Explain the steps to be taken in relation to litigation

Compensation for ineffective termination in labor law


Conflicts in labor law: the court often decides

The claim for damages after the termination of the employment relationship arises if the employer was already aware in advance of the termination that it is ineffective under labor law.

When is a termination invalid?

The effectiveness of a termination is often difficult to predict in Germany. The saying that you are in God's hands in court and on the high seas is particularly true in labor law. Even if you have done everything right formally, it can happen in the context of an action for protection against dismissal that the responsible labor court assesses the matter fundamentally differently. What happens now If the termination is ineffective according to the judgment, the employment relationship continues. If you as an employer could have recognized this beforehand, the question of compensation for the wrongly dismissed employee is often in the room.


Compensation for termination without notice

As the name suggests, termination without notice is a legal act with immediate effect. There must be good reasons for such a drastic measure. The basic guideline here is that the employer cannot be expected to continue the employment relationship. However, the legal hurdles are high in order to adequately protect employees from arbitrary, immediate dismissals.

Understandable reason for termination decides

Assaults by the employee with serious injuries or theft of the employer's property justify termination without notice in any case. In many other cases, however, there are gray areas for assessing the reasonableness of continued employment. If a labor court decides that the facts are not sufficient for a termination without notice, there is usually a claim for compensation for the dismissed employee.

A reason is not necessary in the context of a termination without notice. In this respect, you should always keep letters of termination as short and sober as possible, so as not to create problems afterwards that lead to the ineffectiveness of the termination and, as a result, to claims for damages.


Compensation for ordinary termination

In the case of ordinary termination, the employment relationship is terminated at the earliest possible point in time that the employment contract allows. This period is normally extended if the employment relationship has been in existence for a longer period of time. Important: Even for an ordinary termination, neither the employer nor the employee need to provide a reason.

Avoid dismissal protection lawsuits

Unless it is a small business, dismissal is usually followed by an action for protection against dismissal. In this context, the employee sues that the termination was ineffective and that the employment relationship continues.

If you gave reasons in the termination, you are now committed to them. This takes away the flexibility that can be crucial in a legal dispute. For example, in some cases a personal termination has little chance of success, while an operational reason for termination can be proven. As a rule, it becomes even more difficult if the termination is justified several times (personal, behavioral and operational). Under these conditions, the appealed labor court is usually pricked up and hooks up with each of the reasons mentioned individually. This means that you must present and explain all of the reasons mentioned convincingly.


Compensation in the event of termination by the employee

In exceptional cases, the employee can also claim damages even though he or she has terminated the employment relationship himself. Such a scenario is conceivable if the termination without notice occurred for reasons for which the employer is responsible.

In order to avoid litigation costs, it often makes sense to respond to the employee's claims at an early stage and to conclude a termination agreement that finally clarifies all open questions from the previous employment relationship.


Procedure: action for protection against dismissal due to ineffective termination

If a notice of termination has been given, the employee concerned has three weeks to file an action for protection against dismissal. The legality of the termination is checked as part of the subsequent procedure. The following verdicts are relevant to employers.

Dismissal protection suit ends in settlement

Even if the wording of the dismissal protection suit is made with the aim of continued employment, it is usually aimed at a severance payment for the loss of the job. The dispute then regularly arises about the amount of the severance payment to be paid.

Compensation for ineffective termination

The rule of thumb here is half a month's salary per year of service. After twenty years in the company, this results in ten monthly salaries.

A court settlement will be reached on the payment of the severance payment. This often includes other points such as the creation of a benevolent, qualified job reference.

Conclude comparison with foresight

When finalizing the settlement, pay attention to the details in order to protect yourself legally for the future. Include a clause stating that this settlement settles all claims resulting from the employment relationship. This means that claims for damages that are filed later are no longer possible. You should only refrain from this wording if you would like to reserve the right to claim damages against the former employee. These would be forfeited by the clause.

Dismissal protection suit ends with judgment

If there is no agreement between the parties in the course of the proceedings, this ends with a judgment by the labor court.

Company wins

If the court ruled in favor of the defendant company, there is no longer any risk of claims for damages. However, the plaintiff can go to the next instance. Provided the state labor court decides otherwise, the plaintiff now has several options.

Claimant wins

If, on the other hand, the labor court finds that the termination was ineffective, it may be expensive for you. The employment relationship will be restored in its previous form and the plaintiff may have claims for damages.

