What does the labor law say about dismissal before starting work?

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It is not uncommon for an employment relationship not to materialize despite signing an employment contract. There are good reasons for this, both on the part of employers and employees.

In principle, it is possible to terminate the employment relationship before the first day of work. However, employers often try to protect themselves from this with additions to the employment contract.

Recruitment attorneys Pascal Crosett and Eno Merkel explain how to proceed if you don’t want to start work, what deadlines apply and what else you need to think about.

Lack of legal knowledge can cost a lot of hassle, time and money. Would you rather relax your nerves and your wallet? Then our “Know Your Rights” column is just the thing for you. Here, lawyers Pascal Crosett and Eno Merkel of the Berlin law firm answer a question about labor law every two weeks. This text deals with the question of the conditions under which one can give notice of termination before starting a new business.

Usually anyone who signs an employment contract does so with the intent of taking on the new position. Employers are unlikely to hire new employees unless there is a clear intent to hire them. However, there are always ends on one side or the other – although the ink on the new sheet has not completely dried. How could it be?

After all, the new job is much closer to home, and travel times are halved. Or they fit in much better than they did with the last employer for family reasons, you get more money for less work, colleagues are kinder…so there are plenty of good reasons to change jobs – just as there are good reasons to hire new employees.

How and why it sometimes does not work and what to do next, we will explain step by step here.

Why quit before starting work?

Next scenario: You have signed the employment contract and first of all you have good reason to be happy. But then this happens:

  • You explain to your current employer that you have been looking for him and have found a new challenge – but your boss doesn’t want to let you go and responds with a corresponding offer, salary increase, or promotion.
  • Or you applied for multiple jobs at the same time and got a better offer from another employer.
  • Or your own situation and living conditions have changed. You can no longer start the new job in the other city after all because you met someone at your current workplace, for example.

There are other possible reasons, but in any case it should be clear that there are good reasons for not wanting to take on a job after all. Since you have already signed the new employment contract, this will only be possible with a notice of termination.

By the way, the same can also happen to a new employer. For example in these cases:

  • Suddenly, the business is going very poorly, there is a hiring freeze.
  • Or the planned job doesn’t end as expected – the employee who actually wanted to leave the company now stays after all.
  • Or the ideal candidate for the position has been accepted in the meantime.

Many other reasons can also be visualized here, and here too it becomes clear: there will be more behind the dismissal before the first day of work, i.e. only organizational chaos or malicious intent.

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Termination of the employment contract before it begins – is this possible?

The employment relationship can be terminated by both contracting parties, i.e. by the employer as well as by the employee, before the first day of work. Since the duration of the employment relationship is less than six months, legal protection against dismissal does not apply here (§ 1 KSchG). Therefore, so-called “reasons for termination” are not required. This enables a normal termination before work begins.

But you shouldn’t make it too easy for yourself either: simply “opting out” of the contract or canceling the contract by email is out of the question. If you want to separate, you must give real and appropriate notice of termination. In practice, employees repeatedly choose a tactic that recruiters refer to as “ghosting” or “no show”: they don’t show up. In theory, the employee is threatened with claims for compensation, which we have already described in detail.

However, the risks of having to pay real damages are limited: labor courts only award compensation to employees if the employer can determine precisely the amount of damage incurred. Experience has shown that this rarely happens. Therefore, employers have developed two clauses of employment contracts in order to protect themselves at least a little from the non-appearance of new hires: the exclusion of termination before the start of work and contractual penalties, also combined if desired.

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What is the “disqualification of dismissal before starting work” and the contractual penalty?

There are formulas in the employment contract that prevent the contracting parties from giving notice of termination before the start of the employment contract. This ensures that the notice of termination can only be given on the first day of the employment contract becoming effective (i.e. upon commencement of employment). Thus, termination is possible on the first working day at the earliest, in which case the notice period must always be observed.

So the employee must continue to work for the duration of the notice – and the employer must pay him. This notice period is usually 14 days, as the probationary period is usually agreed upon in employment contracts. But this is not mandatory.

In some cases there is no probationary period. As a result, statutory notice periods (four weeks until the end of the month or the fifteenth of the month) or contractual notice periods, if longer (advanced startups still often agree to a three-month notice period), apply. In this case, as an employee, you are obliged to take the position, even if you have already decided to refuse it.

At the same time, employment contracts regularly contain what is known as a Contractual Fines Agreement. After that, the employee undertakes to pay a contractual fine in case of delay or complete failure to start work. However, according to the landmark ruling of the Federal Labor Court on August 19, 2010 (8 AZR 645/09), this contractual penalty may not be higher than the salary that would have been paid for the notice period. Specifically: If the parties agree to a probationary period during which the notice period is 14 days, the contractual penalty may only amount to a little less than half of the monthly gross salary. Otherwise, the agreement on the contractual penalty is ineffective.

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As lawyers who specialize in labor law, we see time and time again that everything works very differently in practice: in the end, the parties often enter into a termination agreement. Example: Sonja signed an employment contract with ABC GmbH in March 2022, and is scheduled to start work on July 1, 2022. Six months probationary period, gross monthly salary of 5,000 euros, contractual fine of 2,000 euros for no-show, no agreed upon Termination before the start of the contract. At the end of April 2022, Sonja unexpectedly received the promise of her dream job and told ABC GmbH that she would like to “opt out” of the contract. The HR manager is disappointed at first, then a little angry and says Sonja then has to pay the contractual fine.

Next, Sonia contacts a lawyer who specializes in labor law, who informs the employer that Sonia will start working on July 1, 2022 and at the same time deliver the notice of termination on July 15, 2022. He indicates that the employer is definitely not interested in training Sonia for 15 days and then letting her to leave immediately. In addition, the employer will then have to pay a wage for this time, which is about half a month’s salary.

After all, there would be no due contractual penalty, because he would have properly and timely terminated Sonya. Against the background of this scenario, which is absolutely disastrous for ABC GmbH, it is proposed that ABC GmbH terminate the employment relationship with immediate effect by way of a termination agreement, but without paying a contractual penalty. It all seems silly at first, but it has happened many times in our practice.

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Special Inconvenience: Recruitment Fee for Headhunters

Of course, employers are especially angry if they have previously paid agency fees to get employees. Because recruitment fees for headhunters are usually due when the employment contract is signed. Accordingly, employers must also pay this fee if the employee never begins the employment relationship.

Then employers regularly ask if the agency fee—usually a five-figure amount—can be paid to the employee as compensation. However, this is not possible. If the employee resigns in time, he is not in breach of any obligations. This falls within the scope of the employer’s risk. The only option for employers here is to agree to the recruitment fee in advance – so that a third is paid, for example, when signing a contract, a third after six weeks of working with the company, and a third after the probationary period. Passed successfully. Whether this can currently be applied to the market is of course another question.

This article was last updated on March 18, 2022. It was released on March 17, 2022.

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