For a dismissal for operational reasons in a company with no more than ten employees, the employer is, in general, free under German law to decide who it wishes to dismiss.

If the organisation has more than ten employees and the employment relationships have lasted for more than six months, a ‘social justification’ is required, in other words there needs to be a reason for the dismissal and the employer is not free to decide whom to dismiss. The employer must carry out a ‘social selection’ between comparable employees on the same level in the structure and may only dismiss the employees least in need of protection.

To do this, the employer must first establish comparison groups. A comparison group includes all employees who are interchangeable and on the same level within the structure. The employer must then make a social selection based on the statutory criteria of length of service, the age of the employee, whether the employee has dependants, and whether the employee is disabled. It is also possible to group comparable employees by age. Note however, that the employer may exclude individual top performers from the social selection if their continued employment is in the legitimate interests of the company.

A further prerequisite for an effective dismissal for operational reasons is that there is no other opportunity within the company to employ the person being dismissed. If there are vacancies that the employee could fill, the employer must offer them to the employee first. Termination may only be used as a last resort.

In the context of dismissals for operational reasons, the employer must take into account the special protection against dismissal of certain groups of employees. These include in particular works council members and employees on maternity leave or parental leave.