Dismissal for “operational reasons” in Germany – what you need to know

A termination for “operational reasons” can be legal in Germany if the job position of the employee who is terminated is abolished. However, there is a relatively high bar with several criteria that need to be met. For example, it is a requirement that the employer cannot continue to employ you at another, similar job position. Also, an employer must determine which employees will be made redundant as part of a “social selection” process. Exemptions may apply to very small SMEs. Also, there is special protection for certain groups of employees. Last, but not least: Employers will often offer a severance payment with the termination in the event that the employee does not file a lawsuit against unfair dismissal.

What is a termination for “operational reasons”?

Operational termination is the most common type of termination in Germany. According to a recent study, around two-thirds of all employees who have been made redundant are dismissed for “operational reasons”, e.g. because a department has been closed or work processes have changed (Link).

A termination for “operational reasons” occurs when the employer terminates an employment relationship due to the loss of the job position. Within the scope of the Protection against Unfair Dismissal Act (Kündigungsschutzgesetz – KSchG), an employment relationship in Germany may only be terminated for “operational reasons” if the job position exists no more and the employee cannot continue to be employed in another position. If several comparable employees are affected, the employer must select the employees he wants to terminate according to certain social criteria (the so-called “social selection”).

When making such social selections, the employer must take sufficient account of the length of service, age, any maintenance obligations, and any severe disability of the employee. At the request of the employee, the employer must inform the employee of the reasons that led to the social choice made.

When does the Employment Protection Act apply?

The Dismissal Protection Act creates special protection against dismissal. In order for you to be able to invoke it, two conditions must be met:

Waiting period: The employment relationship must have existed in the same company or company for more than six months without interruption (§ 1 Para. 1 KSchG).

Company size: The law on protection against dismissal only applies to companies with more than ten employees.

When is a dismissal for operational reasons permissible?

If the Dismissal Protection Act is applicable, the employer may only give notice if the downsizing is operationally necessary and the specific job of the employee has been eliminated. Examples include the closure of businesses and branches. Changes in work processes or a drop in orders can also mean that certain jobs are lost.

The employer must explain to the labor court to what extent his entrepreneurial decision has led to the permanent loss of the job. However, the labor court only reviews whether the decision is obviously irrelevant, unreasonable or arbitrary.

A mere reference to expiring orders and the lack of follow-up orders is not enough to justify a permanent loss of jobs. Rather, the employer must use its order and personnel planning to show in detail why the order situation not only fluctuates in the short term, but also why the forecasts are bad.

What should be considered in the case of dismissal for operational reasons?

If you have been dismissed for operational reasons, it is first important that you act quickly: You can only bring an action for protection against unfair dismissal at the labor court within three weeks. Your employer may have offered you a severance package so you wouldn’t sue. In any case, the prospects of success of your lawsuit and the offer from your employer should be checked by a specialist lawyer for labor law, because your job or a large sum of money is at stake! A first opportunity to check your claims can be found here:

* A note about our wording. We do not always “gender” – E.g. when we are talking about employees. But we are trying to keep things simple. German labor law is complex enough. For the sake of  clarity and legibility in our texts, we have therefore decided to omit most gender formulations.

You can find more information about what to look out for here: