Review and negotiation of termination and settlement agreements
A termination or settlement agreement ends the employment relationship by mutual consent and sets out the terms of the separation. What is agreed there can hardly be changed afterwards. We review the draft before you sign and negotiate improvements.
The key points at a glance
Termination and settlement agreements
A termination agreement ends the employment relationship without dismissal on an agreed date. Under § 623 BGB it must be in writing. A settlement agreement presupposes a dismissal that has already been given and governs only its consequences, such as severance and a waiver of legal action. Both agreements are binding in principle. There is no statutory right of withdrawal.
Consequences for unemployment benefit
Anyone who contributes to the termination of their employment relationship risks a suspension of unemployment benefit. Whether the Federal Employment Agency imposes a suspension depends, among other things, on whether there is good cause and whether the relevant notice period has been observed. The risk can be reduced considerably by drafting the agreement correctly – for example with wording recording that the agreement avoids an otherwise imminent dismissal for operational reasons by the employer and that the notice period has been observed. We pay attention to such wording in every agreement.
Typical points to be agreed
In addition to the termination date and severance, garden leave, outstanding annual leave, overtime, variable pay, the employment reference, company car and occupational pension need to be addressed. A carefully worded settlement clause is also important, so that you do not inadvertently waive any claims. If you have prospects of a new job, a “turbo” or “sprinter” clause is advisable: it allows you to leave early, and all or part of the salary saved is added to the severance payment.
How we proceed
We go through the agreement clause by clause and point out risks, missing provisions and unfavourable wording.
We assess the effects on unemployment benefit, tax and ongoing entitlements and compare the terms with your position in the event of a dismissal.
If you wish, we negotiate changes with the employer. On this basis, you decide whether and on what terms to sign.
Frequently asked questions
Am I entitled to a severance payment?
As a rule, no. There is an entitlement only in special cases, for example under a social plan agreed between the employer and the works council in the event of operational changes, under a collective agreement, or where the employer offers severance under § 1a KSchG. In the case of executive employees, the employer can have the employment relationship dissolved in dismissal proceedings without giving reasons, against payment of severance (§ 14(2) KSchG). The fact that separations nevertheless usually end with a severance payment has an economic reason: if a dismissal is open to challenge, the employer bears a litigation risk. If it loses, it must pay the salary for the entire duration of the proceedings (default of acceptance pay) and continue to employ you beyond that. Deducted from this pay is what you earn elsewhere in that time or maliciously fail to earn. This risk is all the greater the more doubtful the dismissal and the less likely it is that you will soon find a new position despite serious efforts. In essence, the severance payment is the price the employer pays to eliminate this risk.
Can I reverse a termination agreement I have already signed?
Only in exceptional cases, for example by rescission on grounds of deceit or unlawful threat, or where the agreement was concluded in breach of the requirement of fair negotiation. Whether this applies depends heavily on the circumstances. A review before signing is therefore considerably more reliable.
Can a suspension of benefit be reliably avoided?
There is no guarantee, as the Federal Employment Agency decides independently. However, the risk can often be reduced by careful drafting of the agreement, particularly as regards the termination date and the stated reasons. We will discuss with you which approach may be suitable in your case.
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