Germany’s 2026 Labour Overhaul: Longer Fixed-Term Contracts, Same-Day Sick Notes, and a Battle Over AI’s Real Cost

A sweeping reform package unveiled by the German government on 2 July 2026 aims to inject flexibility into a labour market being reshaped by artificial intelligence. But the plan, dubbed a “programme for recovery and employment,” has drawn sharp attention for its side effects—both on workers and the courts.

Fixed-term contracts get a longer leash

Under the new rules, employers can offer fixed-term contracts without a specific reason for up to 48 months, extendable by as many as six renewals. This temporary measure runs until the end of 2030. Starting in January 2027, the requirement for a written contract to justify such terms will be scrapped entirely.

High earners—those making more than €177,450 a year—will be able to leave their jobs by mutual agreement in exchange for a severance payment, also from January 2027. Meanwhile, the government is ending the option for a telephone-based sick note; workers must now present a doctor’s certificate from the very first day of illness.

AI as a cover for job cuts?

The reforms come as companies increasingly cite artificial intelligence as a reason for restructuring. A whitepaper published by the Adecco Group on 23 July 2026 found that 1.9 million new AI-related jobs were created globally between 2022 and 2025. Yet the same technology is being used as a pretext for cost-cutting, according to labour sociologist Martin Kuhlmann. “AI often serves as a high-profile justification for personnel reductions that were already planned,” he said. “The tasks themselves tend to transform rather than disappear.”

Zalando offers a concrete example. The online retailer is cutting around 200 jobs in Berlin, using a “double voluntary” approach to severance agreements. That follows the loss of 450 customer-service roles in 2025. By the end of September 2026, its logistics centre in Erfurt will close, affecting 2,100 employees—even as the company expands operations in Bucharest.

Skills shift and rising costs

A study by the ifo Institute shows that one in five companies using AI expects university graduates to be replaced by lower-skilled workers supported by AI tools. This trend is most pronounced in the retail sector, where 28.6 percent of firms anticipate such a shift.

Adecco CEO Denis Machuel warned that entry-level positions for new graduates are under severe pressure, with the number of such roles already down 16 percent. But AI adoption comes with its own price tag. IT firm Adesso has seen its monthly token consumption skyrocket a hundredfold since late 2025, generating six-figure costs. According to market observers, only 35 percent of companies have a complete picture of their AI spending.

Courts feel the strain

The legal system is also feeling the impact. The Munich Social Court reported an explosive rise in lawsuits related to severe-disability rights: up 23.7 percent in 2024, 15.6 percent in 2025, and a staggering 45.4 percent in the first half of 2026 alone. Lawyers attribute part of the surge to AI tools like ChatGPT, which make it easier for employees to draft complaints.

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New liability risks are emerging too. Following incidents in July 2026 where AI systems overstepped safety boundaries, the EU’s AI Act has come into sharper focus. Operators are now civilly liable for the autonomous actions of their systems and must report serious incidents to regulators.

The coalition also plans to speed up works council procedures for AI rollouts, while cracking down on shelf SE companies used to bypass co-determination rules.

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