. The legal or contractual notice period must be observed.

If a works council is established, it has to be granted a hearing before the termination.

Instant Dismissal

The employer can terminate by instant dismissal where the employee is guilty of gross misconduct. Certain minimum procedural steps have to be observed in these cases (hearing of the employee and the works council) and certain time-limits have to be observed.

Employee's Resignation

The agreement can generally be terminated by the employee’s resignation. Normally the contract will stipulate the notice period required.

Termination On Notice

The employee can terminate on notice. The notice period depends on the contract or the duration of continuous employment.

An employer with more than 10 employees can terminate on notice, if the duration of employment is less than 6 months. If an employee is employed for more than 6 months’ notice must be based on specific reasons derived from the person or conduct of the employee or other company related grounds.

If the employer has less than 10 employees there are basically no restrictions for terminating the employment.

Termination By Reason Of The Employee's Age

There is no legal retirement age that automatically terminates the employment. Termination due to the employee’s age must be contractually agreed.

Automatic Termination In Cases Of Force Majeure

There is no automatic termination in cases of force majeure. This would be treated as serious cause and would generally justify an instant dismissal if the event comes from outside the influence of the employer.

Collective Dismissals

A collective dismissal is defined by law if a certain number of employees (depending on the number of regular employees in the company) will be dismissed within 30 calendar days. In this case the employer must inform the Federal Employment Agency before issuing the dismissals, otherwise the dismissals are null and void. If there is a works council, the prior implementation of a consultation procedure is generally required. A mass dismissal is usually a change in operations within the meaning of section 111 of the Works Council Constitution Act (BetrVG), so a reconciliation of interests must be negotiated with the works council and a social plan must be agreed under the conditions of section 112 a BetrVG.

Termination By Parties’ Agreement

The parties are entirely free to agree a termination agreement. The parties are not required to obtain the courts’ or regulatory body’s approval before the termination is effective. The agreement will be void if it is not in writing and can have negative impact on unemployment pay.

Directors Or Other Senior Officers

Senior officers who are entitled to hire and fire employees by their own discretion do enjoy only reduced protection against unfair dismissal.

In the case of a statutory director, termination of employment does not automatically bring the directorship to an end. Separate steps will be required to bring the directorship to an end (pursuant to the company’s articles of association). Vice versa the dismissal from the function of the directorship does not automatically bring the employment contract to an end.

Special Rules For Categories Of Employee

Special rules apply for (I) members of the works council, (II) severely handicapped employees, (III) women throughout pregnancy and four months after giving birth, (IV) employees on parental leave and (V) employees who assume certain official duties within the company, e.g. the data security officer, the officer in charge of emission control.

Whistleblower Laws

The deadline for implementation of the Whistle-blower Directive by EU member states into national law is 31.12.2021 and Germany is still working on a draft law which includes that companies with 50 or more employees are obliged to set up internal reporting channels. For companies with up to 249 employees, there will probably be a two-year transition period until the obligation to set up internal reporting channels takes effect. Furthermore, reprisals against whistle-blowers will be prohibited. This also applies to threats and attempts of reprisals. Also a reversal of the burden of proof is foreseen.

Specific Rules For Companies in Financial Difficulties

There are only special rules in cases of adjudication of bankruptcy. In this case the employee or administrator can terminate the employment contract with a notice period of three months (overruling all other agreements under the employment contract or a collective bargaining agreement).

For companies with 10 employees or more all rules regarding protection against unfair dismissal remain valid also in case of bankruptcy. The closing down of a business leads to a justified termination for company related grounds.

Special Rules For Garden Leave

If agreed, garden leave is possible after notice of termination has been given. Outstanding holidays can be taken into account in the case of a revocable leave of absence. Pay in lieu of garden leave is only possible by mutual agreement and would have a negative impact on unemployment pay.

Restricting Future Activities

Generally, parties are free to agree clauses restricting the future activities of an employee. The agreement must be in writing and is only valid if it includes a compensation for the employee of at least 50% of the annual salary during the year preceding the termination. Maximum duration for a non-competition clause is two years.

Severance Payments

In general, severance payments are freely negotiable. German law does not establish a right to severance payments. When determined by a court in cases of unfair dismissal, the age, the duration of employment and the salary are generally considered when calculating the amount of severance payment.

In cases of unfair dismissal the severance payment is usually between 50% - 100% of a monthly salary for every year of employment.

Special Tax Provisions And Severance Payments

Since 2006, there have been no special tax exemptions applied to severance payments.

The only tax privilege is that such extra income – if the sum of all payments exceeds in the respective year the normal annual income – can be treated for taxation as if it would have been paid distributed over five years.

Allowances Payable To Employees After Termination

Employers are not required to contribute to any allowances payable to employees after termination.

Time Limits For Claims Following Termination

Usually a cut-off period for contractual claims is agreed upon in the employment contract or is stipulated by a collective bargaining agreement. Labour Courts have approved time limits of 3 months following the origination of a claim. Otherwise the standard period of limitation for claims applies (3 years).

In cases of unfair dismissal a claim for continued employment has to be served within three weeks of receiving the notice of termination.

Specific Matters Which Are Important Or Unique To This Jurisdiction

Despite the volume of legislation there are lots of gaps in the statutory rules. Labour law in Germany is to a great extent case-law.

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Contact a Contributing Author:
Claudine Gemeiner
Heussen Rechtsanwaltsgesellschaft mbH

Clemens Schalast
Schalast & Partner Rechtsanwälte mbB


© 2021, Heussen Rechtsanwaltsgesellschaft mbh and Schalast. All rights reserved by Heussen Rechtsanwaltsgesellschaft mbh and Schalast as authors and the owner of the copyright in this chapter. Heussen Rechtsanwaltsgesellschaft mbh and Schalast has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021