Have the cancellation agreement checked

Has your employer presented you with a cancellation agreement? Then there is one thing you should never do: sign it immediately. A cancellation agreement can have considerable financial and social consequences - from the Blocking period for unemployment benefit to the loss of important claims. Lawyer Martin Reichelt in Dresden will review your cancellation agreement and protect your interests.

What is a cancellation agreement?

A cancellation agreement (also known as a termination agreement) is a Mutual agreement between employer and employee to terminate the employment relationship. Unlike a notice of termination, which is a unilateral declaration, a cancellation agreement requires the consent of both parties.

The cancellation agreement must In writing be concluded in writing (§ 623 BGB). A verbal agreement or an agreement by e-mail is invalid. Both parties must sign the same document in person.

Difference between a cancellation agreement and termination

The distinction is of great practical importance:

• Cancellation: Unilateral declaration, Dismissal Protection Act applicable, works council must be consulted, notice periods must be observed, dismissal protection action possible.
• Cancellation agreement: Bilateral agreement, Dismissal Protection Act not applicable, no works council consultation required, freely agreeable termination date, no action for unfair dismissal possible.

For the employer, the cancellation agreement is therefore often the preferred means of terminating an employment relationship - it circumvents the protection against dismissal. For employees, this means Special care is required.

Advantages of a cancellation agreement for employees

A cancellation agreement is not disadvantageous per se. In certain situations, it can also be advantageous for employees:

• Severance payment: A severance payment is often agreed as part of a termination agreement, to which there would be no entitlement in the event of dismissal.
• Flexible termination date: The date of termination can be freely agreed - for example, to switch seamlessly to a new employment relationship.
• Good reference: The reference grade can be bindingly regulated in the cancellation agreement.
• Exemption: Paid leave of absence until the end of the contract is negotiable.
• Avoidance of cancellation: An amicable separation looks better on your CV than a dismissal.

Disadvantages and risks for employees

The benefits are offset by considerable risks that many employees underestimate:

Blocking period for unemployment benefit

The biggest risk is that the employment agency will usually impose a cancellation fee in the event of a termination agreement. Locking period of 12 weeks (§ 159 Para. 1 No. 1 SGB III). Justification: The employee has caused his/her own unemployment by agreeing to the cancellation agreement. In addition, the total period of entitlement to unemployment benefit is reduced by a quarter.

A blocking period can be avoided if a important reason for the conclusion of the cancellation agreement. The Federal Employment Agency recognises good cause if:

• The employer has held out the prospect of dismissal for operational reasons
• The threatened termination would have been lawful
• The notice period is observed
• The severance payment is not higher than 0.5 months' salary per year of employment

The correct drafting of a termination agreement to avoid a blocking period requires legal expertise. When drafting the contract, Mr Reichelt pays particular attention to the criteria of the Federal Employment Agency.

No right of cancellation

A widespread misconception: In principle, there is no right of cancellation for cancellation agreements. Unlike consumer contracts (e.g. online purchases), you cannot cancel a signed cancellation agreement within 14 days. Once signed, the contract is binding.

However, the Federal Labour Court in its case law on the The imperative of fair negotiation (BAG, judgement of 7 February 2019, ref. 6 AZR 75/18) clarified that the employer may not put the employee under pressure. If the cancellation agreement is presented in a situation where the employee is taken by surprise - for example with a request to sign immediately - this can lead to it being invalid. Employees should always obtain a Reflection period of at least three days and the contract in accordance with § 623 BGB have them checked by a lawyer before they sign.

A cancellation agreement can only be contested in exceptional cases (see below). The ironclad principle therefore applies: Never sign under time pressure - always have it checked by a lawyer first.

Loss of protection against dismissal

By signing a cancellation agreement, you waive all protection against dismissal: no Protection against Dismissal Act, no special protection against dismissal, no works council consultation. An action for unfair dismissal is no longer possible once the cancellation agreement has been concluded.

Checking a cancellation agreement - typical clauses and traps

A cancellation agreement regularly contains the following provisions, which you should check carefully:

Termination date

The date on which the employment relationship ends. Make sure that the ordinary notice period is observed - otherwise you may be penalised with a blocking period as well as a Rest period of the entitlement to unemployment benefit (§ 158 SGB III).

severance pay

Amount and due date of the severance payment. The rule of thumb is 0.5 gross monthly salaries per year of employment, but can be higher depending on the negotiating position. Also pay attention to the time of payment - a postponement to the following year can bring tax advantages (fifths rule, § 34 EStG).

Exemption

The employee is often released from work until the termination date. Important: The leave of absence should irrevocable and with continued payment of remuneration take place. Also clarify whether remaining holiday and overtime will be offset against the leave of absence.

certificate of employment

Agree the reference grade in the termination agreement and ideally the exact wording of the reference or at least a closing formula (e.g. „always to our complete satisfaction“ for the grade „very good“). This avoids a subsequent reference dispute.

