Once a German employment relationship has been terminated, employers often seek to remove the terminated employee from day-to-day operations as quickly as possible—whether for data-protection reasons, to safeguard customer relationships, or to preserve workplace peace. The usual solution is paid leave until the expiration of the notice period. This approach is practical, well-established, and commonly included as a standard clause in German employment contracts.
In a recent decision, however, the Federal Labor Court (Bundesarbeitsgericht, “BAG”) curtailed this practice where no objective grounds for placing the employee on paid leave exist. This practice, and the ruling discussed below, arise under German employment law, which differs fundamentally from at‑will employment like in the United States.
In a judgment issued March 25, 2026 (5 AZR 108/25), the BAG held that paid-leave release clauses that entitle the employer to place employees on paid leave at its sole discretion, without stating reasons and without any balancing of interests, are unenforceable. The justification is persuasive: A blanket clause disregards the employee’s potentially legitimate interest in actually performing their work. It thereby deprives the employee of the possibility to assert such interest at all—an outcome the BAG qualifies as an unreasonable disadvantage within the meaning of German employment law.
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