Company closing & German law: what to do in case of layoffs

15. March 2023
  • Labour Law

Is your company facing staff cuts, redundancies or even closure? If your employer dismisses “redundant” staff, here you can read in which cases German labour law protects you and what you can do about it.

By Rupay Dahm, specialist lawyer for labour law, Berlin

Your management wants to lay off staff for operational reasons? German employment law protects you against dismissal if

  1. you’ve been employed for at least 6 months,
  2. in a company with more than 10 employees (more details see here).
  3. In this case, the company has to prove that the “social selection” (Sozialauswahl) was carried out correctly.

But before going to court, here are some practical first steps that might help in the irritating situation of looming layoffs:

  • Talk to your colleagues who might be facing the same situation. You always have the right to talk to colleagues about internal problems even if some managers don’t appreciate open discussions. (For example, contracts that forbid talking about your salary are invalid!) Discussing the situation with your teammates can help finding a joint strategy instead of everyone dealing with the situation on their own. You can also make an appointment with us as a group in order to reduce costs.
  • Contact your labour union: they offer free legal advice and representation if you don't have a legal cost insurance.

Establish a Works Council (Betriebsrat). In every company with at least 5 employees a Works Council should be set up. Any employee can initiate the establishment of a Works Council, even if you have a part-time, limited or mini-job contract. Find out more about how to set up a works council.

  • The Works Council is entitled by law to negotiate severance payments or other compensation in case of layoffs (§§ 111, 112 BetrVG).
  • The costs for establishing the works council (training, consultation, Literature, Soft- and Hardware etc.) are covered by the employer i. e. by the company. You as employees do not bear any costs.
  • If you initiate a works council, you are protected against dismissal. Obstructing the establishment or election of a works council is a crime (§ 119 BetrVG).
  • There is no statutory entitlement to a severance pay in the event of termination in German law. However: if a works council negotiates a “Social Plan” (Sozialplan und Interessenausgleich) according to sec 111 and 112 Works Constitution Act the employer and the works council often agree on a regulation that includes a provision for severance pay.
  • Important! Once you have received a letter of termination, you need to file suit at the labour court within 3 weeks after receiving the termination notice. Otherwise, there is absolutely nothing we can do about the termination!

If you face layoffs or you consider establishing a works council, please feel welcome to contact us.