"So test, therefore, who join forever!" – Trial periods in an employment relationship
Employees, in particular start-ups who have little money or time to waste, should make good use of probationary periods in employment relationships. Trials serve as a time to test something before the position is solidified. You test wine at a restaurant before drinking it, go for a test-drive in a car before buying it, you don’t get married at first sight, and thus a new employee should be put to the test in a trial period, too. The regulation of a "trial period" in an employment relationship is quite different from how such trials are commonly understood.
The probationary period as a shorter notice period
The trial period – as German law understands – is set out in § 622 para. 3 of the German Civil Code (Bürgerliches Gesetzbuch, BGB):
"During an agreed probationary period, at most for the duration of six months, the employment relationship may be terminated with a notice period of two weeks."
In an employment agreement, a "probationary period" within the meaning of § 622 para. 3 BGB merely regulates the notice period during that probationary period. By agreeing to a trial period, a notice period of two weeks applies for the duration of that trial period. Rules – which are otherwise common – requiring the notice period to end on a specific termination date (e.g. end of the month, quarter or year) do not apply. You do not need to specifically agree on this brief notice period. However, you may agree on a longer notice period for this trial period. The "probationary period", as established by German law, merely means that the short two-week notice period applies for the first six months of the employment relationship at the most. For start-ups, a short notice period and the ability to terminate at any time makes sense because employees, who don’t work well in the team or don’t perform do not need to be unnecessarily "carried" and paid for a long time.
The trial period as a waiting period
The trial period – as it is commonly understood – is regulated in § 1 para. 1 of the German Protection of Employment Act (Kündigungsschutzgesetz, KSchG):
"The termination of an employment relationship of an employee who has been employed in the same establishment or the same company without interruption for more than six months is legally invalid if it is socially unjustified."
During the first six months of an employment relationship, the termination of that relationship will be justified – without the need for an explicit rule in the employment agreement – without grounds for dismissal within the meaning of the German Protection of Employment Act. Any notice of termination issued during the first six months of the employment relationship may not be vexatious, arbitrary or discriminatory. Pursuant to § 1 para. 1 of the German Protection of Employment Act, the issuance of a notice of termination will be permissible during the waiting period if the employee simply "does not fit".
Waving the trial period means waiving the shorter notice period
If a start-up has an employment agreement which contains a clause, such as "no trial period is agreed", it does not mean that the parties have agreed to waive the six month waiting period to postpone the general protection against unfair dismissal under § 1 para. 1 German Protection of Employment Act. It merely clarifies that no trial period within the meaning of § 622 para. 3 BGB has been agreed and, therefore, that the shorter notice period does not apply. The termination of the employment relationship within the first six months without grounds for dismissal is therefore still permissible (see judgment of the German State Labour Court (Landesarbeitsgericht, LAG) of Baden-Württemberg of 18 June 2019 in Case No. 15 Sa 4/19).
TIP: A notice of termination may still be issued on the last day of the "probationary period".
There is a rumour that any notice of termination issued during a trial period will only be permissible when the notice period ends within that trial period. An example: an employment relationship starts on 1 January 2020 so that the waiting period expires on 30 June 2020. If this rumour is right, the notice of termination would have to be issued to the employee with at least the two-week notice period left before the end of the trial period, i.e. it would need to be issued by 16 June 2020 at the latest. This rumour is incorrect. It is sufficient for the notice of termination to be delivered to the employee on the last day of the "trial period". In the example, therefore, a notice of termination issued on 30 June 2020 would mean that the employment relationship ends on 14 July 2020.
Extending the trial period
Start-ups often also ask whether a trial period can be extended. This question does not mean that the parties agree to extend the duration of the period in which shorter notice periods apply in accordance with § 622 para. 3 BGB, but that the German Protection of Employment Act should not apply for a period longer than six months.
If the employer realises that the cooperation with the employee is not working or that the employee does not fulfil the requirements, is not sympathetic or does not work well in the team, their employment should be terminated "during the trial period". This is particularly true for smaller entities, such as start-ups. Six months is actually quite a long time to "test" an employee. In our experience, an employee that has not demonstrated the suitability within six months is unlikely to prove the worth after the six months either. Still, we have employers and start-ups asking again and again whether a trial period can be extended. An extension of the trial period either in terms of an extension of the waiting period before § 1 para. 1 German Protection of Employment Act applies or in terms of the extension of the period in which a shorter notice period may apply in accordance with § 622 para. 3 BGB, is inadmissible. Nevertheless, the courts have recognised a possible "extension of the trial period" as being permissible.
