Germany: Statutory Minimum Wage also Applies to Foreign Caregivers Working in Private Households
The case at hand concerned an employee who was a Bulgarian national and had been employed by a Bulgarian company since 2015. The employment relationship was based on a Bulgarian employment contract, which provided for a weekly working time of 30 hours. The employee had been sent to Germany and worked for a monthly salary of EUR 950.00 net in the household of a woman over 90 years old. The employee was also accommodated in this house. Her tasks included providing company to the woman, grocery shopping, cooking, cleaning as well as helping with dressing and hygiene by day and even at night if required.
In 2018, the employee claimed further remuneration under the German Minimum Wage Act (Mindestlohngesetz) from her Bulgarian employer. A statutory minimum wage of currently EUR 9.60 gross per hour applies to almost all employees in all sectors of business in Germany. Some sectors, e.g. the construction sector, provide deviating regulations in collective bargaining agreements. The current minimum wage will be subject to further increases and will amount to EUR 10.45 gross per hour by July 2022. Failure to comply with the Minimum Wage Act can be penalised with a fine of up to EUR 500,000.00.
In the case at hand, the employee argued that she worked not only the agreed 30 hours per week, but basically around the clock, partly in stand-by, to be able to help also at night whenever needed. Against this background, the employee calculated the minimum wage based on a working time of 24 hours per day for a seven-month-period in 2015 and claimed remuneration of almost EUR 43,000.00 less the EUR 7,000.00 she had already received for that time period.
The German Federal Labour Court ruled in June 2021 that the statutory minimum wage also applies to foreign employers if they send employees to Germany, regardless of whether German or foreign law applies to the employment relationship between the parties. The reason for this is that the statutory regulation whereas employees working in Germany are entitled to a certain statutory minimum wage qualifies as a so called “overriding mandatory provision” in terms of the European Rome I Regulation (REGULATION (EC) No 593/2008 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL). Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract. Therefore, even if the parties expressly chose in their employment contract that the contract shall be subject to Bulgarian law, this did not effectively exclude the claim to statutory minimum wage under German law.
The Federal Labour Court then faced the difficult tasks of determining for how many hours per day the employee was entitled to the minimum wage. The court found that the hours actually worked and the stand-by- times need to be considered as working time in terms of the minimum wage. While the previous court instance had ruled that 21 hours per day need to be paid at minimum wage, the Federal Labour Court did not accept this calculation and referred the dispute back to the State Court, arguing that further clarification regarding the actual working time and remaining free time was necessary. While there is not final decision yet on the amount to be paid to the claiming employee, it is to be expected that the hours to be paid in the end will range a bit below the 21 hours per day assumed by the State Court at first, but also considerably above the 30 hours per week initially agreed with the Bulgarian employer.
Key Action Points for Human Resources and In-house Counsel
Especially in the low-wage sectors (e.g. cleaning or care services), the Minimum Wage Act is of major importance for employers. As the Federal Labour Court now clarified, this also applies to foreign employers sending employees to work in Germany, regardless of which legal regime the parties would like to apply to their relationship. Specifically, for the sector of care services, on-call duty and stand-by times are common. The remuneration of such times will now need to be reviewed in light of the new court ruling. It is expected that caretaking costs will increase significantly as a result.
In any case, employers should take great care of observing the applicable minimum wage. Otherwise, there is a risk of considerable administrative fines and additional remuneration claims by employees. The usually short statute of limitations commonly agreed in employment contracts do not apply to claims for minimum wage, so that such claims can still be asserted years later.