You have received a termination notice. The shock is real - and at the same time the most important clock in your case is already ticking. Under section 4 of the German Protection Against Unfair Dismissals Act (KSchG), you have exactly three weeks from receipt of the written termination to file an unfair dismissal claim (Kündigungsschutzklage) with the labour court. If you miss this time limit for an unfair dismissal claim, you lose your strongest leverage - regardless of how flawed the termination may be in substance.
This guide explains what an unfair dismissal claim is, when it makes sense, how the procedure works, what a legal expenses insurance policy will cover - and which financial and strategic points you should not overlook.
What is an unfair dismissal claim (Kündigungsschutzklage)?
A Kündigungsschutzklage is an action for declaratory judgment before the labour court. With it you ask the court to declare your employer's termination invalid and to confirm that the employment relationship continues to exist.
In practice, the formal objective of the unfair dismissal claim - continued employment - is rarely the actual outcome. Most unfair dismissal claims end with a court settlement, under which the employee receives a severance payment and waives the right to return to the workplace. The claim is therefore less a "fight for the job" and more a strategic lever to achieve a commercially sensible outcome: severance, garden leave, a strong reference letter, clear rules on bonus and remaining vacation.
The key question is not only whether you can sue for unfair dismissal - but whether doing so is economically sensible in your specific situation.
The 3-week deadline: the first priority
The 3-week deadline starts immediately after receipt of the written termination notice. If you miss this deadline, the termination is considered effective under § 7 KSchG—even if it was substantively or formally defective. A remedy is only possible in very narrow exceptional cases.
The clock starts running when you receive the written termination - not at the termination meeting, not when a manager sends you an email, not on the date printed on the letter. What matters is the moment the document enters your sphere of control, for example when it is placed in your letterbox.
Practical pointers for calculating the time limit for an unfair dismissal claim:
- If the last day of the period falls on a Saturday, Sunday or public holiday, the deadline moves to the next working day.
- The termination is deemed received even if you are on vacation and the letter is posted to your home address.
- Under section 7 KSchG, the termination is considered legally valid as soon as the period expires without you filing an unfair dismissal claim - even if it was substantively or formally flawed.
A late filing can only be accepted in exceptional cases under section 5 KSchG. You must prove that, through no fault of your own, you were prevented from filing the claim in time. This is a very narrow exception and nothing you should rely on.
You should therefore take action no later than in the first week after receiving the termination notice. For an orientation on the very first steps, see our article Received termination notice: what to do in the first 7 days.
When does the Protection Against Unfair Dismissals Act apply?
Not every termination automatically falls within the scope of the German Protection Against Unfair Dismissals Act (KSchG). The law applies only if both of the following conditions are met:
- Length of service: The employment relationship has existed for more than six months (section 1 (1) KSchG).
- Company size: The company regularly employs more than ten full-time employees; part-time employees are counted on a pro-rata basis (section 23 (1) KSchG).
If the KSchG applies to you, your employer must justify the dismissal on social grounds - on operational (redundancy), conduct-related or personal grounds. A dismissal that is not adequately justified or is socially unjustified is invalid.
Even without KSchG protection, a termination can still be invalid, for example due to:
- Formal errors (no original signature, missing power of attorney)
- Violation of special dismissal protection (pregnancy, severe disability, works council membership)
- Lack of or faulty consultation of the works council
- Discriminatory reasons (e.g. gender, origin, religion)
It is therefore worthwhile in every case to have the termination reviewed by an employment lawyer for unfair dismissal - even if you initially believe that the KSchG does not apply.
Quick assessment: is an unfair dismissal claim worth it in your case?
Use the interactive unfair dismissal check for a first orientation on whether you should file an unfair dismissal claim and what a settlement in an unfair dismissal case might look like:
Unfair dismissal claim and severance: what is realistic?
As a rule, German employment law does not grant a statutory right to a severance payment. The exception: in redundancy cases where the employer has made an offer under section 1a KSchG, there is a statutory right to severance - but only if you accept the termination and do not file an unfair dismissal claim.
In practice, however, an unfair dismissal claim is still the main route to a severance payment. The reason lies in the pressure logic of the procedure: if the employer loses, they must reinstate the employee retroactively and pay all outstanding salary from the time the claim was filed - often for many months. This risk makes many employers willing to negotiate a severance as part of a settlement in an unfair dismissal case.
The rule of thumb - and its limits
As a rough orientation, the following rule of thumb is often used in practice: 0.5 gross monthly salaries per year of service. With 8 years of service and a gross salary of €6,000, that would correspond to a reference severance of €24,000.
However, this formula is only a starting point. The actual amount depends on:
- Prospects of success of the claim: the weaker the dismissal grounds, the stronger your bargaining position
- Level of salary and variable compensation: bonus, profit share, commission and other variable pay increase the calculation base and the amount in dispute
- Length of service and age
- Negotiation skills and strategy of your lawyer
- Risk appetite of the employer: the more they fear losing in court, the more open they are to negotiation
Under section 10 KSchG, depending on age and length of service, employees can receive up to 12 months' earnings as a court-ordered severance, or even up to 18 months' earnings in the case of long service or older employees.
