When an employment relationship ends, employees are entitled to a reference. But what constitutes a qualified reference?
The legal aspects of termination
What legal provisions actually apply in the event of termination? How does it have to be justified, in which cases is there protection against dismissal and what deadlines apply?
Employers should familiarize themselves with the legal provisions of a termination in order to avoid potential legal problems and to enable employees to protect their rights. The most important legal aspects are covered in this article. However, in case of doubt, legal advice should always be sought to ensure a legal and fair termination.
Formal requirements for the letter of termination
A notice of termination given only verbally is just as legally invalid as an e-mail or messenger message. For the purpose of a notice of termination, a letter of termination must be drawn up. This letter should state the name and address of the employer and the employee. The termination notice itself should be clearly worded and clearly recognizable as a notice of termination. In addition, neither the date nor the signature should be missing. To ensure that receipt can be proven, we recommend handing over the letter of termination in person and having receipt confirmed. If this is not possible, the letter should be sent by registered mail to ensure legal certainty.
Who may sign a letter of termination
While in smaller companies it is often the boss who signs the termination letters, the CEOs of multinational corporations are usually busy with other tasks. In order for a notice of termination to be legally valid, an authorized representative is required who can prove this with a power of attorney. The corresponding deputy(s) can indicate the legal validity of the termination letter by using the abbreviations ppa. or i.V. before signing. A person without power of attorney who indicates by the abbreviation i.A. that he or she is merely acting on behalf of the boss is not sufficient to sign a legally effective termination letter.
How a termination must be justified
In Germany, there are three reasons why an employment relationship can be terminated by the employer:
Termination for operational reasons
A dismissal for operational reasons may be declared if, for economic, technical or organizational reasons, it is impossible or unreasonable to continue employing the employee. Examples of this are
- the closure of a plant,
- staff reductions due to economic difficulties,
- a relocation
- or technological progress that makes certain jobs redundant.
Termination for personal reasons
Termination for personal reasons is based on the employee's characteristics or behavior. Typical reasons for termination for personal reasons are, for example
- Continuous poor work performance with no foreseeable improvement,
- permanent illness or inability to work
- or the inability to fulfill the contract due to a lack of qualifications.
Termination for behavioral reasons
A termination for behavioral reasons can be pronounced if employees repeatedly or seriously violate their contractual obligations or company rules. Typical reasons for this are
- gross violations of working time requirements or confidentiality obligations,
- appearing at work under the influence of alcohol or drugs or consuming drugs during working hours,
- committing criminal acts that permanently disrupt the relationship of trust.
Depending on the severity of the misconduct, termination for cause may also be extraordinary or without notice.
Special protection against dismissal applies in these cases
The legislator grants certain groups of people extended legal protection against dismissal due to their individual characteristics or social situation. These include, among others, the following groups of persons:
After expiry of the agreed probationary period, ordinary termination of a trainee is no longer possible.
People with a severe disability
Severely disabled people benefit from extensive protection against dismissal. Among other things, this provides that in the event of a reduction in the number of jobs for operational reasons, they may take up a suitable, equivalent job in the company. In order for a person with a severe disability to be dismissed, the approval of the Integration Office must always be obtained beforehand. After hearing the severely disabled person, the works council or staff council and, if applicable, the representative body for severely disabled persons and various experts, the Integration Office examines in a decision on a case-by-case basis the extent to which continued employment is ruled out and termination is justifiable. The letter of termination can only be served after the Integration Office has approved the termination.
Once the employer has been informed of an employee's pregnancy, he/she can no longer terminate the employee's employment, namely
- during the entire pregnancy
- up to four months after delivery
- and in case of miscarriage after the twelfth week of pregnancy, up to four months thereafter.
During parental leave and up to eight weeks prior to it, parents can only be dismissed in exceptional cases and with a special dismissal permit. In order to obtain such a permit, employers must submit a written application to the competent state authority for occupational health and safety to prove that the reason for the dismissal is not the loss of work due to parental leave.
Works council and staff council members
Members of employee representative bodies must be able to carry out their activities without fear of sanctions by the employer. For this reason, special protection against dismissal applies to these groups of persons during their term of office and for up to one year thereafter. Ordinary termination is only possible if the entire company is shut down; extraordinary termination requires the prior consent of the employee representative body.
These notice periods must be observed
The date on which the employment relationship is terminated with due notice should be noted on the letter of termination. In the case of ordinary notice of termination, the period of notice depends on the length of service of the employee. During the probationary period, this is two weeks at any time. After the probationary period for employment of up to two years, the notice period is four weeks to the 15th or to the end of a calendar month. From the second year of employment, notice can only be given to the end of a month. The notice periods are then based on the length of service and are as follows:
2 years of employment, 1 month notice period
5 years of employment, 2 months' notice
8 years of employment, 3 months' notice
10 years of employment, 4 months' notice
12 years of employment, 5 months' notice
15 years of employment, 6 months' notice
20 years of employment, 7 months' notice
This is what happens to the vacation entitlement
In principle, employees are entitled to vacation even in the event of termination. If the termination takes place in the second half of the year, they are still entitled to the entire remaining vacation. The situation is somewhat more complicated in the event of termination during the first half of the year. In this case, the months he/she was employed in that year are divided by 12 and multiplied by the vacation days.
Example: If the employee has a vacation entitlement of 25 days and is terminated on 03/31, the entitlement is:
Since the vacation entitlement may not be rounded down, the employee is entitled to seven vacation days until termination of employment. This pro-rata rule also applies to employees who are terminated in the second half of the year, provided they have not been employed by the company for more than six months.
If the employee still has outstanding vacation days after termination, these must be taken before the employment relationship ends. The only exception is if the employee is still training new employees. If it is no longer possible to use up the entire vacation days, the remaining vacation entitlement must be compensated financially. Even in the event of termination without notice, it is no longer possible for the employee to take vacation and it must be paid out in full.
The amount of vacation pay is calculated from the average gross monthly salary of the last 13 weeks or three months. The easiest way to explain the calculation is to use an example.
Example: Three days of remaining vacation can no longer be claimed and the employee earns 2600 euros gross per month with a five-day week. In the last three months or 13 weeks he/she has earned 3*2600 Euro = 7800 Euro. This corresponds to weekly earnings of 7800 Euro/13 = 600 Euro. With a five-day week, this corresponds to a daily wage of 600 Euro/5 = 120 Euro. Since 3 vacation days still have to be compensated, the daily pay is multiplied by 3 in the last calculation step. The vacation pay is therefore: 3*120 euros = 360 euros.
In these cases, severance pay is paid
Although there is no fundamental legal entitlement to severance pay, it must be paid under certain conditions. Namely,
- if a severance payment rule exists as a result of a social plan,
- if a collective bargaining agreement, management agreement or individual employment contract provides for severance pay,
- if the employer and employee voluntarily agree on a severance payment and stipulate it in the contract,
- if the dismissed employee can invoke common law, since dismissed employees generally receive severance pay
- and if the employee is dismissed due to urgent operational requirements, in which case the dismissal letter must explicitly state that he/she is entitled to severance pay after the expiry of the notice period, provided that an action for a declaratory judgment is waived. In this case, the severance payment is regulated by the Dismissal Protection Act and amounts to half a month's salary per year of service.
The role of the works council
Works council members not only have special protection against dismissal, the committee must also be informed before any dismissal. Once this is done, objections to a termination can be raised within three days. Without prior reporting to the works council, a termination letter is invalid in any case.
Every time an employee leaves, the offboarding process, also known as exit management, begins. It is particularly important to approach the exit phase in the most structured and careful way possible. That's why you should check out our offboarding guide: