13. May 2016

Termination of employment – Part 3: on operational grounds

In German employment law, an employer may terminate an employment contract only under strict conditions. If the employment has lasted for more than six months and the company employs more than ten workers, a termination is only effective if it is socially justified, that is if the termination is based on behavioral, personal or operational grounds.

A termination on operational grounds is socially justified if it is based on compelling operational requirements which preclude the continuation of employment. As a result, an employment may be terminated when the need to employ the worker has ceased to exist and his position cannot be made available in future.

The compelling operational requirements may be the result of internal or external circumstances. Internal circumstances refer to operational constraints, the outsourcing of work or organizational changes (more efficient work organization, productivity improvements etc.). External circumstances include, among other things, a lack of orders.

A termination is ineffective despite compelling operational requirements if a different job of equal or inferior value is available. The opportunity for continued employment not only refers to the specific facility, but also to the company as a whole – but not to the corporation. If appropriate jobs become available during the notice period, a termination on operational grounds is again ineffective.

If not all comparable jobs are cut, the employer is not free to decide which employees to dismiss. He must identify those who are least deserving of protection in a social selection procedure. The criteria that determine protection are seniority, age, maintenance obligations and any severe disability. Within narrow limits, the employer may also exclude high achievers (whose continued employment is in the legitimate business interest of the company because of their knowledge, skills and services) from the social selection procedure and continue to employ them.


Julius Jacoby

Arbeitsrecht, Wirtschaftsrecht, Internationales Recht

Julius Jacoby