Non-compete clause

Check whether a post-contractual non-competition clause has been agreed in the cancellation agreement. Such a prohibition is only effective if the employer Compensation for waiting time of at least 50 per cent of the contractual services last received (Section 74 HGB). Without compensation for non-competition, the non-competition clause is non-binding.

Equalisation clause (settlement clause)

Caution! Many cancellation agreements contain a clause stating that all mutual claims are settled upon fulfilment of the agreement. Such a compensation clause can lead to you waiving existing claims - for example to Overtime pay, holiday pay, commission or bonuses. Attorney Reichelt examines which claims are jeopardised by an equalisation clause.

One of the most common traps in a termination agreement: the compensation clause can also include entitlements to a good reference, commission, bonuses or a company pension scheme. Don't be fooled by a high severance payment if far-reaching claims expire at the same time. Attorney Reichelt identifies such hidden risks and negotiates a formulation that protects your interests.

Cancellation of a cancellation agreement

A cancellation agreement that has already been signed can only be contested in very exceptional cases:

Fraudulent misrepresentation (§ 123 BGB)

If the employer has induced the employee to conclude the termination agreement by making false statements of fact, this can be contested. Example: The employer untruthfully claims that the business is being closed.

Unlawful threat (§ 123 BGB)

If the employer threatens an obviously unlawful dismissal or criminal charges in order to persuade the employee to sign, this constitutes an unlawful threat. However, the threat of dismissal is only unlawful if a reasonable employer would not have given such notice. do not seriously consider was allowed.

Requirement of fair negotiation (BAG case law)

In its case law, the Federal Labour Court has The imperative of fair negotiation as a barrier to termination agreements (BAG, judgement of 7 February 2019, case no. 6 AZR 75/18). Accordingly, a termination agreement may be invalid if the employer creates a psychological pressure situation that makes it considerably more difficult for the employee to make a free decision. Examples:

• Surprise situation without time for reflection
• Negotiation in an unusual environment (e.g. private home of the sick employee)
• Exploitation of a recognisable emotional or physical exceptional situation

Checklist before signing a cancellation agreement

Before you sign a cancellation agreement, you should check the following points or have them checked:

• Cooling-off period: Do you have enough time for the exam? Don't let yourself be put under pressure.
• Cancellation period: Is the ordinary notice period observed? (Avoidance of blocking period and rest period)
• amount of severance pay: Is the severance payment appropriate? Orientation: at least 0.5 months' salary per year of employment.
• Reason for termination: Is an operational reason documented in the contract? (avoidance of blocking period)
• Exemption: Is the leave of absence irrevocable and with continued payment of salary?
• Remaining holiday: How is the remaining holiday treated? Offsetting against leave of absence or compensation?
• Job reference: Has the certificate grade been agreed?
• equalisation clause: Which claims are lost due to the equalisation clause?
• Non-compete clause: Is there a post-contractual non-competition clause? Is compensation for non-competition provided for?
• Overtime and bonuses: Are outstanding remuneration claims taken into account?
• Company pension scheme: What happens to existing entitlements?
• Tax organisation: Is the payment date of the severance payment optimised for tax purposes?

Golden rule: Never sign a cancellation agreement on the same day it is presented to you. Take the document with you and have it checked by a lawyer specialising in employment law.

Frequently asked questions about the cancellation agreement

Can I refuse a cancellation agreement?

Yes, you can refuse a cancellation agreement at any time. Nobody can force you to sign a cancellation agreement. If you refuse, the employer - if they wish to terminate the employment relationship - must take the route of dismissal, which must fulfil the requirements of the Protection against Dismissal Act.

Can I revoke a signed cancellation agreement?

Basically no. There is no statutory right of cancellation for cancellation agreements. The contract can only be cancelled on the grounds of fraudulent misrepresentation, unlawful threats or a breach of the principle of fair negotiation - which has high hurdles in practice.

Am I threatened with a blocking period in the event of a cancellation agreement?

As a rule, yes. The employment agency generally imposes a blocking period of 12 weeks if the employment relationship is terminated by a cancellation agreement. A blocking period can be avoided if the termination agreement fulfils certain requirements - in particular if there is a threat of dismissal for operational reasons and if the notice period is observed.

How much severance pay can I demand in the event of a cancellation agreement?

The amount of severance pay is purely a matter of negotiation. The rule of thumb of 0.5 gross monthly salaries per year of employment serves as a guide. The stronger your negotiating position (e.g. in the case of special protection against dismissal or dubious grounds for dismissal), the higher the severance payment can be.

Do I have to agree to a cancellation agreement immediately?

No. You have the right to take time to think about the contract and have it checked by a lawyer. Reputable employers allow a reasonable period of time. If your employer insists on an immediate signature, this is a warning sign - and could possibly be a breach of the principle of fair negotiation.

This article is intended to provide general information and does not replace individual legal advice. For an assessment of your specific case, please arrange a consultation with lawyer Martin Reichelt.