Executive employment in Germany: status, contract and position

The title “executive” does not by itself determine a person’s legal status under German employment law. The employment contract, actual duties, decision-making powers and integration into the organisation must be assessed together.

Compare the contract with the actual role

The first step is to compare the agreed position with the role actually performed.

Relevant questions may include:

• Which duties are defined in the employment contract?
• Which responsibilities are stated in the job description?
• What decisions may be made independently?
• Which reporting lines apply?
• Does the executive hold personnel responsibility?
• Are powers of representation or commercial authority granted?
• Has the role changed over time?

Differences between the contractual position and the practical role may become particularly important when responsibilities are removed or a separation is announced.

Senior executive is a legal classification

Not every executive qualifies as a senior executive under German law.

A management title, high salary or responsibility for employees is not necessarily sufficient. Actual authority concerning hiring, dismissal, representation or substantial independent business decisions may be decisive.

The classification may affect dismissal protection, works-council matters and the available litigation strategy.

Review remuneration completely

Executive remuneration frequently consists of several components.

The review may include:

• fixed salary
• annual or long-term bonuses
• target agreements and target specifications
• discretionary remuneration
• commissions
• company cars and other benefits
• occupational pension arrangements
• share, participation or incentive programmes
• post-contractual non-compete compensation

Each component should be assessed separately and as part of the complete economic package.

Examine changes of responsibilities early

The removal of duties, altered reporting lines, loss of personnel responsibility, reassignment or restrictions on decision-making authority may substantially affect the executive’s position.

The legal assessment should compare:

1. the contractual wording,
2. the previous practical role,
3. the employer’s managerial rights,
4. the extent of the proposed change, and
5. the professional and financial consequences.

A change that appears organisational may have significant contractual and reputational effects.

Assess separation as one complete package

Where dismissal or a termination agreement is being considered, the following issues should not be negotiated in isolation:

• termination date
• continued remuneration
• bonus and target-based payments
• garden leave
• severance
• employment reference
• agreed internal and external communication
• restrictive covenants
• return of company property
• professional references and future opportunities

The legal position, economic value and practical consequences should be evaluated together.

Consider reputation and future professional opportunities

For executives, the wording and communication of a position change or separation may be particularly important.

Internal announcements, external statements, employment references, professional references and the description of the reason for departure may affect future employment opportunities.

These issues should be addressed before the final separation documents are agreed.

Define the intended outcome

Possible objectives may include:

• preserving the existing position
• restoring responsibilities or authority
• negotiating a revised role
• securing bonus and remuneration claims
• arranging an orderly exit
• negotiating severance and garden leave
• protecting professional reputation
• obtaining an appropriate employment reference
• coordinating the start of new employment

The appropriate legal strategy depends on which outcome has priority.