Unlike in the event of a dismissal/termination, the employment relationship is brought to an end on a mutually amicable basis in cases involving an agreement to terminate a contract. However, for this purpose certain requirements have to be contractually fulfilled.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: An agreement to terminate a contract represents in many instances the elegant alternative to a standard termination for employers and employees. Whereas termination is a unilateral legal transaction, employer and employee have agreed to end the employment relationship in the case of an agreement to terminate a contract.
This can entail advantages for both sides. The employer need not, for example, have regard for notice periods and the legal consequences of a dismissal. The employee, on the other hand, may receive severance pay. Having said this, one must also exercise careful scrutiny in cases involving an agreement to terminate a contract. If mistakes are made in the process, mutual consensus might not be worth much and the agreement can be challenged.
An agreement to terminate a contract ought to satisfy at least the following requirements. The agreement needs to be in written form and signed by both parties, thus an agreement that is concluded orally or forwarded by email is not sufficient for it to obtain legal force. Moreover, the employee must not be taken by surprise or put under pressure. It is necessary in each case for him to be granted a certain amount of time for consideration before signing the agreement to terminate a contract. If he is pressed into signing immediately, the agreement to terminate a contract is invalid.
It is possible to arrange severance pay in the agreement to terminate a contract. It is not, however, mandatory for employees to receive severance pay. This is not a legal right. To this extent, the matter comes down to negotiation skills.
In order to prevent legal disputes from arising at a later date in cases involving an agreement to terminate a contract, the formal requirements should be satisfied and the substantive arrangements well balanced to ensure that consensus does in fact emerge between both parties in the end. This gives the parties the legal certainty that the employment relationship has come to an end. A lawyer who is competent in the field of labour law can therefore be consulted when dealing with an agreement to terminate a contract. Of course, this also applies to all other divisions within labour law. Obtaining competent legal advice from an early stage can enable you to avoid legal disputes at a later date.