American player – German labor law

How American employers prevent their new German subsidiary from becoming more expensive than expected

American employers who take over a company in Germany or found a subsidiary here have to adapt to different labor laws. Professional employment law expertise can help to avoid unforeseen costs.
Experts from the international law firm oikon, for example, guarantee that the personnel budget will not be burdened by unexpected claims. Get advice early on to avoid expensive consequences.

American and German labor law differs significantly. While many things can be freely agreed between employers and employees in the USA, American employers have to rethink massively when moving to Germany. This applies to the takeover of a German company as well as to the founding of a subsidiary in Germany. As soon as the plans for this become concrete, American employers should involve experienced German employment lawyers in their expansion project.

For example, the experts at the international law firm oikon guarantee that the personnel budget will not be burdened by unforeseen claims. This is particularly important in the case of takeovers, because they are often associated with changes in personnel and are even often calculated accordingly. For example, a poorly prepared separation of parts of the workforce can quickly become very expensive.

Why is that? Unlike in the USA, it is assumed in Germany that the legal relationship between employers and employees is not a matter for two partners on an equal footing. German labor law tends to be based on a weak and a strong legal partner and therefore aims to protect the weaker and his job.

As a result, two essential things are different on the German job market than in the USA: Personnel changes require far more time than is usual on the other side of the Atlantic. There are also a number of legal provisions on how employment contracts and their termination are to be structured.

This leads to a certain inertia in German companies when it comes to personnel changes. German employers only commit to staff after careful consideration, because getting rid of unwanted employees is no small matter.
This often does not fit the needs of companies that are under pressure and need to restructure quickly. Anyone who deals with such companies in the course of a due diligence check is therefore well advised to secure solid employment law expertise at an early stage. Surprising personal castling is almost always very expensive in Germany.

“We’re no longer talking about the usual severance payments of half a month’s salary per year of service,”

warns Ulrich Baumann, partner at the Munich law firm oikon.

“Anyone who only calls us in when the child is in the well can often only realize a dismissal with a multiple of the standard severance payment.”

American employers must therefore rethink massively when it comes to labor law when moving to Germany.

Find out more about how you can prevent the takeover of a German company or the founding of a subsidiary in Germany from becoming more expensive than you think.

Contact person: Ulrich Baumann, Sandra Desche