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Once is (not) enough – Dismissal without notice under German labour law

Is it legal to terminate the employment contract, without notice, of a woman who has worked as a checkout operator for thirty years because she misappropriated deposit receipts for bottles and cans with a total value of EUR 1.30? In certain circumstances, it definitely is!

How can you dismiss an employee under German labour law?

Employers have various options available to them when they wish to dismiss employees. The “normal case” is known as ordinary dismissal (termination of the employment relationship after the expiry of a notice period). In an “extreme case”, extraordinary dismissal is also possible. The extraordinary dismissal, in turn, can be with or without notice. Given the high degree of practical relevance, this article will focus on extraordinary dismissal, without notice, (immediate termination of the employment relationship).

Extraordinary dismissal, without notice

An extraordinary dismissal, without notice, should be specifically referred to as such. It must be supported by one of the following reasons:

  • person-related reasons (e.g. long-term illness of the employee),
  • operational reasons (e.g. a works closure) or
  • conduct-related reasons (e.g. employee misconduct, under their control).

Extraordinary dismissal without notice on conduct-related grounds has the most relevance in practice.

The misappropriation of deposit receipts valued EUR 1.30 by a supermarket employee constitutes misconduct. Known as the "Emmely case", significant media interest in 2008 and 2009 made it one of the best-known cases in the more recent German labour court case law. While both the Labour Court (first instance) and the Regional Labour Court (on appeal) considered the dismissal justified, the German Federal Labour Court viewed the dismissal in this case as disproportionate and therefore declared it invalid.

Depending on the specific circumstances, the misappropriation of something of low value could justify termination of employment and the dismissal can be valid. This article will use the "Emmely case" to illustrate the requirements of an extraordinary dismissal without notice.

Extraordinary dismissal without notice – the requirements

Imagine the extraordinary dismissal without notice as a two-story building. The first floor is supported by four pillars (formal requirements), while three pillars support the second floor (substantive requirements). Employers should carefully assess these “pillars” before issuing a letter of extraordinary dismissal without notice. If one of the pillars is missing, the whole building could collapse.

The four pillars supporting the first floor – formal requirements

Employers must observe the following formal requirements:

  • Right to issue a letter of dismissal (first pillar)
  • Written form (second pillar)
  • Two-week period for delivery of the letter of dismissal (third pillar)
  • Works council hearing (fourth pillar)

Right to issue a letter of dismissal (first pillar)

The person who issues a letter of dismissal must have the right to do so. In general, the employer will have the right to issue a letter of dismissal. For a stock company (Aktiengesellschaft – AG), this will be in the form of the executive board, for a limited company (Gesellschaft mit beschränkter Haftung - GmbH), it will be the managing director. In the case of representation, e.g. by authorised officers (Prokuristen) or chief representatives (Generalbevollmächtigte), the power of attorney, in original, signed by the employer, should normally be provided together with the letter of dismissal (copies, faxes and emails are insufficient). Failure to do so can mean that the dismissal is rejected, making it ineffective as a result.

Written form (second pillar)

The letter of dismissal must be issued to the employee in written form, which means the signature on the letter must be original. It is imperative that employers ensure that this is done properly and provide appropriate evidence (Caution: this is prone to error). Emails and faxes are not sufficient. Generally, the letter of dismissal does not have to state the reason for the dismissal. However, in certain circumstances set out in law (or in the contract), the reasons must be stated (e.g. when the employee in question is pregnant). In all cases, the employer must provide the employee with the grounds for dismissal in writing without delay upon request.

Two-week period to deliver the letter of dismissal (third pillar)

The letter of dismissal must be delivered to the employee in written form within a period of two weeks; the employer should also ensure that they have proof of delivery. This time period begins when the person, who has the right to issue to the letter of dismissal, becomes aware of the facts that are decisive for the dismissal.

Works council hearing (fourth pillar)

If there is an employee representative, in other words, a works council, it must be heard before the letter of extraordinary dismissal without notice, can be issued. Specific formal and substantive requirements must also be respected. Once the three-day deadline for comments from the works council has expired, the employer can issue the letter of extraordinary dismissal without notice, theoretically even if the works council objects. In certain circumstances regulated by law, the approval of the works council is required to dismiss employees that belong to certain categories.

Caution: In addition to these four pillars, the employee must be heard prior to the issue of the letter of dismissal where the employee is to be dismissed on a mere suspicion of a serious breach of duty (so-called dismissal on the basis of suspicion, see below under “Demonstrability: dismissal based on facts v suspicion”).

If even one of the formal requirements is not fulfilled, the letter of dismissal will generally be invalid.

The three pillars of the second story – substantive requirements

Before issuing a letter of extraordinary dismissal without notice based on misconduct, the employer should always assess whether:

  • there is a "serious ground" (first pillar),
  • a written warning was issued or was not required (second pillar) and
  • the balance of interests, taking all circumstances into account, is in the employer’s favour (third pillar).

