You work from Berlin or Munich, your paycheck comes from Delaware or London, your contract says “governed by the laws of California” — and one day a termination email arrives that reads like it was written for an at-will jurisdiction. If you physically work in Germany, German mandatory employment law protects you — regardless of what your contract says and regardless of where your employer is incorporated. The harder questions are structural: who is actually your employer, whether the KSchG’s ten-employee threshold is met, and how to sue and enforce against an entity with no German address.
The three setups — and why the difference matters
1. German subsidiary (the normal case)
The US/UK group operates a German GmbH, and that GmbH is your contractual employer. Legally the cleanest constellation: German employer, German payroll, a German address for service. Your dismissal protection depends on the size of the GmbH’s operation — more on the counting question below.
2. Direct employment by the foreign entity
Smaller companies often skip the subsidiary and employ German-based staff directly from abroad. This is legal: the foreign employer must register for German social security and run German-style payroll contributions (in some constellations the contribution obligations are shifted to the employee by agreement, Art. 21(2) Regulation (EC) 987/2009). Your employer is the foreign entity — which means suing and enforcing abroad, but with German law protecting the substance.
3. Employer of Record (EoR)
Increasingly common: a global EoR provider (a German or EU entity) is your formal contractual employer, “leasing” your services to the US/UK company that actually directs your work. EoR setups raise genuine legal questions in Germany — including whether the arrangement constitutes unlicensed employee leasing (Arbeitnehmerüberlassung, AÜG) — and they blur the most basic question in any dismissal: who must I sue?
German law applies to work performed in Germany
Choice-of-law clauses cannot take away your German baseline. Under Art. 8 Rome I Regulation, the parties may choose a governing law, but the choice cannot deprive the employee of the protection of the mandatory rules of the country where the work is habitually performed. For an employee working in Germany, that means the Kündigungsschutzgesetz, statutory notice periods (§ 622 BGB), continued pay during illness (EFZG), statutory holidays (BUrlG), maternity and parental-leave protection, and the written-form requirement for terminations (§ 623 BGB — an email dismissal is void) all apply, whatever the contract says.
A US-style letter announcing termination “effective today, per your at-will employment” is therefore measured against German standards — and often fails at the first step: the missing wet-ink signature.
Does the KSchG protect you? The counting question
General dismissal protection under the KSchG requires more than ten employees in the Betrieb (operation) (§ 23 KSchG). For foreign-employer constellations, this threshold is where cases are won and lost:
- German subsidiary with 30 staff: unproblematic — KSchG applies.
- Foreign employer with 6 employees in Germany and 500 in the US: contentious. The Bundesarbeitsgericht has held that the KSchG’s Betrieb concept is essentially tied to operations in Germany, so employees abroad are generally not counted (BAG, judgment of 26 March 2009 — 2 AZR 883/07). But the case-law leaves room for argument where the German unit is managed from abroad or integrated into a larger structure — these cases are fact-driven and worth fighting.
- EoR employment: the formal employer (the EoR entity) may have hundreds of employees in Germany across many client companies. Whether they form one Betrieb, several, or must be viewed through the client’s organisation is unresolved — which cuts both ways and creates settlement leverage.
Even below ten employees you are not unprotected: dismissals must not be arbitrary, discriminatory or in bad faith (§§ 138, 242 BGB, AGG), and notice periods and the written form remain mandatory. But the full “employer must justify the dismissal” regime of the KSchG is what generates real severance leverage — see our severance-calculation article.
Who do you sue — and where?
You sue your contractual employer — the entity named in your employment contract and on your payslips. And you can sue it in Germany: under Art. 21 Brussels Ia Regulation, an employee may sue the employer in the courts of the place where the work is habitually performed — even where the employer is not domiciled in any EU member state (Art. 21(2) Brussels Ia Regulation). A Berlin-based employee of a Texas company sues at the Arbeitsgericht Berlin; domestic venue follows the habitual place of work (§ 48(1a) ArbGG).
