Labor Law

Employee Protection, Termination & Severance

Labor law in Germany is divided into individual labor law and collective labor law. While collective labor law governs relationships between employers and representative bodies like works councils, individual labor law focuses on the direct relationship between employer and employee.

This area of law is one of the most commonly litigated fields in Germany. That’s why having an expert employment lawyer on your side is so important – and that’s where we come in.

With millions of employment contracts in force, covering everything from duties and rights to salary, contract duration, and termination procedures, disputes are inevitable. One of the most prominent areas of conflict is the wrongful termination lawsuit  brought by employees.

Employment Contract Review & Drafting

The employment contract sets the rules for the employment relationship. Common types include:

• Standard employee contracts
• Executive employment agreements
• Service contracts (freelancer agreements)
• Termination agreements
• Settlement agreements
• Employee invention agreements

Key Employment Contract Elements

Employment contracts should include at minimum:

• Salary and bonuses
• Weekly working hours and overtime terms
• Vacation and leave policy
• Job location
• Job description

Design Options: Employers and employees can also agree on:

• Profit-sharing or commissions
• Company pension schemes
• Perks like company car, laptop, mobile phone
• Health benefits such as in-house yoga
• Travel cost subsidies and employee discounts
• Coverage of continuing education costs

Working Hours, Overtime & Termination Clauses

Working hours are often defined (e.g., 38 hours/week), but distribution across days is frequently not.

Overtime pay is mandatory unless the employee earns more than €5,800/month (West Germany) or €4,900/month (East Germany), or is classified under “higher-level services.” In such cases, a specific clause should address overtime compensation.

Be cautious of contracts requiring 4 hours of weekly overtime but only compensating 2 – such clauses can be legally valid but unfavorable to employees.

Contracts must also define notice periods, clearly lay out bonus entitlements, and include post-contractual non-compete clauses that should be reviewed by an labor law attorney.

Termination, Severance & Wrongful Dismissal Claims

Terminations are a common cause for legal disputes. If you believe your dismissal was unjustified, you may file a wrongful termination lawsuit (Kündigungsschutzklage).

Types of termination:

• Ordinary (with notice)
• During the probationary period
• Extraordinary (immediate) for cause

Companies with more than 10 full-time employees fall under the German Dismissal Protection Act (KSchG), which requires valid grounds for termination and a proper social selection process.

Mistakes here can lead to lawsuits. Most wrongful termination cases are resolved through settlements, often including a severance payment and a favorable reference letter.

Severance, though only legally guaranteed in cases of operational terminations under §1a KSchG, is common in negotiated settlements.

Warnings in Labor Law – 5 Essential Tips

Warnings are issued for violations of contractual duties. They can serve as a precursor to termination, especially if repeated.

Tips for Employees Receiving a Warning:

1. Stay calm – read the warning carefully. Avoid reacting emotionally.
2. Only acknowledge receipt, never admit fault or agree to the allegations.
3. Write down your version of the incident immediately while it’s fresh.
4. If justified, speak with your employer or seek help from your works council.
5. If unjustified, consult an employment lawyer – they can dispute it in court or help you add a rebuttal to your personnel file.

The SBS Labor Law Glossary

Your compact overview of labor law terms and rights.

SBS LEGAL – Your Labor Law Firm in Hamburg

Whether you need help drafting an employment, executive, or invention contract, reviewing a termination or settlement agreement, enforcing severance pay, or disputing a reference letter – we’re here for you.

For Employees, Employers, and Works Councils

Need to review a non-compete clause? Defend against or issue a warning? Are you a works council in conflict with management? Are you an employer needing legal support with terminations?

At SBS LEGAL, you're in the best hands. Our experienced labor law attorneys offer professional, business-minded legal advice tailored to your needs.

Your first consultation with SBS LEGAL is always free of charge.