Initial situation

A disqualification period may be imposed in any case in which the unemployed person »terminated the employment relationship or gave cause for the termination of the employment relationship by acting in breach of the employment contract and thereby brought the unemployment about intentionally or by gross negligence«(Section 159 (1) of the German Code of Social Law III (SGB III)). However, a disqualification period is not imposed if the employee had »good cause« for terminating the employment.

What constitutes »good cause«?

The legislator has not provided a definition for what establishes »good cause«. According to the jurisdiction of the Federal Social Court, good cause is given if, following an informed consideration of the interests of the community of the insured, the employee could not reasonably have been expected to continue in the employment relationship as this would have unduly damaged the employee’s interests.

Previous directives of the Employment Agency

The Employment Agency has issued directives on assessing whether a disqualification period should be imposed. These are binding on the case workers who decide on the application of a disqualification period, but not on the courts. Nevertheless, these directives provide specific decision-making assistance with regard to the design of termination agreements. According to previous directives, no disqualification period should be imposed if

  • the employee had previously been led to expect a termination for reasons of redundancy,
  • at the employer’s instigation, the separation agreement did not terminate the employment relationship prior to the expiry of the ordinary notice period,
  • the employee did not have special protection against dismissal and
  • the termination announced as to be expected would have proven to be »socially justified«.

The »social justification« of the hypothetical termination was always assumed, according to the internal directive, if

  • the employee received severance pay of
  • at least 0.25 gross monthly salaries per year of employment and
  • a maximum of 0.5 gross monthly salaries.

»Personal reasons« were only to be sufficient if the employee was unable to continue carrying out the work activities for health reasons, which was to be proven by medical certificate.

A termination of the employment relationship by way of judicial settlement should not, according to the internal directive, trigger a disqualification period if the conclusion was not preceded by conduct in breach of the employment contract, i.e. a dismissal on grounds of conduct. For this reason, employee representatives press for termination by the employer and termination of the employment by judicial settlement, the latter including no conduct-related reasons but »redundancy« or in any case »operational« reasons, prior to a termination by common consent.

Directive as of 25.01.2017

As of 25.01.2017 the Employment Agency no longer insists on the lower limit for severance payments of 0.25 gross monthly salaries per year of employment. Henceforth, no disqualification period is to be imposed if

  • the employee was definitely threatened by a termination on the part of the employer,
  • this impending termination was based on operational or personal (but not conduct-related) reasons,
  • the notice period was observed,
  • the employee did not have special protection against dismissal and
  • the employee (in reference to Section 1a of the German Employment Protection Act (KSchG)) is paid severance of a maximum of 0.5 gross monthly salaries.

Conclusion

The updated directive gives employees and employers greater leeway in settling an out-of-court severance without a disqualification period. Henceforth, no minimum severance pay has to be paid in order to avoid a disqualification period. Personal reasons (including termination for health reasons) are possible grounds for a termination, alongside operational reasons. By contrast, termination for conduct-related reasons always triggers a disqualification period; termination by judicial settlement as a rule continues not to trigger disqualification.

Expect only the best from us.

We periodically provide you with news regarding important topics from the world of employment law and keep you posted about vangard. Sign up for our newsletter now!

Get our newsletter