German Federal Labour Court's Stringent Rulings Raise Stakes for Employers Planning Layoffs

Recent BAG rulings invalidate digital mail proofs, strengthen bEM obligations, and expand parental leave protection. New 2027 rules ease dismissals for top earners with tax reform.

A wave of recent decisions by Germany's Federal Labour Court (BAG) has significantly tightened the legal requirements for dismissing employees, creating a complex landscape for companies like O2 Telefónica, which is cutting more than 1,000 positions. With a workforce of 6,820, the reduction will eliminate roughly every sixth or seventh job. A voluntary severance programme has already begun in some areas, offering employees financial compensation to leave.

One of the most consequential rulings came on 7 May 2026 (docket 2 AZR 184/25), where the court ruled that a digital delivery confirmation from the postal service does not prove that a registered letter was actually placed in the recipient's mailbox. The log is often generated before the physical delivery occurs. This creates particular problems for the mandatory Return-to-Work Management process (bEM), a legally required procedure for employees who are frequently absent due to illness. The BAG declared a sickness-related dismissal invalid because the employer could not demonstrate that the bEM invitation had been properly served. Moreover, the court clarified that if an employee becomes unfit for work again for more than six weeks, a fresh bEM offer is required — even if the same worker previously declined an earlier invitation.

During the probationary period, employers also face new pitfalls. In a ruling dated 29 January 2026 (2 AZR 128/25), the BAG held that dismissing a severely disabled employee is ineffective if the disabled persons' representative was not properly involved. A mere stamp acknowledging receipt does not suffice; the statutory one-week period for the representative to submit a statement must be fully respected.

Parental leave protections were also strengthened. On 18 June 2026 (2 AZR 213/25), the court ruled that the pre-emptive dismissal protection arises anew before each individual period of parental leave, even if several leave periods were applied for simultaneously. A dismissal within the eight-week period before a leave period begins is automatically invalid without prior approval from the competent authority.

Meanwhile, the policy landscape is shifting for top earners. A coalition paper dated 2 July 2026 announced changes effective 1 January 2027: dismissal protection will be loosened for employees earning an annual salary above €177,450. In exchange for a severance payment, terminations will be made easier. Accompanying this change, the tax treatment of severance payments will also be reformed: a planned tax bonus will depend on how quickly the employee finds a new job. Legal experts warn that workers have a duty to mitigate their losses — anyone who unreasonably turns down suitable job offers may have that income attributed to them as willfully lost earnings. The resulting advice: keep meticulous records of every job application.

Separately, in May 2026 the Higher Regional Court of Bamberg prohibited O2 Telefónica from enforcing a contested contract clause that allowed the company to unilaterally terminate certain unlimited tariff plans during their minimum contract term. Employers across Germany now face a legal environment where even procedural missteps — from failed delivery of a single letter to incomplete involvement of employee representatives — can unravel a dismissal entirely. For those advising companies on restructurings, the message is clear: nothing can be taken for granted.