If the employment relationship is actually resumed, there is initially a certain chance that there will be no legal action at all, because the employee is also interested in a peaceful progression of things at the end of the dispute.

The situation is different if the resumption only takes place in order to be able to apply from a position that has not been terminated. In this case, there may be another lawsuit. The labor court also examines whether, for what and to what extent claims exist.


Requirements for claims for damages

There are three basic requirements for claims for damages against the employer after a dismissal:

  1. The termination was ineffective
  2. The employer has violated his duties
  3. The employee suffered financial damage as a result of the dismissal


Breach of duty by the employer

Before you can be held liable for the resulting damage, there must be evidence of a breach of duty of care. In the case of an obligation, such as an employment contract, this can be done intentionally or negligently (Section 276 of the German Civil Code).

Negligent breach of duty

There is always negligence when the “due care required in traffic has been disregarded” (Section 276 (2) BGB). This means that you as an employer are obliged to check carefully whether the planned termination will be effective before issuing a notice of termination. If a simple check of the facts reveals that the termination will be ineffective for obvious reasons known to the employer, then there is a clear breach of duty.

Willful breach of duty

The employer deliberately violates his obligations if he could not only see that the termination is likely to be ineffective, but knew it positively. If evidence can be presented that the employer deliberately intended to harm the employee through an invalid termination, the judgment in the matter of compensation will be all the quicker and clearer.

While negligent neglect of duties of care may only result in partial blame or a settlement is possible, a successful defense in court proceedings becomes virtually impossible in the event of a deliberately unlawful termination.


Possible claims for damages by the employee

Actual damage suffered by the plaintiff as a result of the termination is necessary for the action to be brought. Due to the nature of the termination, it is almost always a question of clearly quantifiable financial damage.

Unemployment costs

Upon receipt of the notice of termination, employees are obliged to register as unemployed with the agency responsible for them at the Federal Employment Agency. Otherwise they face a blocking period for receiving unemployment benefits. Following the report, the former employee will probably have to attend several placement appointments with the authorities. The employee spends not only time on this, but also travel costs. Additional costs are often incurred for applications and trips to job interviews. These expenses can also be reclaimed if necessary.

Overdraft interest current account (overdraft facility)

If the termination was given without notice, the employee has a significant loss of earnings overnight, as the unemployment benefit is not paid out immediately and only partially covers the previous income. This means that the usual running costs for rent, electricity, club fees, etc. can quickly lead to an overdraft of the current account. If the process takes a long time, the interest burden increases accordingly. Since the financial distress was caused by the dismissal of the employer, a claim for compensation for the accrued interest costs can arise.

Dissolution of private or company pension schemes

In order to absorb the financial damage caused by a termination, many employees use reserves such as their private retirement provision. The termination of the corresponding contracts almost always results in a financial loss to the detriment of the employee. The consequences are even more drastic if the company pension plan was terminated in the course of termination. In these contexts, too, claims for damages may be asserted due to financial losses.


The social selection in the event of operational dismissal may also have been made in a discriminatory manner for the plaintiff. If this is determined in the context of the dismissal protection lawsuit, there is a legally stipulated claim to compensation under the General Equal Treatment Act (Section 15 AGG).


Strategy for the dismissal protection process

In the defense against dismissal, you should clearly state how you weighed up the reasons for dismissal to the detriment of the employee. It is important that you explain your decision-making process to the court in a plausible manner and in a comprehensible manner in individual steps.

This not only increases the chances that the termination will be considered effective, but also reduces the risk that the former employee will be able to assert claims later.


Conclusion on compensation for ineffective termination

If the termination of an employment relationship is ineffective, claims against the former employer are not uncommon.

  • With a termination without giving the reasons, you can better defend against the dismissal protection suit
  • But: dismissal protection suits often end differently than expected
    • Comparison (payment of a severance payment)
    • Plaintiff wins
  • Risks of the dismissal protection suit
    • Ineffectiveness of termination
    • Resumption of employment
    • Claims for damages in further proceedings
  • Prerequisite for claim for damages in labor law
    • Ineffective termination
    • Proof of financial damage incurred
    • Breach of duty by the employer
  • Claims for damages for several areas of life
    • Loss of salary
    • Interest on the overdraft facility
    • Dissolution of personal reserves / retirement provisions
    • Discrimination


The information published on our site is all written and checked by experts with the greatest care. However, we cannot guarantee the correctness, as laws and regulations are subject to constant change. Therefore, always consult a technical expert in a specific case - we will be happy to put you in touch.

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