New BAG case law: Important changes to termination agreements

The latest ruling by the Federal Labor Court (BAG) marks a turning point in the handling of termination agreements. As a specialist employment lawyer, I have been observing developments in this sensitive area of labor law for years. With its current decision of March 12, 2025, the BAG has now established clear guidelines that both employers and employees should be aware of.

The Federal Labor Court's new ruling primarily strengthens the position of employees by setting specific requirements for the validity of termination agreements. Essentially, this concerns the granting of sufficient time for reflection and comprehensive disclosure obligations. This change is not a surprise, but rather the logical consequence of an already emerging development in case law.

The new regulation regarding the reflection period is particularly interesting. The court has clarified that employees must be given at least 24 hours to consider a termination agreement. For more complex agreements, such as those involving senior management or special compensation components, this period can be significantly longer. This requirement may seem like an obstacle at first glance, but in practice it creates greater legal certainty for both parties.

A recent case from my firm illustrates the practical significance of this ruling: A medium-sized company in Berlin faced the challenge of terminating a senior executive. By adhering to the new Federal Labor Court (BAG) guidelines, we were able to find a solution satisfactory to both parties. We granted a 72-hour cooling-off period and provided comprehensive written explanations. The result was a legally sound termination agreement that considered both the company's and the executive's interests.

The new case law also impacts unemployment insurance law. Employers must now explicitly inform employees about potential consequences for receiving unemployment benefits. This includes, in particular, information about a potential waiting period. This duty to provide information may initially seem like an additional burden, but it prevents later disputes and creates transparency in the process.

In practice, this means that termination agreements must be prepared even more carefully. Documenting the handover and the information provided is becoming increasingly important. At the same time, however, the new case law also offers opportunities: Clearly structured processes and transparent communication lead to legally sound solutions that are supported by both parties.