Unemployment among Germany’s managers hit hard in 2025, rising 14 percent to 49,000 people, according to the Federal Employment Agency. The figures come as a series of court rulings are reshaping the legal landscape for both employers and senior staff — most notably a landmark decision from the Federal Labour Court (BAG) that bans companies from contractually excluding pay owed after an invalid dismissal.
The ruling, handed down on 28 January 2026 (case reference 5 AS 4/25), declares any clause in an employment contract that waives the employee’s right to remuneration during the employer’s default (Annahmeverzugslohn) as void under Section 134 of the German Civil Code (BGB). The judges reasoned that allowing such a waiver would effectively gut the statutory protection against unfair dismissal, because the financial risk of an unlawful termination would shift entirely onto the worker.
“If contractual exclusion were permitted, employers could push the entire economic burden onto employees,” the court stated. “That runs counter to the purpose of the Protection against Unfair Dismissal Act.” Even choosing a foreign legal framework would not automatically shield a company from this level of protection, the judges added.
However, employees must meet strict conditions to claim the back pay. They have to file a dismissal protection suit within three weeks and document their willingness to work. If they win, any income earned elsewhere — or deliberately not earned — is deducted from the amount the employer owes. For companies, the verdict raises the stakes: if a separation turns out to be unlawful, they must pay full salaries for the entire duration of the legal dispute, even though the employee performed no work.
In a separate fundamental ruling (8 AZR 26/18), the BAG clarified that the standard civil late-payment penalty of €40 under Section 288(5) BGB does not apply to employment relationships. The reason lies in the specialised cost regime of Section 12a of the Labour Courts Act (ArbGG), which excludes any cost-recovery claim at first instance. Workers can still demand unpaid salaries plus interest, but they cannot claim an additional flat-rate compensation.
For managers, the practical implications are particularly acute. Statutory severance rights are rare for this group, except in cases of operational dismissals that come with a transition offer. Typical severance arrangements amount to one month’s gross salary per year of service. Experts recommend that executives respond to settlement offers within seven to fourteen days and seek legal advice.
Transparency is also gaining ground beyond the courtroom. In April 2026, the Berlin Court of Appeal (Kammergericht) ruled (case Verg 13/25) that in public procurement, losing bidders must be informed of the winning competitor’s prices. That decision parallels an October 2025 BAG judgment, which affirmed employees’ right to access colleagues’ salary information when there are indications of gender pay inequality — a move that foreshadows the EU Pay Transparency Directive.
