LAG Cologne: Change of contract in case of poor performance and low performers

A recent decision by the Cologne Regional Labor Court is causing controversy: At the beginning of 2025, the court declared a change of contract for conduct-related reasons to be lawful for the first time ( case number 7 Sa 558/23 ). In this specific case, a public sector employee was classified in pay group 14 of the German Public Service Agreement (TVöD ). However, the employer was dissatisfied with her performance and, by means of a change of contract, downgraded her to a lower salary group . This meant that she was not dismissed; instead, she continued to work under less favorable conditions. This situation is rare in German labor law practice—and it raises important questions for employees.

What is a change of notice?

A dismissal with a change of terms means that an employer terminates the employment relationship but simultaneously offers to continue it under changed – usually worse – terms . Affected employees have a choice: They can accept the offer, reject it, or accept it with reservations and have the court examine whether the change is legal. In many cases, dismissals with a change of terms are issued for operational reasons, for example, when a job is being restructured. The ruling by the Cologne Labor Court now expands the possibilities for using such a measure even in cases of poor performance. This represents a significant tightening of the situation for employees, as previously, dismissals for conduct-related reasons usually resulted in a complete termination of the employment relationship.

Significance for skilled workers from abroad

This development is particularly relevant for international skilled workers coming to Germany. Many of them have gone to great lengths to gain a foothold in Germany after a long immigration process. If the employer is then dissatisfied with the employee's performance, a change of contract can be a less drastic measure than an immediate termination of the employment contract. It makes it possible to continue working in Germany, even if under less favorable conditions. However, a downgrade to a lower salary bracket can also affect residence permits, particularly if these are linked to a certain minimum salary or to recognition as a skilled worker. Anyone who finds themselves in such a situation should definitely seek legal advice, as the consequences can be far-reaching - both in terms of employment law and residence permits.

What employees should know now

For employees – especially skilled foreign workers – the ruling means they must pay even closer attention to their rights in the future . While a change of contract may have the advantage of preserving the employment relationship, it often comes with significant disadvantages. It should also be noted that employers in Germany cannot simply enforce a change of contract. They must meet strict requirements, and the measure must be proportionate. This means that not every poor performance evaluation justifies such a termination.

For migrants who came to Germany via VISAGUARD or other means, it is especially important to be aware of such developments. Because labor law and residence law are closely intertwined here. A reduction in salary can jeopardize certain residence permits. Therefore, it is advisable to seek legal advice early on – ideally from attorneys specializing in labor and immigration law who consider both perspectives.