Service of process and enforcement abroad
Suing a foreign employer works — but two practical frictions are worth knowing:
- Service of process: if the employer has no German address, the Klage must be served abroad, usually under the Hague Service Convention (US, UK) or the EU Service Regulation. This adds translation requirements and months of delay. A German subsidiary or EoR entity as defendant avoids this entirely.
- Enforcement: a German judgment enforces easily within the EU. Against a UK or US employer with no German assets, recognition proceedings abroad are needed — possible, but slow. That is why these cases overwhelmingly settle: a court settlement (Prozessvergleich) with a fixed payment date beats a judgment you must chase across the Atlantic. See our article on court settlements.
EoR red flags for employees
- The contract names an entity you have never interacted with, while all instructions come from the client company.
- Foreign choice-of-law clauses or “at-will” termination language in a contract for work performed in Germany.
- No German-law notice periods, or “notice” defined in days rather than the statutory months.
- Severance or final pay conditioned on signing a broad US-style release and waiver.
- Nobody can tell you which Betrieb you belong to or how many colleagues it has — the KSchG counting question left deliberately vague.
None of these clauses survive contact with German mandatory law — but they signal an employer likely to mishandle a termination, which is when early advice pays. Executives and Geschäftsführer of German subsidiaries face an additional layer — see our article on managing-director dismissals.
Worked example
A UK-national sales director based in Berlin, employed via an EoR arrangement: the contractual employer is the German entity of a global EoR provider; the actual work is directed by a US software company. Salary: €10,000 gross per month (€120,000 per year), 3 years of service. On a Tuesday, the US company’s HR emails: “your position is eliminated effective immediately; you will receive two weeks’ pay in lieu of notice.” The EoR follows up with a posted termination letter offering €10,000 as a “goodwill payment”.
The German analysis: the email termination is void for lack of written form (§ 623 BGB). The posted letter starts the 21-day clock. The statutory notice period is two months to month-end (§ 622 BGB) — not two weeks. The EoR entity employs well over ten people in Germany, so we argue the KSchG applies; the EoR argues each client assignment is its own micro-Betrieb. Neither side wants a court to resolve that question, and the US client wants no German judgment on the record.
The Kündigungsschutzklage is filed within the deadline against the EoR entity. Settlement at the Gütetermin: salary through a proper 3-month exit horizon (€30,000 gross), plus a severance of 1.5 × monthly salary × years of service = €45,000, plus a Grade-1 reference. Total package: €75,000 against an opening offer of €10,000 — driven almost entirely by the written-form defect, the notice-period miscalculation and the unresolved counting question.
Frequently asked questions
My contract says California law governs. Is a Kündigungsschutzklage still possible?
Yes. The choice of law is not void, but it cannot displace the mandatory protections of the place where you habitually work (Art. 8 Rome I Regulation). For work performed in Germany, the KSchG, statutory notice periods and the written-form requirement apply regardless.
I was dismissed by email. Does the 21-day deadline run?
An email termination is void for lack of written form (§ 623 BGB) and does not start the three-week deadline — that requires a signed original. But do not rely on this passively: a compliant letter usually follows, and reacting early keeps you in control of the timeline.
Who is my employer in an EoR setup — the EoR or the client company?
Formally, the EoR entity named in your contract. In substance, the client company may have become the real employer — particularly where the arrangement violates the German employee-leasing rules (AÜG), which can create an employment relationship with the client by operation of law. In a dismissal, we typically sue the contractual employer and use the AÜG question as leverage.
Can I really force a US company with no German office into a German court?
Yes — jurisdiction at the habitual place of work applies even to employers domiciled outside the EU (Art. 21(2) Brussels Ia Regulation). The friction lies in service and enforcement, which is why these cases are built to settle: most foreign employers prefer a clean settlement over a default judgment in a jurisdiction they ignored.
Do employees of the group’s US offices count toward the ten-employee threshold?
Generally no — the BAG counts the domestic Betrieb (BAG, 26 March 2009 — 2 AZR 883/07). But borderline structures (German staff managed as part of a larger cross-border unit, multiple German entities under common direction) leave real room for argument, and the uncertainty itself is settlement leverage.