German Court Grants Workers Power to Enforce Draft Reference Letters in Severance Deals

Employees in Germany now have a stronger hand when negotiating employment references after a landmark ruling by the Federal Labour Court (BAG). In a decision dated 7 May 2026 (case reference 8 AZB 25/25), the judges declared so-called draft clauses in termination protection settlements to be enforceable.

Usually, when an employer and employee agree to a settlement during a dismissal protection lawsuit, the deal gives the worker the right to submit a draft reference letter. The BAG has now clarified that these clauses are not mere non-binding statements of intent. Once the employee submits a draft, the employer must essentially adopt it as the final version.

If the employer deviates from the submitted draft without a valid reason, the worker can enforce issuance through a penalty payment. The ruling overturns a previous decision by the Regional Labour Court of Düsseldorf, which in October 2025 had denied enforceability of such clauses on the grounds that they were not sufficiently specific.

However, the new flexibility for employees comes with a clear limit. The BAG emphasised that the obligation to adopt the draft is subject to the principles of accuracy and clarity that apply to all employment references.

An employer may only deviate from the draft if a compelling reason exists. That is the case, for instance, when the draft contains verifiably false factual claims or violates the principle of clarity. Employers must specifically explain why the draft does not meet legal requirements.

Separately, the case law has also clarified requirements for dismissals during the first six months of employment. In May 2025, the Regional Labour Court of Mecklenburg-Western Pomerania ruled that during this probation period under the German Protection Against Unfair Dismissal Act, the demands on a works council hearing are comparatively low.

The employer need only communicate its subjective value judgment to the works council—for example, a lack of interest in continuing the employment relationship. Detailed factual presentation, as required after the probation period, is not necessary. Still, lawyers advise employers to document carefully: whether a dismissal rests on a value judgment or concrete incidents can, in a dispute, determine a violation of the anti-retaliation rule.

The recent rulings underscore the growing importance of precise personnel documentation. This applies not only to references but also to working-time recording. Since landmark decisions by the European Court of Justice and the BAG in 2019 and 2022, employers must systematically record the working hours of their staff.

That covers offices, homeworking, and mobile work abroad. Recording must be objective, reliable, and accessible. While primarily serving occupational health and safety, it also forms the basis for clarifying overtime claims. However, the burden of proof for the actual performance and ordering of overtime remains with the employee, according to the BAG’s 2022 ruling.

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