Mass Layoffs in Germany: Court Spells Out Sequential Rules, Nixes Boilerplate Release Clauses

Prenediated release clauses slipped into employment contracts after a dismissal are no longer enforceable, Germany’s Federal Labor Court (BAG) ruled on 25 March 2026 (Az. 5 AZR 108/25). The judges declared such pre?formulated clauses void under paragraph 307(1)(1) of the Civil Code (BGB), which governs standard?term contracts. An employer may only grant a release on a case?by?case basis after weighing the individual circumstances — because, in principle, every employee retains a right to actual employment.

The ruling was one of several landmark decisions handed down by the BAG and other labor courts in recent weeks, bringing both clarity and fresh pitfalls for employers handling dismissals and mass layoffs.

Timing trumps trivial errors

Worrying about minor formal mistakes in a mass?layoff notification? The BAG on 25 June 2026 (Az. 6 AZR 7/26) offered some relief: small inaccuracies do not automatically invalidate the process — as long as the Federal Employment Agency (Agentur für Arbeit) can still carry out its duties. In the case before the court, an insolvency administrator had notified the agency of 34 planned dismissals but actually carried out only 31 or 32. The judges found the dismissals valid. The same logic applies to mistakes in the consultation letter to the works council, provided the correct information was obvious to the committee.

But sequence is non?negotiable. In a separate judgment of 1 April 2026 (Az. 6 AZR 152/22), the court made clear that filing a mass?layoff notification before concluding the consultation procedure with the works council renders the dismissals void. The order is mandatory: consult first, notify second.

Sick?note pitfalls after dismissal

A particularly sensitive area concerns medical certificates (AU) submitted after a dismissal. The BAG (Az. 5 AZR 335/22) held that when the documented period of illness exactly matches the remaining notice period, the evidentiary value of the sick note can be shaken. This is especially true if the employee seamlessly starts a new job. The employer may then refuse continued wage payments — unless the worker provides additional proof of genuine illness. The situation differs if the incapacity for work existed before the dismissal was announced: in that case, the evidentiary value normally remains intact.

Suspicion alone is not enough

The Mecklenburg?Vorpommern Regional Labor Court (Az. 2 SLa 45/25) raised the bar for suspicion?based dismissals. In the case of a zookeeper, mere suspicion of a duty violation did not justify termination — the employer failed to present solid evidence and also neglected to interview the employee beforehand. The court reinforced that employers must conduct a proper investigation and hear the worker’s side before acting.

Works councils and reference letters

Two further clarifications: Foreign companies with domestic sites can be subject to works?council elections if they have a minimum of organisational independence and actual authority to give instructions on site (BAG, Az. 7 ABR 7/25).

And in settlement agreements, clauses that grant the employee the right to submit a draft reference letter are sufficiently specific and enforceable. An employer may only deviate from the submitted draft if it violates principles of truthfulness or clarity (Az. 8 AZB 25/25).

Special rule for severely disabled workers

Lastly, the BAG (Az. 2 AZR 178/24) confirmed that during the first six months of an employment relationship, no preventive procedure under disability law is required before a dismissal. The specific protection against dismissal for severely disabled employees only applies after that six?month waiting period has elapsed.

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