Dismissal Rules Loosen for Germany's High Earners as Coalition Rewrites Labour Law

When a Berlin investment firm fired a portfolio manager in November 2025, the Labor Court struck down both the summary and ordinary termination. The judge found no specific breach of duty in the employer’s notice, noted that deadlines had been missed, and ruled that the staff council had not been properly consulted. That kind of judicial scrutiny, which has long frustrated employers, is about to shrink for a select group of workers.

The coalition government of the Christian Democratic Union and Social Democratic Party has passed a sweeping labour law package that rebalances the rights of companies and employees. At its centre: workers earning roughly €177,500 a year or more — 1.75 times the pension insurance contribution ceiling — lose the special dismissal protection they previously enjoyed. From now on, an employer can end such a contract by paying a severance package of up to 18 months’ salary, without needing to cite a concrete reason. The mechanism borrows from existing rules for risk-takers in the financial sector.

Small businesses gain flexibility too. The so-called small-business clause, which exempts firms from the requirement that dismissals be socially justified, now applies to companies with up to 50 employees — up from 10. Certain protected groups, such as pregnant women and disabled workers, retain their extra safeguards.

Fixed-term contracts grow more generous. The maximum period for a fixed-term contract without a specific cause doubles from two years to four, with up to six renewals allowed. The mandatory written form for these agreements has also been scrapped.

While the government loosens hiring and firing for high earners and smaller firms, it is tightening rules around sickness. The phone-in sick note is abolished: employees must present a doctor's certificate from the first day of illness. Case law is reinforcing that shift. The Hamm Regional Labour Court upheld the summary dismissal of a worker who had submitted an online sick certificate obtained without any personal or video consultation with a physician. The court called it a severe breach of trust.

The Cologne Regional Labour Court added a further nuance on 3 July 2026. The evidentiary weight of a standard sick note can be undermined, it ruled, if the timing coincides conspicuously with workplace conflicts — such as disputes over shift schedules or the return of company equipment. When an employer challenges a sick note, the employee must then give a detailed account of their symptoms.

Digital delivery does not count as proof of receipt. The Federal Labour Court ruled on 7 May 2026 that a digital delivery confirmation from Deutsche Post for a registered letter does not constitute prima facie evidence that the document arrived. In the case at hand, an employer could not prove that an invitation to a Company Integration Management meeting (Betriebliches Eingliederungsmanagement, or BEM) had reached the worker. The dismissal founded on that missed meeting was declared invalid. The judges stressed that switching to digital systems without location-based documentation cannot guarantee legally secure notification.

Mass redundancies also remain a minefield. The Sixth Senate of the Federal Labour Court confirmed on 1 April 2026 that dismissals are void if the employer files the mandatory mass-dismissal notice to the employment agency before completing the consultation procedure with the works council — or fails to file it at all.

One worker learned a costly lesson about post-settlement behaviour. The Solingen Labour Court ruled on 15 June 2026 that a €415,748 severance payment could be entirely forfeited. After signing a termination agreement, the employee ordered goods through an internal company system, had them delivered to his private address, and pretended the purchase was business-related. The court found that this conduct so undermined the basis of the settlement that the employer’s obligation to pay the severance ceased.

The importance of clear performance criteria emerged in a separate international case. A court ordered an employer to back-pay salaries from September 2024 to April 2025 because the company’s workplace regulations contained no specific criteria for how employees were supposed to carry out their tasks.

Germany’s labour landscape is shifting fastest where incomes are highest — and where paperwork is no longer considered a shield against dismissal. Employers gain new room to manoeuvre, but the rulings on sick notes, digital delivery, and mass layoffs show that procedural rigour still commands the court’s attention.

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