Can I Be Terminated While Sick?
One of the most common misconceptions in German employment law is the belief that illness automatically protects against termination. This is incorrect. A termination is generally possible and legally valid even during a period of sick leave. There is no blanket prohibition of termination during incapacity for work.
However, the Dismissal Protection Act (Kuendigungsschutzgesetz, KSchG) protects employees in companies with more than ten employees from arbitrary dismissals. Every termination must be socially justified, meaning it must be based on personal, behavioral, or operational reasons. A sickness-related termination is a form of personal termination and is subject to strict requirements.
Requirements for a Sickness-Related Termination
For a sickness-related termination to withstand scrutiny before the labor court, three requirements must be met. First, a negative health prognosis: at the time of termination, there must be reason to expect that the employee will continue to have significant sickness-related absences in the future. One-time or short-term illnesses are generally not sufficient.
Second, significant impairment of operational interests: the absences must cause unreasonable economic or organizational burdens for the employer. In the case of long-term illness, this can be the case when permanent incapacity is established or a return in the foreseeable future is not expected.
Third, balancing of interests: the employer's interest in terminating the employment must outweigh the employee's interest in its continuation. Length of service, age, maintenance obligations, severe disability status, and the absence history are all considered.
What Happens to Sick Pay After Termination?
The good news is that the sick pay entitlement generally continues even after termination. As long as statutory health insurance membership exists, sick pay continues to be paid. After the employment relationship ends, there is typically a mandatory continuation of insurance with the statutory health insurer.
There is an important nuance: when the employment ends while the employee is incapacitated, the employer's continued pay obligation does not transfer to the health insurer. Sick pay begins where continued pay would have ended, meaning after a total of six weeks from the start of the incapacity. If the six weeks have already elapsed at the time of termination, the health insurer continues paying seamlessly.
Termination During Sick Pay Receipt
If the employment relationship is terminated or ended by a settlement agreement during the sick pay period, this initially does not affect the sick pay entitlement. The health insurer continues to pay as long as the incapacity persists and the maximum payment period of 78 weeks has not been reached.
After the employment relationship ends, the insured person is typically continued as a voluntarily or mandatorily insured member. During sick pay receipt, there is contribution-free insurance, meaning the insured person does not need to pay separate health insurance contributions, as these are already deducted from the sick pay.
Severance Pay and Sick Pay
With a settlement agreement including severance pay, the question arises whether the severance affects sick pay. In principle, a severance payment is not offset against sick pay. However, a settlement agreement may lead to a blocking period for unemployment benefits if the employment would not otherwise have been terminated by the employer.
There is no blocking period for sick pay due to a settlement agreement. Sick pay continues to be paid regardless of the reason for termination. Only when sick pay runs out and an ALG I application is filed can a blocking period due to the settlement agreement become relevant.
Workplace Integration Management (BEM)
Employers are legally required to conduct Workplace Integration Management (Betriebliches Eingliederungsmanagement, BEM) when an employee has been incapacitated for a total of more than six weeks within twelve months. BEM aims to identify ways to overcome the incapacity, prevent future incapacity, and preserve the employment.
BEM is not mandatory for the employee, who can decline to participate. However, participation significantly strengthens their legal position. If the employer has not conducted BEM, a sickness-related termination has very little chance of success before the labor court. Participation in BEM can also lead to concrete improvements such as a change of workplace, adapted working conditions, or gradual reintegration.
Practical Tips for Affected Employees
Document everything: sick notes, doctor visits, medical reports, and all correspondence with the employer. If termination is threatened, seek immediate advice from a lawyer specializing in employment law or a trade union representative. Participate in BEM and bring your own suggestions. Check whether gradual reintegration is possible. And register with the employment agency in good time, at least three months before the expected end of the employment relationship.
Health Insurance After Employment Ends
After the employment relationship ends, the question of health insurance coverage arises. Those receiving sick pay remain insured as members of the statutory health insurance system. Contributions are deducted from the sick pay. When sick pay ends, the mandatory continuation insurance under Section 188 SGB V applies, meaning the insured person remains in the statutory system but must bear the full contributions themselves unless they are receiving ALG I, in which case the employment agency covers the health insurance contributions. Always consult with your health insurer about the specific contribution obligations to avoid gaps in coverage. Understanding these rules is essential for financial planning during and after a period of long-term illness.