When the Dismissal Protection Act applies and what justifies a dismissal

A metalworking firm with 14 full-time staff loses a major customer and dismisses a fitter aged 34, father of two, nine years with the firm. It keeps a single colleague who joined two years ago. The labour court declares the dismissal invalid, and the firm owes the salary of €3,200 a month for the seven months the case lasted.

Two thresholds before any review

The Dismissal Protection Act (KSchG) does not require a reason for every dismissal. It only protects employees who clear two hurdles: a personal one, the length of the employment, and an operational one, the number of people employed. Only when both are met must the employer show that the dismissal is socially justified.

The personal threshold is in section 1(1) KSchG. Protection covers anyone whose employment in the same establishment or company has lasted, without interruption, for more than six months. According to case law, what counts is the date the notice of dismissal is received, not the later end of the employment.

An employee who receives the notice on the last day of the six months is therefore not yet protected, even if the notice period runs for several more weeks. Conversely, waiting until the period has passed and only then looking for a reason does not help: from the first day of the seventh month, the firm needs one.

The waiting period is not the same as a probationary period. An agreed probation shortens the notice period, while the waiting period decides whether dismissal protection applies. Both often last six months and run side by side, but they come from different statutes. Notice periods themselves belong to a separate notice-period course, which also deals with holidays and sickness.

The word interruption should be taken seriously. If one employment ends and a new one starts later, the waiting period generally starts again. An employer who rehires someone after a short break should neither assume that the earlier time is safely lost nor that it counts: the courts look at the connection case by case.

The small business and its counting rules

The operational threshold is in section 23(1) KSchG. The First Part of the Act, which contains general dismissal protection, does not apply to establishments that regularly employ five or fewer employees. Apprentices and other persons employed for their vocational training are left out of this count.

Regularly means that the count covers the workforce that normally shapes the business, not the headcount on a random day. A temporary helper for the Christmas season does not lift a business over the threshold. A short staff shortage lowers the regular headcount no more than a temporary peak in demand raises it.

Part-time staff are weighted under sentence 4. Anyone who regularly works no more than 20 hours a week counts as 0.5, anyone working no more than 30 hours as 0.75. Everyone else counts in full. Four mini-jobbers working ten hours a week each therefore add up to only two employees.

Sentence 3 adds a cut-off date. For employees whose employment began after 31 December 2003, general dismissal protection only applies in establishments that regularly employ more than ten employees. For most people employed today, the relevant threshold is therefore ten, not five.

Those hired before the cut-off date keep their protection as long as more than five such long-standing employees work in the business. Staff hired later are not counted towards this threshold of five until the business regularly employs ten. If the old workforce shrinks to five or fewer, their protection lapses too.

In old craft businesses, long-serving employees are often the core of the workforce. Anyone who wants a reliable count therefore needs two pieces of information for every employee: the start date and the regular weekly working hours. The overview below assumes that the waiting period has been completed.

The small-business exception is narrower than many assume. It removes the First Part of the Act but expressly keeps sections 4 to 7. An employee of a small business who considers a dismissal invalid, for instance because of a formal defect, must therefore also sue within three weeks.

A dismissal in a small business can still be invalid. The written form required by section 623 BGB and the special protection rules apply regardless of size. A small business needs no reason within the meaning of section 1, but case law still requires a minimum of social consideration there and forbids arbitrary or discriminatory dismissals.

Three grounds and who proves them

Once an employee is covered, an ordinary dismissal is legally invalid if it is socially unjustified. Section 1(2) sets out what justifies it: reasons relating to the person of the employee, reasons relating to his or her conduct, or urgent operational requirements that stand in the way of continued employment in that establishment.

The burden of proof lies with the employer. Subsection 2 states expressly that the employer must prove the facts on which the dismissal rests. A business should therefore know before giving notice how it will substantiate the reason: absence records, formal warnings, sales figures or the documented decision that removes the job.

A dismissal for personal reasons relates to characteristics or abilities the employee cannot control. The main case is illness. Here, the courts examine whether further substantial absences are to be expected, whether they place a substantial burden on the business and whether the balancing of interests goes against the employee.

A dismissal for conduct requires a breach of duty the employee can control: repeated lateness, unexcused absence, refusal to work. Here the courts generally require a prior formal warning, the Abmahnung. It is not written in the Act; it follows from the principle that dismissal may only ever be the last resort.

