Dismissal: When are employees entitled to severance pay?

Dismissal: When are employees entitled to severance pay?

The job is gone, but at least a severance payment from the employer? When this can be the case with redundancies - and why claims for severance pay are rare.

Being made redundant is a dreaded prospect for many employees. Some may at least hope for a severance payment. But when are you actually entitled to this after being dismissed by your employer?

First of all, if the employer terminates an employment relationship effectively and with due notice, employees are not legally entitled to severance pay. "Severance pay claims are relatively rare in employment law," says Johannes Schipp, a specialist lawyer for employment law in Gütersloh. "Most cases in which severance solutions are reached as a result of dismissals are actually agreements that either the parties to the employment contract reach between themselves or that are decided in the form of a settlement at the labor court."

In these cases, the employer pays a severance payment in return for the employee accepting the validity of the dismissal. This applies regardless of whether the dismissal would have stood up in court or not. According to Schipp, employers and employees thus avoid the often undesirable outcome of having to continue working together in the event of a successful dismissal protection claim. This is because if a labor court were to decide that the dismissal is invalid, for example because there are insufficient grounds for dismissal, the employment relationship would continue - without any entitlement to severance pay.

Another employment relationship is not reasonable

There are only exceptions to this in rare cases, "if the employee or employer cannot reasonably be expected to continue the employment relationship despite the invalidity of the dismissal", explains Schipp. According to Section 9 of the Dismissal Protection Act, in this case the labor court can terminate the employment relationship at the request of the employee or the employer and order the employer to pay an appropriate severance payment.

As a rule, however, the bar for this is "very, very high", emphasizes the specialist lawyer. Only in the case of senior employees who are authorized to independently hire and fire staff is such an application for termination by the employer possible without giving reasons.

Severance pay for dismissals for operational reasons

There is another option for dismissals for operational reasons: the employer can announce a severance payment in the notice of termination in the event that the employee does not take legal action against the dismissal. In this case, the severance payment must be at least half a gross monthly salary per year of employment. This is regulated in Section 1a of the Dismissal Protection Act.

In addition, industry collective agreements can provide for severance pay in the event of redundancies for operational reasons. If a company closes or there are redundancies due to a restructuring in the company, the works council also negotiates a social plan. This usually stipulates severance payments for the loss of employment, to which employees are then entitled.

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1. In some instances where a dismissal is deemed invalid by the courts of justice, an employer may be required to make a severance payment to the employee, as stipulated by Section 9 of the Dismissal Protection Act, if continuing the employment relationship becomes unreasonable for either party.
2. During unemployment, seeking advice from a legal advisor could be beneficial when dealing with legal issues related to severance payments and potential claims for unfair dismissal.
3. The rarity of severance pay claims in employment law is largely due to agreements reached between the parties involved or settlements at the labor court, resulting in a severance payment from the employer in exchange for the employee's acceptance of the validity of the termination.
4. Judgments handed down by the courts of justice in cases involving disputes over severance payments can have a significant impact on future employment relations and may set a precedent for similar situations.
5. In cases of dismissals for operational reasons, an employer may offer severance payments as stated in Section 1a of the Dismissal Protection Act, which requires a minimum payment of half a gross monthly salary per year of employment, or as stipulated in industry collective agreements during restructuring or company closure.

Source: www.ntv.de