A dismissal often catches employees off guard and raises the question of whether they should negotiate a severance package. The key is not how sympathetic the employer seems, but the litigation risk as leverage they carry if the case goes to labor court. This article shows how employees can strategically use the employer’s litigation risk as leverage without relying on legal guarantees.
Why Sympathy Is Irrelevant in Severance Negotiations
Many conversations attempt to leverage a good relationship with the supervisor to secure a higher severance payment. Experience shows that the emotional dimension has little influence on the final outcome. The employer decides primarily based on economic considerations: How high is the probability that a dismissal protection lawsuit would succeed in court? What costs would litigation entail? What reputational damage could arise? These questions determine the employer’s willingness to negotiate far more than personal feelings toward the employee.
For example: An employee who has had a trusting relationship with their manager for years still receives a low offer because the company has internally calculated that the chances of success for a dismissal protection lawsuit are below 30 %. Personal goodwill does not change that calculation. It is therefore more effective to focus on the objective risk factors that the employer actually evaluates.
Using Litigation Risk as Leverage Strategically
The core of a successful negotiation lies in increasing the opponent’s perceived litigation risk. The higher the risk the employer sees, the more willing they are to pay a higher severance to avoid court proceedings. This risk can be broken down into several concrete components, each weighted differently.
Typical Risk Factors: Dismissal Protection Lawsuit, Litigation Costs, Reputational Damage
The most important factor is the prospect of a dismissal protection lawsuit. If the employee has good chances that the court will declare the dismissal invalid, the litigation risk as leverage for the employer increases significantly. Factors such as social selection, the form of dismissal, and potential errors in the dismissal letter play a role here. The stronger these points are, the more likely a ruling in the employee’s favor becomes.
Another cost factor is the anticipated litigation costs. Attorney fees, court costs, and potential expert witness fees can quickly amount to several thousand euros. Even if the employer believes they would win the lawsuit, they must bear these expenses. A high severance payment can therefore be viewed as a settlement that avoids these costs.
Last but not least, reputational damage plays a role, particularly for larger companies or in industries where employer branding matters. Negative press coverage of a controversial dismissal can harm employer branding and affect recruitment long-term. Employees who credibly signal a willingness to pursue legal action publicly increase this reputational risk and can thereby strengthen their negotiating position.
To make these factors concrete, a look at the statutory framework can help. The provision on severance entitlement in cases of operational dismissal can be found, for example, in § 1a KSchG. Although this does not create an automatic entitlement, it shows the conditions under which an employer may voluntarily offer a severance — usually precisely when they assess the litigation risk as leverage as too high.
Preparation: Securing Evidence, Observing Deadlines, Building a Negotiating Position
Before the first conversation takes place, the employee should carefully examine their evidentiary position. This includes the dismissal letter, any prior warnings, references, employment contracts, and all documents showing that the employer may have made mistakes (e.g., missing social selection, disregarded notice periods). The more complete the documentation, the more credibly the litigation risk as leverage can be presented.
At the same time, deadlines must be monitored. The three-week period for filing a dismissal protection lawsuit begins upon receipt of the dismissal. Anyone who lets this deadline expire loses a crucial pressure tool. Legal advice should therefore be sought early — for instance, from an independent specialist lawyer for employment law who can realistically assess the chances of success.
On this basis, a negotiating position can be developed. It helps to outline a realistic scenario: What severance amount would compare to the expected litigation costs and a potential court judgment? This internal calculation forms the lower limit below which a settlement would be pointless. Simultaneously, an upper limit should be defined representing the maximum justifiable amount — for example, based on the gross monthly salary multiplied by a factor that varies by industry and length of employment.
Thorough preparation also includes knowledge of alternative paths that can increase the employer’s risk. For instance, operational integration management (BEM) may become relevant in health-related dismissals. Further tips on this can be found in our article BEM Severance Negotiation, which shows how a failed BEM can strengthen the negotiating position.
Negotiation Strategies: From the First Offer to Settlement
The first step is often the employer’s offer. This should be neither immediately accepted nor rejected, but treated as a starting point for further discussion. It is advisable to remain calm and clearly present one’s own figures — i.e., the expected litigation costs and the potential severance in case of a successful lawsuit.
A proven tactic is to explicitly address the employer’s risk: “I see that due to possible social selection errors and the associated litigation prospects, you face a significant litigation risk as leverage.” This shifts the conversation to a factual level and removes sympathy from the focus.
If the first offer is significantly below one’s own lower limit, a counterproposal can be made slightly above it. The employee should signal a willingness to avoid court proceedings as long as the severance adequately compensates the expected risk. This often creates negotiating pressure, prompting the employer to improve their offer to prevent litigation.
In the further course, intermediate steps can be useful: for example, proposing a mediator or threatening an interim injunction. These measures increase pressure without immediately initiating a lawsuit. The decisive factor is that every step raises the employer’s perceived risk while simultaneously strengthening one’s own position.
Common Mistakes That Reduce the Employer’s Risk
A classic mistake is relying too heavily on emotional arguments. Statements like “I’ve always worked loyally” or “I expect fairness” have little impact on the opponent’s economic calculation. Instead, employees should cite concrete points that increase the litigation risk as leverage — such as missing consultation prior to dismissal or the disregard of social selection.
Another pitfall is missing deadlines. Anyone who lets the three-week period expire loses the most important pressure tool and gives the employer the opportunity to lower or withdraw the offer entirely. Equally damaging is failing to secure evidence: lost emails, unrecorded conversations, or missing witness statements weaken the position considerably.
Finally, accepting a first offer too early can weaken the negotiating position. The initial offer often deliberately includes downward room for maneuver so the employer can later concede without losing face. Anyone who agrees immediately leaves this potential unused and risks receiving a severance that is too low.
When a Litigation Funder Can Improve Enforcement Chances
Not every employee has the financial means to sustain a lengthy court proceeding. This is where a litigation funder like RechtStark can help by covering attorney and court costs, with repayment from the achieved severance only in case of success. This model reduces the personal financial risk and enables the employee to fully play out the litigation risk as leverage — because they do not have to worry about running out of money before a judgment is rendered.
A litigation funder assesses the prospects of success of a dismissal protection lawsuit in advance and decides whether financing makes sense. Legal advice remains with the independent specialist lawyer for employment law, while the funder assumes only the cost risk. This separation ensures that the legal strategy is not influenced by the funder’s financial interests.
Through the combination of solid preparation, clear risk description, and the potential support of a litigation funder, employees can significantly improve their negotiating position. The key lies in not viewing the litigation risk as leverage as an abstract concept, but as a concrete, calculable factor that one actively brings into the negotiation.
Note: This article is for general information purposes only and does not replace individual legal advice. For a free initial assessment of whether litigation funding may be an option for your case, you can contact RechtStark.