Abuse of Power by Executive

Sexist remarks, demotion, withdrawal of rights, and ultimately termination after rejecting an intimate relationship. When an executive abuses their power in such a way, a company should not shield them. This is demonstrated by a remarkable decision of the LAG Cologne (Judgment of 9.7.2025 – 4 SLa 97/25).

Initially, a seemingly usual case: An employee is dismissed for alleged breaches of duty. She files a lawsuit for protection against unfair dismissal and demands continued employment. However, the case evolves into an employment law thriller in court. The plaintiff had worked closely with the defendant's managing director for more than four years. Her salary had recently been €7,744.75 per month. The managing director gave her gifts and provided her with a company car.
One morning, the managing director sent the plaintiff a message: "Good morning boss, good morning beautiful woman, good morning my headache...," asking if she could dress up for a meeting with "wannabe bankers," "something short and rock-like" and "with a neckline," of course with red nails and high heels and "very important, don't wear anything under the skirt" – "just kidding," he later added. But when she did not respond as desired, insults and humiliations followed: "You never learn. That means, yes, my dear. (...) You should fall to your knees and say thank you. What kind of person are you (...) You are just a dumb woman. No class, no decency, just a peasant girl. (...) I don't want to see your dumb ugly face!!! (...)" He sent her on vacation and to work from home, demanded the return of all gifts, and announced a reduction in salary and withdrawal of the company car.
A few days later, she received a bouquet of flowers and a voucher for a joint visit to a spa. She declined. Shortly thereafter, the managing director had the gifts collected from the plaintiff and terminated the employment relationship for alleged breaches of duty.
During the unfair dismissal proceedings, the defendant acknowledged the claim and requested the plaintiff to return to work. The plaintiff fell ill – diagnosis: post-traumatic stress disorder – and applied for the dissolution of the employment relationship in return for compensation of €70,000.
The Bonn Labor Court upheld the claim. The defendant appealed against this decision.

The LAG largely confirmed the decision and only slightly reduced the compensation to €68,153.80. Continuing the employment relationship was unreasonable for the plaintiff. The claim for continued employment did not preclude the application for dissolution. Appropriate compensation was to be paid.

Unreasonableness of Continuing the Employment Relationship

According to § 9 para. 1 sentence 1 KSchG, the court must dissolve an employment relationship that has not been terminated by a socially unjustified dismissal if the continuation is unreasonable for the employee. According to the case law of the Federal Labor Court, unreasonableness exists if the dismissal or the unfair dissmissal proceedings are accompanied by additional circumstances that exclude future trustful cooperation for the employee.
The LAG Cologne considered these conditions to be clearly met in the present case. In its opinion, the requirements for additional reasons are all the lower, the more serious the social injustice of the dismissal. The defendant's presentation of the dismissal was vague and unsubstantiated. The managing director's behavior also clearly constituted an abuse of power. The plaintiff would also have to expect employment-law sanctions in the future if she were to oppose the managing director's private wishes. Continuing the employment relationship was therefore unreasonable for her. Whether a friendly relationship had previously existed was irrelevant.

Coexistence of Dissolution and Continued Employment Applications

The LAG also considered the application for dissolution to be permissible despite the previous application for continued employment. This approach was neither in bad faith nor abusive, but rather to be regarded as standard legal practice.

Amount of Compensation

According to § 10 para. 1 KSchG, the court may, in principle, set compensation of up to 12 months' earnings.
According to the case law of the Federal Labor Court, the following factors are decisive for determining the specific amount of compensation:

Based on these guidelines, the LAG Cologne found that compensation amounting to two gross monthly salaries per year of employment, i.e., a total of €68,153.80, was appropriate in the present case. The so-called standard compensation of half a monthly salary per year of employment had to be increased here because the social injustice of the dismissal was not in dispute. Furthermore, the significant humiliation and psychological stress experienced by the plaintiff had to be compensated, and the compensatory satisfaction function had to be fulfilled. Finally, the defendant had intentionally caused the grounds for dissolution, so that a high degree of fault in relation to the termination was attributable to them.

The case clearly shows: Abuse of power by executives can have serious legal and economic consequences for companies – not to mention reputational damage.
Overall, it should be noted that employers are obliged, not only from a moral but also from a legal perspective, to consistently take action against discriminatory, sexually intrusive, or degrading behavior at the executive level, but also among employees. The General Equal Treatment Act (AGG) obliges employers to protect their employees from discrimination and sexual harassment (§ 12 AGG). In the event of incidents, appropriate measures must be taken immediately – up to and including a warning or the dismissal of the person responsible. In the event of violations, claims for damages by those affected are also possible (§ 15 AGG).

Companies should therefore: