Germany’s Dismissal Lawsuits Jump 33% as High Stakes Play Out from Volkswagen to Sick-Leave Rulings

German workers face a tougher job market with a 33% spike in dismissal lawsuits in 2025. Key developments include Volkswagen buyouts up to €40k, a landmark sick-leave ruling, and strict 21-day filing deadlines.

Workers across Germany are facing a dramatically tougher job market, with new figures showing a 33 percent surge in dismissal-protection lawsuits in 2025 — and the pace quickening into 2026. But behind the numbers lie a series of concrete developments: a landmark court ruling on sick leave, a Volkswagen restructure that dangles buyouts worth up to €40,000, and government plans to ease firings for the highest earners.

The trend is most visible in industrial strongholds. Baden-Württemberg’s labour courts logged more than 42,000 new cases in 2025 alone. In the first half of 2026, the statewide total climbed another 9.8 percent — a sign, say legal experts, that economic uncertainty is translating into more contested dismissals.

The 21-Day Deadline That Can Make or Break a Case

Any worker who receives a notice of termination has exactly three weeks to file a claim with the local labour court. The goal is not automatically a severance payment, but a judicial ruling on whether the employment relationship continues. This rule applies even in cases of immediate (fristlose) dismissal: the employer must, upon request, provide the written reason without delay under §626(2) of the German Civil Code. The three-week filing deadline remains fixed.

Courts are also scrutinising behaviour-based dismissals more closely. In many cases, a prior written warning is mandatory. Judges examine whether a fresh warning was necessary after long periods of unblemished service.

Those time pressures become especially acute when workers are weighing company exit packages.

Volkswagen’s “Gentle” Job Cuts Come With a Trap

On 9 July, Volkswagen’s supervisory board approved a cost-saving plan that postponed concrete plant closures. Workers now face a stark choice: stay on or leave with a severance bonus. Offers range from €30,000 to €40,000 under voluntary programmes.

Yet labour lawyers warn that signing a mutual termination agreement (Aufhebungsvertrag) can trigger up to 12 weeks of blocked unemployment benefits — a risk many employees may not fully appreciate. For mass layoffs or partial plant closures, social plans typically determine who is most vulnerable; protection increases with age, length of service and family obligations.

Sick Leave: Tighter Rules After May 2026 Ruling

The Federal Labour Court (BAG) raised the bar for illness-based dismissals in a decision on 7 May 2026 (case 2 AZR 184/25). Without a properly conducted company reintegration process (Betriebliches Eingliederungsmanagement, or bEM), a termination is invalid, the court ruled. Employers bear the full burden of proving an employee received the invitation to bEM — a mere scan of a registered mail receipt is insufficient.

A separate ruling on 5 May 2026 by the Lower Saxony Regional Labour Court struck down a fixed-term contract without objective grounds, even though the employee had last worked for the same employer 17 years earlier. The judges found a two-year probationary fixed term disproportionate given that statutory probation is six months.

Reform Plan Targets Top Earners – Unions Push Back

The federal government is preparing to loosen dismissal protection in 2027, but only for a narrow group: employees with gross monthly salaries around €15,000. Employers would gain the ability to end such contracts more easily in exchange for a severance payment. Supporters point to tax incentives designed to encourage a quick return to work.

The ver.di union has sharply criticised the plan. Researchers at the Institute for Employment Research (IAB) warn that the salary threshold could create a “glass ceiling”, discouraging career advancement by making top positions legally riskier to hold.