Termination notice Germany power of attorney: How companies avoid a costly formal error trap
The letter is signed, the signatory is authorised – and the termination can still fail. Under German law, the recipient may reject a unilateral declaration if the original power of attorney is missing. Ecovis experts explain how companies avoid this costly formal trap under Section 174 of the German Civil Code (BGB).
When does Section 174 BGB apply?
Section 174 of the BGB covers unilateral legal acts: above all terminations of employment, lease or service contracts, but also rescissions and withdrawals. If a representative signs on the company’s behalf without enclosing the original power of attorney, the recipient may reject the declaration for that very reason. A copy, scan, fax or PDF is not enough. The same applies if the document is illegible or unclear in scope.
The rejection must be made without undue delay. There is no fixed deadline, but German courts generally consider more than one week too late unless special circumstances apply. Note: if the recipient’s lawyer rejects, they must also enclose an original power of attorney.
Why a formal error can hurt
A rejected notice is void, and presenting the power of attorney later does not cure it. The company has no choice but to repeat the termination – and every repetition costs time and therefore money. By then, the notice period may have moved to a later date, or the two-week deadline for summary dismissal may have expired. A small formality can mean months of extra salary or rent.
We draft robust powers of attorney and signature policies, review termination procedures prior to the issuance of notices of termination, and represent clients before German labour courts.
Eda Kaplan, Attorney-at-law (Rechtsanwältin), ECOVIS KSO Steuerberater + Rechtsanwälte GmbH & Co. KG, Cologne, Germany
What employers should consider and do
For any important unilateral declaration, companies should enclose the original power of attorney and clearly specify its scope, for example, “authorised to issue notices of termination”. Alternatively, they can inform the recipient of the authorisation in writing, such as at the time of hiring, and obtain confirmation of receipt.
Appointing someone to a position that typically includes dismissal powers, such as head of HR, may also suffice, provided the workforce knows who holds it and any change is communicated. Foreign parent companies and group HR teams signing for German subsidiaries should be especially careful.