Fixed-term employment agreements with and without objective grounds
If, shortly before the expiry of the six month trial period, the employer is not sure whether he wants to continue working with the employee or not, the employment relationship and the trial period may be extended by a fixed-term agreement without objective grounds for that fixed term within the meaning of § 14 para. 2 of the German Part-time and Limited-term Employment Act (Teilzeit- und Befristungsgesetz, TzBfG). A fixed-term employment agreement without an objective reason for the fixed term requires there to have been no prior temporary or permanent employment relationship with the same employee. This requirement would not be fulfilled where there was a previous trial period as an employment relationship existed during that trial period.
Conversely, an agreement may always have a fixed term when there is an objective reason for that fixed term. In practice, it is often difficult to find an objective reason within the meaning of § 14 para. 1 of the German Part-time and Limited-term Employment Act for an "extension" of the trial period (e.g. cover for another employee, a fixed term based on a court-approved settlement).
Shorter notice periods generally apply during the trial period. As a result, the case law permits a "trial period extension" where the employment relationship may be terminated or ended by concluding a termination agreement during the trial period with a longer, appropriate notice period rather than the shorter notice period, in order to allow the employee to be tested for a longer period. This de facto extension of the trial period "outsmarts" the German Protection of Employment Act. The issue of the notice of termination or conclusion of the termination agreement occurs during the trial period as at the point of time the German Protection of Employment Act does not yet apply. The Act will, however, apply when the employment relationship ends. For the extension of the trial period to be permissible, the following requirements must be met:
- there may not be a significant extension of the normal short notice period of two weeks during the trial period, a three to four-month notice period is an appropriate duration;
- the employee must be informed that they have failed to prove themselves during the trial period and that they now have a further chance to prove themselves;
- the "trial period extension" may not only be or may not primarily be in the interests of the employer (e.g. to bridge personnel shortages);
- the employee must have the chance to be reinstated (reinstatement guarantee); and
- in the case of a termination agreement, typical elements such as a release from duties, a written reference, severance or the return of company property must be regulated.
In light of these criteria, an employer, who considers that the employee has failed to pass the trial period, may, instead of terminating the employment relationship with a short notice period normally of two weeks, give the employee an additional chance to prove themselves. In accordance with the case law of the German Federal Labour Court (Bundesarbeitsgericht, BAG), the employer must provide a clear and longer notice period or conclude a termination agreement and guarantee that the employee will be reinstated should they prove themselves.
Termination instrument: notice of termination, termination agreement or winding-up agreement
An unilateral notice of termination issued by the employer, a termination agreement or a winding-up agreement (Abwicklungsvertrag) may be used to terminate the employment relationship during the trial period with a longer notice period in which to test the employee. Compliance with all formalities must be ensured, for example, the issue of a notice of termination requires written form and the possible previous hearing of the works council.
Maximum extension of the trial period
The German case law is not entirely clear on for how long a trial period may be extended. There should be an appropriate relationship between the notice period under the agreement, statute or collective agreement during the trial period, which is often only two weeks, and the extension. There is agreement that the longest possible relevant notice period should not be exceeded in any case. According to § 622 BGB, the longest possible notice period is seven months. In various judgments, the German state labour courts have held that it is permissible to extend a trial period by a notice period of three or four months.
Information for employees
In order to prevent that a fixed-term employment agreement without a justifiable reason for the fixed term is found to be unlawful, the employee must be informed that he failed to prove himself during the trial period and that the employer is giving the employee another chance to prove himself until the end of the employment relationship. In addition, the employer must promise the employee that he will be reinstated if he uses this second chance and proves himself before the end of the notice period. It is imperative that the notice of termination, termination agreement or winding-up agreement contain the keywords "further chance to prove yourself" and "the prospect of reinstatement".
The notice of termination, termination agreement or winding-up agreement may not mention that the longer trial period is for operational reasons because this would document that the extension is only or is primarily in the interests of the employer, e.g. due to staff shortages.
"Everything must come to an end…" even the employment relationship. In many cases, it is advisable to use a trial period to conclusively terminate the employment relationship. Start-ups will save a lot of time, money and hassle. If a trial period is to be extended, it is vital that all criteria are met and, in particular, that the extension is not for more than three or a maximum of four months.