For more on severance, see our article Is there any entitlement to severance on termination?.
What does an unfair dismissal claim cost - and who pays?
The rules on costs before the labour courts differ significantly from those in civil courts:
- In the first instance, each party bears its own legal fees - regardless of who wins (section 12a ArbGG).
- The amount in dispute in an unfair dismissal claim is generally the equivalent of three gross monthly salaries.
- With a gross salary of €5,000 and an amount in dispute of €15,000, lawyer's fees under the German fee schedule (RVG) in the first instance typically range from around €1,500 to €1,800; court fees are added on top.
If the parties reach a settlement that also covers additional items (reference, bonus, overtime), the so-called additional settlement value can increase the costs - and may also affect what your legal expenses insurance will cover.
Legal expenses insurance: when and how it applies
If you have legal expenses insurance that includes employment law cover, it can take over your lawyer's and court costs - and significantly strengthen your position when you sue for unfair dismissal.
Key points regarding legal expenses cover:
- Not every legal expenses policy automatically includes employment law cover - this often has to be added as a separate module.
- For employment law cover, there is usually a waiting period of three months from the start of the policy. Terminations during the waiting period are not covered.
- The insurer issues a confirmation of cover before you file an unfair dismissal claim - this should be requested by your lawyer, as an unwise wording in direct contact with the insurer may lead to refusal.
- The confirmation of cover is a declaratory acknowledgment of debt - once granted, the insurer is legally bound by it.
- A separate confirmation of cover is required for each instance and each stage of the proceedings.
An employee with legal expenses cover has a stronger position in settlement negotiations: the employer knows they cannot simply wait for the employee to give up because of financial pressure. In practice, this often leads to higher severance offers in a settlement in an unfair dismissal case.
Have these documents ready: your insurance policy, the termination notice and your employment contract - so that a specialist employment lawyer for unfair dismissal can quickly assess your situation and request cover from the insurer in a structured way.
How the procedure works: step by step
Document the date of receipt, photograph or scan the termination notice. The 3-week period under § 4 KSchG begins running from that day. If the deadline ends on a Saturday, Sunday or holiday, the period shifts to the next business day.
Collect: employment contract (all amendments), payroll records for the last 12 months, bonus agreements, commission arrangements, warnings, settlement offers, and - if available - the policy of your legal protection insurance.
If you have a legal protection insurance policy with an employment-law module: contact your insurer or have the lawyer handle this. The coverage confirmation should be in place before filing the lawsuit.
Have a specialist employment-law attorney assess the chances of success and the financial strategy (continued employment vs. settlement with severance, employment reference, and exemption from duties). Clarify all outstanding claims: bonus, commissions, remaining vacation, overtime, company car.
The attorney files the dismissal protection claim at the competent labor court. The claim must be received by the court no later than the last day of the 3-week deadline, not just stamped or sent.
Typically a few weeks after filing, the conciliation hearing takes place. The court aims for an amicable settlement—often in the form of a settlement with severance, end date, employment reference, and exemption from duties.
If no agreement is reached at the conciliation hearing, a chamber hearing with an evidentiary taking follows. Many proceedings, however, end already during or shortly after the conciliation hearing through settlement—or through an out-of-court settlement in the weeks in between.
What a settlement typically covers
Most unfair dismissal cases do not end with a judgment but with a judicial or out-of-court settlement. If you prepare this strategically, you can achieve far more than just a headline severance figure.
| Negotiation Point | Why It Matters | Particularly Relevant For |
|---|---|---|
| Severance (gross) | Core component of the settlement for the loss of employment | All employees |
| Paid leave | Guarantees full pay through the termination date with no obligation to work | All, especially with a long remaining notice period |
| Reference letter (grade & wording) | At least 'good'; determine wording preferences | All, especially for applications in the same market |
| Bonus / Incentive / Commission | Partial or full payment of due variable compensation | Sales, executives, IT, Finance |
| Remaining vacation & overtime | Settlement of outstanding vacation days and overtime | Employees with accrued time off |
| Return of company car | Define timing and conditions clearly | Managers, field sales |
| Blocking period (ALG I) | Wording determines the risk of a blocking period for unemployment benefits | All who want to apply for ALG I |
| Non-compete | Review duration, geographic scope, and compensation for non-compete | Executives, sales, key roles |
| Confidentiality clause | Ensure the settlement's content and the reason for separation are safeguarded from public disclosure | Executives, public-facing roles |
| Release of all mutual claims | Review wording to prevent any future claims | All |
Especially for executives and high-earning employees, variable compensation, company car, non-compete clauses and confidentiality provisions are not side issues - they are central to the negotiations when you file an unfair dismissal claim.
