A settlement after summary dismissal is for many employees the last chance to obtain severance pay. A recent case shows how a hotel operator initially terminated without notice but later backed down. For affected employees, this is an important signal: Even after an extraordinary dismissal, it pays to know your rights and act strategically.
Summary dismissal: What it means for employees
Summary dismissal, legally also called extraordinary dismissal, ends the employment relationship from one day to the next – without observing the otherwise applicable notice periods. Employers resort to this most severe measure when continuing the employment relationship until the end of the ordinary notice period is no longer reasonable for them. The law requires an important reason within the meaning of Section 626 of the German Civil Code (BGB).
Typical examples include criminal offenses against the employer, persistent refusal to work, serious insults, or repeated breaches of duty despite a prior warning. However: Not every summary dismissal withstands judicial scrutiny. Often there is already a lack of a prior warning, although this is generally required for controllable misconduct. The two-week deadline under Section 626 BGB is also frequently missed by employers: The dismissal must be pronounced within two weeks of becoming aware of the relevant facts. Read more about the role of warnings in our article Warning before dismissal.
Why employers back down after a summary dismissal
When an employer suddenly backs down after a summary dismissal and offers severance pay, there is usually a simple calculation behind it: The dismissal is legally vulnerable, and a lost lawsuit would be expensive. If the labor court declares the dismissal invalid, the employment relationship continues – and the employer must pay back wages for the entire period until the final judgment. This so-called back pay during default of acceptance can quickly amount to several months’ salary.
Added to this are legal costs, time expenditure for management and HR, and the risk of negative publicity. Especially in industries with high customer contact – such as hospitality – employers want to avoid protracted court proceedings. A settlement is then the elegant way out: The employee waives continuation of the employment relationship, the employer pays severance, and both sides avoid an open trial.
The hotel operator case mentioned at the beginning fits this pattern exactly: After the summary dismissal, it apparently became clear quickly that a legal dispute would be risky. The backing down is, from the employer’s perspective, less generosity than risk management.
Settlement after summary dismissal: No automatic entitlement, but a matter of negotiation
There is no statutory entitlement to severance pay in the event of a summary dismissal. The well-known rule of thumb from Section 1a of the Protection Against Dismissal Act (KSchG) – half a gross monthly salary per year of employment – applies only under narrow conditions: The employer must designate the dismissal as operational and expressly offer the severance in the dismissal letter. In the case of an extraordinary dismissal, this is usually not the case.
A settlement after summary dismissal arises in most cases only through an agreement in the unfair dismissal proceedings. The employer pays to end the litigation risk; the employee accepts termination of the employment relationship in return for a financial payment. The amount depends on the prospects of success of the lawsuit, the length of service, the salary, and not least the willingness of both sides to negotiate. The rule of thumb from Section 1a KSchG often serves as a reference point – more on this on our overview page Severance pay after dismissal.
Important to understand: The severance is not a handout, but the price the employer pays for ending a legally vulnerable employment relationship. The stronger your legal position, the higher the offer typically is.
The three-week deadline: Using the unfair dismissal claim as leverage
The most important lever for a settlement is the unfair dismissal claim. You must file it with the labor court within three weeks of receiving the dismissal – otherwise the dismissal is deemed valid from the outset under Section 7 KSchG. This deadline is statutory and cannot be extended. Anyone who misses it permanently loses the possibility to challenge the dismissal and negotiate severance.
The claim is directed against the dismissal itself: You apply for a declaration that the employment relationship was not terminated by the summary dismissal. With the filing of the claim alone, pressure builds on the employer, because back pay during default of acceptance and legal costs now loom. In many cases, this leads to settlement negotiations – and this is precisely where the decision on severance is made. A detailed introduction to the procedure and requirements can be found in our guide Unfair dismissal claim: Everything you need to know.
Steps you should take immediately after a summary dismissal
The first days after a summary dismissal are decisive. Anyone who hesitates now risks losing their rights. The following sequence has proven effective in practice:
- Review the dismissal: Was it issued in writing? Was it signed? Does it contain a reason? Formal errors can render the dismissal invalid.
- Note the deadline: The three-week period begins upon receipt of the dismissal. Record the date immediately and count the days.
- Seek legal advice: A specialist lawyer for employment law can assess whether the dismissal has prospects of success. Bring all documents: employment contract, dismissal letter, references, correspondence.
- No premature signatures: Do not let yourself be pressured into a termination agreement or waiver declaration before you have been advised.
- Register as unemployed: Register with the Federal Employment Agency as early as possible, even if you are still filing a claim. This avoids disadvantages regarding unemployment benefits.
- Secure claims: Document outstanding vacation days, overtime, and arrange for the issuance of a qualified employment reference.
These steps take little time but can decide over significant money. In particular, the sequence – first advice, then signature – protects against consequential errors. Even if the situation seems hopeless: Never simply accept a summary dismissal without at least obtaining an initial assessment from a specialist lawyer.
When an unfair dismissal claim is really worthwhile
Not every summary dismissal is vulnerable, and not every claim leads to severance. A realistic assessment of the prospects of success is therefore the first step. Good chances exist if the dismissal was issued without a prior warning, the important reason is not comprehensible, or the employer’s two-week deadline has expired. Long periods of service and higher salaries also make a claim worthwhile because the economic consequences for the employer are greater.
The prospect of severance depends largely on the prospects of success of the claim. Anyone who sues merely pro forma to extort severance risks losing in court and bearing the costs. Anyone who has a strong legal position, however, can move the employer to a fair settlement. An experienced lawyer can usually assess the prospects roughly after the first consultation.
Litigation funding: Reducing the cost risk in unfair dismissal proceedings
Unfair dismissal proceedings cost money: lawyers’ fees, court costs, and in the event of defeat, the opposing party’s costs as well. Not everyone has legal expenses insurance, and not every policy covers employment law disputes. This is exactly where litigation funding comes in: A litigation funder like RechtStark examines the prospects of success of your case and assumes the costs of the proceedings if successful. As an employee, you bear no financial risk – in the event of success, the funder participates in the severance obtained.
Important to know: A litigation funder is not a law firm and does not assume representation in court. Legal advice and court representation always lie with an independent specialist lawyer for employment law. The funder merely examines whether the case is promising enough and then assumes the costs. For employees considering an unfair dismissal claim but shying away from the cost risk, this is a serious alternative to self-funding. Especially in cases of summary dismissal with unclear legal situations, litigation funding can make sense because the outcome of the proceedings is difficult to predict.
Whether litigation funding is worthwhile depends on the individual case. Decisive factors are the prospects of success, the amount of potential severance, and the expected legal costs. A specialist lawyer can assess these factors and help you make the right decision.
Conclusion: A summary dismissal is a heavy blow – but no reason to despair. The hotel operator case shows: Even after an extraordinary dismissal, severance can result if employees know their rights and act quickly. The three-week deadline is the key: Anyone who uses it opens up the chance for a settlement after summary dismissal. Anyone who lets it pass usually comes away empty-handed. Obtain legal advice early and examine whether an unfair dismissal claim is the right path for you.
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.