"Serious ground" (first pillar)

First, the facts must “in themselves” be able to constitute a “serious ground” for the dismissal. “Serious grounds” typically include offenses against property, which detrimentally affect the employer, or similarly serious acts of a non-criminal nature. The German Federal Labour Court viewed the one-off misappropriation of deposit receipts with a value of EUR 1.30 as a “serious ground”. It still caused a loss of trust, regardless of the small value of the property involved.

In the case law, there was found to be a “serious ground” in the following cases:

  • a gross affront to the employer (e.g. calling the boss an “arsehole”)
  • persistent refusal to work
  • a declaration of a future refusal to work
  • making false claims with respect to working hours
  • theft (even of things of little value)
  • using future illness as a threat
  • violence among colleagues
  • unauthorised taking of leave
  • lateness
  • working extremely slowly or making errors
  • breaches of the ban on smoking or alcohol

Issue of a written warning or a warning was not required (second pillar)

The purpose of the extraordinary dismissal without notice is to avoid future disruptions to the employment relationship. If the employer can fulfil this purpose through a less restrictive measure, then that measure has to be used. The written warning, in particular, is one such less restrictive measure, as it warns the employee and asks them to fulfil their employment contract (caution: very prone to error!). As a rule, therefore, the termination of the employment contract of an employee due to misconduct requires (at least) one written warning. Only when the employee breaches their duties again in a comparable fashion may a letter of dismissal be issued.

Only in exceptional cases may a letter of dismissal be issued immediately, without first giving the employee a written warning:

  • First, this will be the case when the employee is not expected to change their conduct in the future, even after they have received a written warning. Example: breaches of duty resulting in a loss of trust (misuse of the expense account; serious declaration by the employee that they do not intend to change their conduct, among others).
  • Second, this will be the case when the breach of duty is so serious, that the employee should easily recognise that their conduct would not be tolerated by the employer. Example: significant breaches of duty resulting in a loss of trust (theft, where the employee took steps keep the theft secret or repeated the offence; continued and deliberate false claims with respect to working hours, among others).

In light of these requirements, the German Federal Labour Court viewed the extraordinary dismissal without notice as invalid, for example, in the case of an employee, who misappropriated deposit receipts worth EUR 1.30 after 30 years of employment without incident. A written warning would have been the necessary and appropriate measure to avoid the risk of a future disruption to the employment relationship. While there may have been a loss of trust, the many years of employment without incident meant that trust was not irreparably destroyed. In particular, the written warning was required because the employee had not sought to cover her tracks. She could therefore assume that her conduct would be tolerated or could be corrected.

In line with this criterion, two outcomes are conceivable: if a written warning is necessary (as is the rule), it must first be issued. This will “use” the specific breach of duty, and a letter of dismissal may be issued for a further, comparable breach of duty. If, exceptionally, a written warning is not required, a letter of dismissal may be issued immediately.

Balance of interests (third pillar)

The specific extraordinary dismissal without notice must be justified in light of the special circumstances of the case, taking into account a weighing the interests of the contractual parties (employer and employee), and it must be proportionate. The “serious ground” must be so significant that the employer cannot be reasonably expected to continue the contract until the expiry of the notice period or the end of the agreed contractual term. How is the employer supposed to find this out? The employer must weigh up the following factors: importance and impact of the violation of the contractual duty (loss of trust and economic consequences), degree of fault of the employee, possible danger of reoccurrence, duration of the employment relationship and whether or not there have been any previous incidents. In our example, the 30 years of employment without incident tipped the balance in favour of the employee. In addition, the employer had to show that all possible less severe options would have been unreasonable. In addition to the written warning, ordinary dismissal (termination after the expiry of the statutory notice periods) must always be considered.

Demonstrability: dismissal based on facts v suspicion

The employer issues a letter of dismissal based on facts when he is convinced that the employee has actually breached his or her duty and the employer can prove this breach. An employer may also base dismissal on a suspected breach of duty, whenever the employer is not convinced that there was an actual breach of duty and/or is unable to prove it (so-called dismissal based on suspicion). The dismissal based on suspicion may only be used when a very serious breach of duty is suspected (e.g. an allegation of sexual harassment of a colleague) and only to the extent that the suspicion is based on reliable facts.

Conclusion

All of the above requirements are prone to error and can easily be overlooked in practice. However, this can be very expensive for employers. In addition to the requirements outlined in this article, there are numerous details that must be taken into account. Moreover, there are some “devices”, which can be used to provide additional support for the "building" of the extraordinary dismissal without notice. Drafting employment contracts, for example, can set the course for the future e.g. key contractual duties can be set out in the employment contract in order to clarify that a breach of one of these duties is serious (keyword: “serious ground”). From the drafting of the contracts to issuing the letter of dismissal, and to possible court proceedings: well thought out procedures are advisable and, if followed, can ensure the dismissal is successful. We therefore recommend that you seek comprehensive advice as early as possible – it can make the decisive difference.

If you have any questions related to this topic, please feel free to contact Florian Denninger (Lawyer).

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