A formal warning does two things. It describes the conduct complained of concretely, with a date and an incident, and it announces consequences for the continuation of the employment if the conduct is repeated. General dissatisfaction without an incident or without a warning is not enough. For particularly serious breaches, case law may treat it as unnecessary.

A dismissal for operational reasons rests on a business decision: a department closes, a task is outsourced, a position is cut. The court reviews only to a limited extent whether the decision is wise. It checks closely, however, whether the decision is actually carried out and whether it removes this particular job.

Subsection 2 also names cases in which continued employment is possible in another job in the establishment or company, including after reasonable retraining or on changed terms. The Act links these cases to an objection by the employee representatives; the courts nevertheless check for vacant positions even without one.

In practice this gives an order of steps. First the reason is established and documented, then the employer checks whether a milder measure would do: a warning, a transfer, different terms. An employer who wants to offer different terms can give notice of a change of terms under section 2, which the employee may accept under reservation.

Social selection: four criteria

A dismissal for operational reasons requires a second review. If not every job in a group disappears but only one of several, the employer must choose whom to let go. Section 1(3) KSchG gives the yardsticks for that choice, and many operational dismissals fail precisely at this selection.

The Act names four criteria: length of service, age, maintenance obligations and severe disability. If the employer has not taken them into account, or not sufficiently, the dismissal is socially unjustified despite the operational reason. Performance, absences or personal preference have no place in this weighing.

Only comparable employees are included. According to case law, an employee is comparable if, given his or her tasks and qualifications, he or she could take over the remaining position without a change to the employment contract. Selection takes place on the same level of the hierarchy and relates to the establishment, not the whole company.

Sentence 2 allows individual employees to be taken out. Employees whose continued employment is in the justified operational interest are left out, in particular because of their knowledge, skills and performance or to secure a balanced staff structure. This exclusion is an exception that must be justified, not a free choice.

The burden of proof is split here. The employee must prove the facts that show a faulty selection. However, he or she can ask the employer to state the reasons for the choice made. A business that cannot produce a traceable weighing in response to that request quickly loses the advantage of the burden of proof.

Subsection 4 offers relief. If a collective agreement or a works agreement under section 95 BetrVG lays down how the four criteria are weighted against each other, the court reviews the weighting only for gross error. In practice these are points schemes that assign a certain number of points to each criterion.

Without a works council there is no works agreement, and the relief of subsection 4 falls away. A small business can still use its own points scheme to make its weighing traceable, but the scheme is then reviewed in full. The Act prescribes no point values, so every weighting remains a judgement by the employer.

Subsection 5 concerns larger restructurings. If, in a change to the establishment, the employees to be dismissed are named in a reconciliation of interests with the works council, the operational reason is presumed and the social selection is reviewed only for gross error. This list of names also replaces the works council's opinion on the collective redundancy notification.

The works council before every dismissal

If the establishment has a works council, a formal duty is added. Under section 102 BetrVG it must be heard before every dismissal, and the employer must tell it the reasons. A dismissal given without a hearing is invalid, however good its reason may be.

The works council has one week to raise concerns about an ordinary dismissal and at most three days for an extraordinary one. If it does not comment on an ordinary dismissal in time, its consent is deemed given. An employer who gives notice earlier, before the works council has made its final comment, risks an incomplete hearing.

If the works council objects in due time and form, for example because of a faulty social selection, the employer must attach a copy of its opinion to the notice. If the employee then sues, he or she can demand to be kept on under unchanged terms until the proceedings end with final effect.

Groups with their own protection

Alongside general protection, some groups face additional hurdles before they can be dismissed. These rules largely apply regardless of the size of the business. Pregnant employees and employees on parental leave are protected by dismissal bans with an administrative exception route; they are described in detail in a separate maternity-protection course.

Under section 168 SGB IX, severely disabled people may only be dismissed with the prior consent of the Integration Office, and under section 169 the notice period is at least four weeks. The office should decide within one month. Once consent has been served, the employer has one month to give notice.

Section 173 exempts, among others, employment relationships that have not yet lasted more than six months when the notice is received, and cases in which the severe disability has not been established at that time. Independently of this, severe disability counts as the fourth criterion of the social selection.

Under section 15 KSchG, members of the works council can only be dismissed for good cause, and only with the consent of the works council or a court decision replacing it. The protection continues for one year after the term of office ends. Similar rules apply to electoral boards, candidates and employees who call a works council election.