Lost Severance and Shifting Rules: German Courts Tighten Compliance in Mass Layoffs

A former employee in Solingen walked away from an agreed-upon severance package worth €415,748 after a German court ruled that his misconduct voided the contract. The worker had used his employer’s internal purchasing system for private orders—a breach the Labour Court of Solingen considered a fundamental disruption of the contractual relationship under Section 313 of the German Civil Code (BGB). Because the mutual termination agreement had already ended his employment, a subsequent dismissal was impossible, but the financial settlement collapsed entirely. The judgment, handed down on 15 June 2026, underscores how personal compliance failures can wipe out even signed agreements.

The Solingen case is just one example of a broader trend as German courts and lawmakers reshape the framework around job terminations. The Federal Labour Court (BAG) has recently issued rulings that make mass dismissals even more vulnerable to legal challenge. On 19 March 2026, the BAG’s Second Senate reaffirmed that a missing or flawed mass-dismissal notification automatically invalidates every termination. The judges grounded their decision in the European Mass Dismissal Directive and followed a European Court of Justice ruling from October 2025. Only weeks later, the Sixth Senate added two more decisions on 1 April 2026. In one, an insolvency administrator fired 25 workers without any prior notification. In the other, an airline dismissed 348 employees after filing the dismissal notice before completing the consultation process with the works council.

The BAG was explicit about the sequence: consultation must come first, then the official notification, and only then can dismissals proceed. There is no option to catch up later. For employers, the message is clear—procedural missteps can unravel entire waves of layoffs.

Meanwhile, the federal government is preparing several changes to labour law that will affect how companies handle terminations, sick leave, and flexible employment. Among the most contentious is a plan to tighten sick-note requirements. A medical certificate would be mandatory from the first day of illness, and the option of a telephone-based sick note would be scrapped entirely. Labour-law experts warn that existing employment contracts with more favourable provisions may be protected under the principle of favourability (Günstigkeitsprinzip).

The reform package includes a number of other measures:

• Fixed-term contracts: Unlimited fixed-term contracts without a specific cause could be extended to up to 48 months until the end of 2030, compared with the current limit of two years.
• High earners: From 2027, employees earning €177,450 or more annually would face loosened protection against dismissal, making it easier for employers to let them go in exchange for compensation.
• Reserve duty: The Bundeswehr would gain the power to call up reservists without the employer’s consent for up to twelve weeks per year. The goal is to build a reserve of 200,000 deployable personnel by 2035. Employers would be notified eight weeks in advance.
• Mini-jobs: The flat-rate tax on marginal employment would increase from two to five percent.

Proponents say these changes are designed to stimulate the economy and strengthen defence capabilities. For human-resources departments, however, they spell a significant increase in administrative workload and legal complexity.

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