The Executive Remuneration Review, 10th Edition
Employment law
i Severance payments
Executives do not generally have a statutory severance claim upon termination of their service or employment relationships; any entitlements in this respect need to be stipulated in their individual service or employment agreements.
Executive employees
Agreements with employees with management functions within the meaning of the Works Constitution Act (executive employees) will only occasionally include severance clauses, because this group of executives is subject to statutory protection against wrongful dismissal under German labour law. Accordingly, a termination by an employer requires a justified reason, such as behavioural reasons (e.g., severe misconduct), personal reasons (e.g., continuing incapacity) or operational reasons (e.g., redundancy, in particular in connection with the shutdown of a department or site). Absent such justified reason, an employer will have to reach a settlement with an employee in the course of legal proceedings that employees in Germany typically initiate after receiving notice of termination from their employers, or enter into a termination agreement with an employee (which requires the employee's consent). The severance amount to be paid to make the employee accept his or her dismissal is subject to negotiation, and usually depends on how the parties evaluate their chance of succeeding in the (pending) legal proceedings. Generally, severance payments by...
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