The Foundation of German Employment Law

German employment law is a complex and highly developed body of law built on a combination of statutory rules, collective agreements, case law from the specialist Labour Courts, and individual employment contracts. It is frequently cited as among the most employee-protective systems in the world — a characterisation that is accurate, though it tells only part of the story. For employers operating within Germany, understanding and working with the system — rather than against it — is the key to sustainable and productive employment relationships.

The primary sources of employment law in Germany are the BGB (Bürgerliches Gesetzbuch), which governs the individual employment contract; the Kündigungsschutzgesetz (KSchG), which regulates dismissal protection; the Betriebsverfassungsgesetz (BetrVG), which governs workplace co-determination through works councils; the Arbeitszeitgesetz (ArbZG), which sets out working time rules; and numerous sector-specific statutes and collective agreements (Tarifverträge). EU employment directives — particularly on working time, equal treatment, and collective redundancy — have also significantly shaped German employment law.

For internationally mobile employees and employers dealing with cross-border employment situations, additional complexity arises from questions of applicable law, social security coordination, and the interaction between German employment protections and the law of the employee's home country or other posting location.

The Employment Contract: What Must Be Included

Since August 2022, the Act on Evidence of Essential Working Conditions (Nachweisgesetz) has required employers to confirm in writing, on or before the first day of work, an expanded list of key employment terms. These include the date of commencement, the place of work, a description of activities, the remuneration (including any allowances and the payment schedule), the agreed working hours, holiday entitlement, probationary period (if any), notice periods, pension arrangements, collective agreements applicable to the employment, and — for employees posted abroad for more than four weeks — additional information about the conditions of the posting.

The probationary period (Probezeit) in Germany may last up to six months. During this period, either party may terminate the employment relationship with just two weeks' notice — significantly shorter than the notice periods applicable after completion of the probationary period and the acquisition of dismissal protection under the KSchG.

Restrictive covenants — non-competition clauses (Wettbewerbsverbote) — are enforceable in Germany but subject to strict conditions. A post-contractual non-competition clause is only valid if it is agreed in writing, does not exceed two years, covers a legitimate business interest, and is accompanied by a contractual payment of at least half the employee's last contractual remuneration for the duration of the restriction. An employer who fails to pay this compensation cannot enforce the restriction. This is an area where we frequently advise both employers and senior executives.

The Betriebsrat: Works Council Co-Determination

One of the most distinctive features of the German employment system is the institution of the Betriebsrat — the works council. Under the Betriebsverfassungsgesetz, employees in companies with five or more permanent employees have the right to establish a works council. The Betriebsrat has extensive rights of information, consultation, and co-determination across a wide range of matters including working hours, workplace order and conduct, holiday scheduling, remuneration systems, training, and — crucially — individual and collective dismissals.

Co-determination rights mean that certain employer decisions cannot be implemented without the works council's consent or, failing agreement, a ruling by the Conciliation Committee (Einigungsstelle). This applies, for example, to changes in daily working hours, the introduction of performance monitoring systems, the establishment of shift work patterns, and workplace guidelines. Implementing such changes without works council involvement is not merely a technical violation — it renders the measure legally ineffective.

For employers new to Germany, the existence of a Betriebsrat can come as a surprise and the timelines required for genuine consultation can appear to slow down operational decisions. In practice, however, companies that engage their works councils constructively and in good faith consistently report more stable employment relationships, lower turnover, and more effective implementation of change than those that treat the Betriebsrat as an obstacle.

Dismissal Protection and the Kündigungsschutzgesetz

Germany's Kündigungsschutzgesetz (KSchG) applies to employees who have completed their probationary period and work in a company with more than ten employees. Once the KSchG applies, an employer may only dismiss an employee on one of three grounds: personal reasons (e.g. long-term incapacity to perform the role), conduct-related reasons (e.g. repeated misconduct after warning), or operational reasons (e.g. genuine redundancy due to business restructuring).

Operational dismissals — the German equivalent of redundancy — require particular care. The employer must demonstrate a genuine operational necessity, must correctly apply the Sozialauswahl (social selection criteria) to determine which employees are selected for dismissal, and must consult the works council (where one exists) before serving notice. The Sozialauswahl process requires the employer to compare employees in similar roles and select for dismissal based on weighted criteria: length of service, age, maintenance obligations, and disability. Errors in the Sozialauswahl are a common ground for successful unfair dismissal claims.

Notice periods under German law increase with length of service. The statutory minimum — two weeks during probation — rises to four weeks to the fifteenth of the month or end of the month after the first six months of employment, and then increases by one month for each year of service after the second year up to a maximum of seven months after twenty years. Contractual or collectively agreed notice periods may exceed these statutory minima.

Key Developments and Compliance Priorities in 2025-2026

German employment law continues to evolve rapidly. Key areas of recent legislative activity and active litigation include the following: the ongoing implementation of the EU Directive on transparent and predictable working conditions; increased scrutiny of fixed-term contracts and the restrictions on successive fixed-term renewals; growing case law on mobile and hybrid working arrangements and the obligations of employers to provide appropriate home working equipment; and the increasing enforcement of equal pay transparency requirements under the Entgelttransparenzgesetz.

For employers with cross-border workforces, the EU Posted Workers Enforcement Directive and its German implementing legislation — the Arbeitnehmer-Entsendegesetz — continue to generate complex compliance questions, particularly in sectors including construction, logistics, and professional services. Minimum wage and maximum working time rules must be observed for all employees posted to Germany regardless of the law governing the underlying employment contract.

LexBerg's employment law team advises German and international employers across all sectors on contract drafting, works council relations, dismissal procedures, employment litigation before the Labour Courts, and senior executive exits and separation agreements. If you are establishing a new operation in Germany or facing an employment challenge in your existing business, we welcome the opportunity to discuss how we can help.