Aktualisiert am:
State Labor Court of Rhineland-Palatinate, 09.12.2011, Case No.: 9 Sa 557/11
If an employee loses their job due to a dismissal or a termination agreement, they do not automatically have a right to severance pay, contrary to popular belief. Such a claim can only arise from a social plan or a collective bargaining agreement.
Despite the absence of such a severance claim, employers frequently still pay severance. The main reason for this is usually the employer’s fear that the employee could challenge the dismissal with a wrongful dismissal claim, potentially resulting in the court overturning the termination. In such cases, the employer may be forced to reinstate the employee, which can lead to additional wage costs.
Severance can be arranged either through a termination agreement or during the course of a wrongful dismissal lawsuit following a termination. The first step towards obtaining severance after a dismissal is therefore filing a wrongful dismissal claim with the labor court.
During the legal proceedings, the employee and employer can reach a settlement that includes severance. Alternatively, the employee can request the court to set the severance amount (in this case, Section 10 of the Employment Protection Act (KSchG) regulates the severance amount if the Employment Protection Act is applicable).
However, calculating severance or determining its amount can be problematic when it is to be stipulated in a termination agreement or as part of a settlement in a wrongful dismissal case.
For severance calculation, there is a basic formula, called the “standard severance,” which amounts to half a month’s gross salary for each year of employment.
However, half a month’s gross salary is not always justified; in some cases, it may be too high or too low. The following factors should therefore always be considered when determining severance:
- Length of service: The longer the employee has been with the company, the higher the severance should be. It’s important to consider not just the length of service at a specific branch, but the overall length of service with the company.
- Employee’s age: Age also plays a role in severance determination, particularly for employees over 40, as their chances of finding new employment decrease with age. A high age can, however, reduce severance if the employee is close to retirement.
- Employee’s family status: An employee responsible for supporting three children should receive higher severance than a childless employee.
- Consequences of dismissal: The anticipated impact of the dismissal is also relevant. If the employee faces long-term unemployment, this should be reflected in the severance amount.
- Unfounded accusations by the employer: If an employer wrongfully accuses an employee of a crime, resulting in harmful rumors, this must also be factored into the severance calculation.
- Financial situation of the employer and employee: The financial circumstances of both parties should be taken into account when determining severance.
- Workplace bullying: If the employee was subjected to bullying before the dismissal or termination agreement, this should be considered. Conversely, if the employee made defamatory or slanderous accusations against the employer, this could reduce severance.
In the case at hand, the Rhineland-Palatinate State Labor Court had to decide on the severance amount for the dismissal of a sales manager in the appeals process.
1. Background of the case
The plaintiff, born on July 7, 1975, had been employed as a sales manager with the defendant, a company with more than 10 employees, since February 1, 2005. His gross monthly salary was €2,300. He was also responsible for supporting two dependents. On January 24, 2011, the defendant lawfully terminated the employment relationship, which the plaintiff sought to contest through a wrongful dismissal claim. The defendant acknowledged the claim, after which the plaintiff demanded the court terminate the employment relationship and award him severance. The labor court ruled to dissolve the employment relationship as of March 31, 2011, and granted the plaintiff severance of €4,000.
2. Plaintiff’s appeal
Dissatisfied with the severance amount, the plaintiff appealed to the State Labor Court of Rhineland-Palatinate. He argued that the severance was unreasonably low and significantly below the expected amount of €6,690 based on the “basic formula.” The plaintiff also pointed out that he had applied for 20 jobs since December 2010 without success, supporting his claim that his age made it difficult to find new employment.
3. State Labor Court’s decision
The Rhineland-Palatinate State Labor Court partially agreed with the plaintiff. The court stated that, under Section 9(1) of the Employment Protection Act (KSchG), the plaintiff was entitled to an appropriate severance. The court specifically took into account the length of employment and the plaintiff’s age. A final severance of €6,700 was deemed appropriate. The court emphasized that neither the plaintiff’s age nor his job prospects justified a higher or lower severance amount.
4. Justification for severance amount
The court further explained that the original labor court decision, which awarded the plaintiff €4,000 in severance, had not adequately considered all relevant factors. Specifically, the plaintiff’s decision not to accept the defendant’s offer to continue employment was understandable, as the defendant had indicated that the plaintiff would not be immediately reinstated as sales manager due to an alleged loss of trust that existed at the time of the conciliation hearing.
5. Summary and conclusion
The Rhineland-Palatinate State Labor Court ruled that the plaintiff was entitled to severance of €6,700, and the plaintiff’s appeal was otherwise dismissed. The final severance amount was based on the calculation of half a month’s salary per year of employment, resulting in the stated amount given a monthly salary of €2,230 gross. Additional factors such as the plaintiff’s age or job search efforts did not influence the severance amount. The plaintiff was awarded an additional €2,700, on top of the already granted €4,000.
Source: Rhineland-Palatinate State Labor Court
Important Note: The content of this article has been prepared to the best of our knowledge. However, the complexity and constant changes in the subject matter make it necessary to exclude liability and warranties.
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