Top 5 Mistakes in Executive Dismissals to Avoid

Some Background Information Beforehand

Middle managers almost always have provisions in their contracts that deviate from regular contracts. More obligations and extensive working hours are often compensated with higher salaries and attractive bonuses. However, it's important to keep certain contractual peculiarities in mind in the event of termination. Even for experienced employers, terminating a middle management representative is something special.

In judicial practice, there are often cases where mistakes are made in terminating middle management employment contracts. Below is an excerpt of issues where mistakes occur particularly frequently.

1. Suspension

There are cases where middle managers were kept employed until the termination date, even though the employer had issued a suspension. The employee assumed that they also had to agree to the suspension for it to be valid.

This is not the case. Legally, an employer does not need the employee's consent when issuing a suspension. At the same time, the employee does not automatically have a right to suspension if they are terminated. That only happens if the employer issues it. Otherwise, they are obligated to fulfill their work duties until the agreed contract end date. However, the employee may request a suspension.

In practice, the employer usually suspends the employee voluntarily. A common reason for this is to prevent the middle manager from accessing internal data further to prevent misuse or taking it along. Whether this line of thought is also sensible in the case of a voluntary resignation by the middle management member is another question. If there is indeed a desire to harm the company, they would likely have taken appropriate actions before the resignation. Of course, suspension is not always issued solely due to mistrust. Often it is done simply out of goodwill to facilitate a smooth separation for both parties.

2. Misconduct and Abusive Termination 

There is often confusion about abusive terminations when it comes to terminating middle managers. This frequently happens in the context of actual or perceived misconduct by employees. Sometimes the rights of executive-level employees and those who are not part of the management are misinterpreted.

As a good example, negative remarks from a non-management member can be considered. Let's assume this employee complains repeatedly, and quite aggressively, about the management. Would you consider termination if they don't improve despite warnings? Many would answer yes to this question. However, there are situations where the court decides in favor of the defendant in such cases and considers it an abusive termination. The court often considers the background of the action and the employee's rights to protection. If the employee committed the act because the employer was at fault within labor law protection provisions, this fact can outweigh. Long-term employees are often considered to have a particularly protective position by the court.

Conversely, there is also the situation where employers often hesitate to terminate a middle manager after multiple complaints. After all, they hold a higher position and thus more rights. However, this is only partly true. It is often forgotten that a management position also entails a duty of loyalty. Of course, the employee can be honest. Nevertheless, termination can still be considered justified in individual cases if a middle manager repeatedly starts public disputes with the management in front of employees or tells their employees about disputes between management members and makes corresponding insulting remarks. Of course, such cases must always be checked individually and with sensitivity.

3. Severance Pay

The payment of severance pay is often considered obligatory when terminating middle managers. After all, the middle manager supposedly has a right to demand it. This is not the case in all instances.

In fact, the legal point of severance pay has more or less become obsolete with the parallel mandatory provident fund payments, which must be made available for measures for professional reorientation or starting a business. Since the financial scope of the outplacements that must be provided to the former middle manager can be offset against the severance pay, there is no fundamental right to compensation beyond that. Unless the employer voluntarily wishes to pay it.

However, the situation must be evaluated differently if it is not a direct termination but the case of early retirement and the employee has surpassed the age of 50. In this case, extensive legal premiums, damages, and wage replacement payments are even due to them. This also applies in that case for non-management members.

4. Confidentiality Obligation

A particularly important point often addressed in terminations is the issue of confidentiality obligation. Every employee is obligated to this. Employers are usually aware of the high priority of this contractual point for managers. After all, a middle manager has particularly extensive rights to access sensitive internal data. But the fact is that the law does not encompass all data. For example, customer data and addresses do not automatically count. If these are abused, the middle manager cannot be held any less accountable, but this falls under the aspect of data protection in legality.

To include all data in the confidentiality obligation, this must be stipulated in the employment contract from the outset.

5. Non-Compete Clause

Likewise, a non-compete clause must also be agreed upon in writing. It is often assumed that the confidentiality obligation and the non-compete clause go hand in hand. However, this is a separate legal point. The worst-case scenario occurs when a non-compete clause or the confidentiality obligation regarding customer data is not explicitly agreed upon before the middle manager's termination. In this case, with the explicit, written consent of the customers, the employee could theoretically take customer data and start their own business in the same sector without expecting penalties.

Alternative to Termination: Termination Agreement

A sensible alternative to terminating middle managers is a termination agreement. This allows for deviation from contractually agreed-upon modalities on one hand, and shortening the notice period on the other. This is usually in the interest of both parties. It may save further direct conflicts and, as an employer, potentially avoid greater competition or damage to reputation. This is especially important if your company should be in the media spotlight.

A balance clause is recommended within a termination agreement. This legally clarifies that all mutual obligations have been fulfilled.

Support from Specialist Lawyers

For termination or termination agreements with middle managers, the support of a lawyer is explicitly recommended. GetYourLawyer is happy to support you in finding a skilled lawyer. After consulting with our experienced staff via the free online form, you will quickly and easily receive suggestions for specialist labor law lawyers from your region.