Termination of the employment contract: are employers permitted to immediately cease salary payments?

It is common practice for employers to expect employees to seek new employment immediately following the termination of their contracts, and for employers to cease salary payments as a precaution.

However, the Federal Labor Court has recently ruled that employers are not permitted to immediately cease salary payments if the employee who has been dismissed has not sought new employment within the notice period. The employer reserves the right to continue the employment.

In the event of the employer terminating the employment relationship in the correct manner and releasing the employee from work despite the employee’s right to work, the employee will not generally be deemed to be maliciously refraining from earning income elsewhere within the meaning of Section 615, sentence 2 of the German Civil Code (BGB) if he does not take up other employment before the end of the notice period.

However, after the end of the notice period, if the employee does not seek other employment, they may have to accept a deduction for the lost interim earnings.