German Minister Proposes Labor Law Reforms to Boost Competitiveness

Federal Economics Minister Katherina Reiche has called for sweeping changes to labor regulations, proposing longer daily working hours and a loosening of employee dismissal protections to enhance the competitiveness of the German economy. Speaking at a mechanical engineering summit in Berlin, the CDU politician argued that current frameworks hinder essential corporate changes and that boosting productivity requires employees to work a bit longer each day.

Reiche also challenged the existing legal framework governing job security, stating that a very rigid and unmovable protection against dismissal impedes necessary economic transformations. While acknowledging that layoffs are difficult for both sides, she suggested that such measures can sometimes ensure a company's survival and future growth. Her proposals have drawn sharp contrast with industry associations, such as the mechanical engineering federation, whose president recently accused the federal government of endangering Germany's industrial standing through internal disputes and reform gridlock.

Labor law developments have also recently drawn attention in the courts and the legal sector. The Federal Labor Court in Erfurt recently ruled that employees of Catholic institutions do not automatically face job loss for leaving the church, provided that religious requirements are not consistently applied to all workers with comparable tasks. The high court declared a social worker's dismissal invalid, noting that the employer already employed non-Catholic staff in pregnancy counseling roles and that a church resignation alone does not justify discrimination.

In another notable labor court ruling, the Gelsenkirchen Labor Court upheld the immediate dismissal of an employee who called in sick after his vacation request was denied. The court found the termination lawful due to contradictory statements made by the worker regarding a medical examination, emphasizing that while a doctor's sick note carries significant evidentiary value, employers can challenge it when concrete discrepancies arise. The court also reiterated that traveling during an illness is permissible as long as it does not hinder recovery.

Meanwhile, legal practices continue to adjust their leadership teams to meet market demands. The Vienna-based law firm Cerha Hempel announced the appointment of Maria Schedle as a partner and head of its employment law practice group, effective December 15, 2026. Schedle, who brings over two decades of experience, will expand the firm's advisory offerings covering everything from modern workplace conditions to individual and collective labor disputes for national and international clients.

Within the federal government, adjustments to working hour limits and dismissal protections remain a subject of debate. While the coalition agreement outlines plans to transition from daily to weekly maximum working hour limits in compliance with European directives, trade unions continue to oppose such flexibility measures, highlighting ongoing tensions surrounding the future of labor regulations.