As always, the parties who signed a (settlement) agreement are bound by it.

However, the right to revoke the settlement agreement or to withdraw from the contract can be granted in the settlement agreement or in a bargaining agreement with the trade union.

If the employer has to terminate the employment relationship for good cause with immediate effect before the termination date of the settlement agreement, he is entitled by law to withdraw from the contract. Effect: The employee loses the severance payment.

A settlement agreement in context with a transfer of the undertaking can be void. If the undertaking is transferred from the transferor (old employer) to the transferee (new employer), the employment relationships follow automatically by way of law and the working conditions stay basically unchanged. In this situation, it is not allowed to terminate the employment contract with the old employer and to offer an employment contract with the new employer with worse conditions.

A settlement agreement can be invalid, if the employer did not observe the “commandment of fair negotiations”. The employer is not obliged to announce in advance that he wants to talk about a settlement agreement, to grant time for consideration or the right to revoke or withdraw. However, he is not allowed to create or utilise mental pressure on the employee with the effect that a free and deliberate decision is extremely difficult or even impossible. Examples:

• creating very uncomfortable surrounding circumstances which distract the employee significantly or rouse flight instinct
• utilise mental or physical weakness or lack of language ability
• blindsiding the employee, e.g. visiting him at home during illness without warning

Furthermore, the avoidance of the settlement agreement is possible in case of error, deception or threat within a certain period of time after signing the contract. However, the employee cannot justify the avoidance with an error about the consequences of the settlement agreement for unemployment benefits. He can justify the avoidance, if the employer threatened him with a dismissal and a prudent employer would not have done this, because it was clear that the dismissal would be invalid.