If your employer has offered you a termination agreement (Aufhebungsvertrag), you should have this reviewed by a lawyer before signing. You can find more on this in our article Have a termination agreement reviewed: checklist for employees before signing.
Special aspects for executives and senior managers
Executives and senior managers are subject to specific rules in unfair dismissal proceedings:
- Senior executives within the meaning of section 14 (2) KSchG can more easily be "bought out" by the employer - the employer can apply to the court to terminate the employment relationship in exchange for severance without having to state particular grounds for termination.
- The distinction as to whether someone is a "senior executive" in the legal sense is often disputed and depends on their actual decision-making authority - not merely on their job title.
- In management roles, bonus, profit shares, variable pay, company car and non-compete clauses are typically the subject of separate legal negotiation in an unfair dismissal claim.
Our advisers at Vectocon | Steuerberater Rechtsanwälte understand not only the employment law perspective - they are also familiar with the commercial logic behind restructurings and employer decisions. This enables strategically sound advice that is not just legally correct but aligned with your business interests. Learn more about our employment law team and expertise.
When legal support is particularly useful
In principle, you can file an unfair dismissal claim in the first instance without a lawyer. In practice, however, this carries significant risks: even formal mistakes can cause your claim to fail, and without negotiation experience, settlements in unfair dismissal cases usually result in substantially lower severance payments and weaker overall terms.
Legal representation is particularly advisable if:
- Your salary is high or heavily performance-based (bonus, commission, profit share)
- You have long service with the company and the severance potential is correspondingly high
- You have legal expenses insurance (so your costs are covered)
- The termination shows formal or substantive weaknesses
- You hold a management position or qualify as a senior executive
- There are open claims at the same time (bonus, payment in lieu of vacation, overtime)
- You have been offered a termination agreement that you want to have reviewed
Vectocon | Steuerberater Rechtsanwälte advises you as an integrated Boutique-Kanzlei with both lawyers and tax advisers - particularly relevant where severance needs to be optimised from a tax perspective or where variable compensation has tax implications.
You can find more on our legal services in employment law on our services page.
Frequently asked questions about unfair dismissal claims
Do I have to file a dismissal-protection claim, even if I do not want to return to work?
Yes, often that makes sense. The lawsuit is the most important bargaining tool to secure a severance, a good reference letter, and a clear release-from-work arrangement. Whether you want to return is a separate question—the majority of cases end in a settlement, not in returning to work.
Does the Employment Protection Act automatically apply to me?
The KSchG applies if you have been employed in the company for more than 6 months and the company regularly employs more than 10 full-time employees (taking part-time into account). Even outside the KSchG protection, a dismissal can be invalid for other reasons—for example, due to formal defects, lack of special protection against dismissal, or failure to involve the works council.
Does my legal protection insurance cover the dismissal protection lawsuit?
Not every legal protection insurance automatically includes an employment-law module—check your policy. If you have employment-law protection and the policy was taken out before the termination (and the waiting period, typically 3 months, has elapsed), the insurance generally covers attorney and court costs. Have the coverage confirmation obtained early—preferably through your lawyer.
What is the rule of thumb for the severance amount?
In practice, a court settlement is often based on about half of the gross monthly salary per year of employment. However, that is only a guideline—the actual amount depends on the chances of success of the claim, the salary (including bonus and variable compensation), tenure, and the negotiation situation. There is no statutory severance entitlement.
What happens if the 3-week deadline has expired?
Under Section 7 of the KSchG, the termination is considered valid as soon as the deadline passes without a lawsuit being filed. A late admission of the suit is only possible under Section 5 KSchG if you can prove that you were prevented from timely filing through no fault of your own — this is a very narrow exception. Act immediately.
Can I file a dismissal-protection claim as an executive or senior employee?
In principle yes—executives have the same 3-week deadline. However, the employer can, under certain conditions, more easily seek to terminate the employment relationship with severance for executives. For this reason, strategic preparation for executives is particularly important: bonuses, variable compensation, company car, non-compete clause, and the reference letter should all be included in the negotiation.
The key points at a glance
- 3 weeks from receipt of the written termination to file an unfair dismissal claim - this time limit for an unfair dismissal claim is strict.
- The KSchG applies if you have more than 6 months' service and the business has more than 10 full-time employees.
- In practice, the unfair dismissal claim is often used as a negotiation tool for severance, reference, garden leave and variable pay - not only to get your job back.
- There is generally no statutory right to severance; severance is created through negotiation and settlement in an unfair dismissal case.
- If you have legal expenses insurance with employment law cover, obtain confirmation of cover early - ideally via your lawyer.
- The higher your salary and the longer your length of service, the more financial value is at stake in the procedure - and the more important it is to have strategic, professional support from an employment lawyer for unfair dismissal.
If you have received a termination notice and want to understand how your situation stacks up legally and financially, talk to us. We will review your case in a structured way, clarify deadlines, prospects of success and - where applicable - the position with your legal expenses cover before you decide whether to sue for unfair dismissal.
