Germany: Any Fixed Term Agreed by Means of a “simple” Electronic Signature is Not Valid under German Law
German law contains various regulations on different types of formal requirements, which apply depending on the type of contract or declaration concerned. In particular, the law provides for written form (original document to be signed in wet ink by hand), text form (legible declaration on a permanent medium, e.g. email) and electronic form (qualified electronic signature). In certain cases, the written form can be replaced by the electronic form, if a qualified electronic signature is used. The requirements for the qualified electronic signature are based on the EU regulation on electronic identification and trust services for electronic transactions in the internal market. In practice, the authorised signatories at the employer and the employees rarely have an electronic signature in place that fulfils these requirements. Therefore, where written form is required by law, there is usually no feasible way around the “old fashioned” wet ink signature.
Employment contracts are generally not subject to specific formal requirements, i.e., they can be validly concluded in text form, using a simple electronic signature (e.g., through DocuSign or similar) or even verbally. However, employers must pay attention when the employment contract shall only be concluded for a fixed term, as the agreement on the fixed term within the employment contract is subject to a statutory written form requirement. If this formal requirement is not observed, the employment contract as such remains valid, but the fixed term is considered invalid. In consequence, the employment relationship is deemed to have been concluded for an indefinite period. Employees may challenge the validity of a fixed term until three weeks after it was supposed to expire.
In the case recently ruled on by the labour court, the employer and the employee had concluded a fixed-term employment contract. However, they did not sign the contract in wet ink, but used an electronic signature instead. The labour court found that the electronic signature used was not sufficient to meet the requirement of written form, as it did not provide the required certification. Therefore, the fixed-term agreement was considered invalid and the employment relationship was deemed to have been concluded for an indefinite period.
This case shows the particular importance of due diligence when it comes to formal requirements in employment law. Violations of such requirements can lead to serious consequences, not only regarding the validity of fixed term agreements. For example, an original dismissal letter that is not signed by hand is ineffective. Even though there is a great need for digitalisation in employment law, presently it is hardly worth it for employers to switch to the partially recognised electronic form through qualified electronic signature. Such signature can only be used to a limited extent anyway (e.g. not for dismissal letters). Moreover, the technical requirements and the risks of accidental non-compliance with formal requirements are particularly high.
Key Action Points for Human Resources and In-house Counsel
- Compliance with formal requirements is of the utmost importance, particularly when it comes to dismissals, termination agreements and fixed-term employment contracts. Mistakes are easy to avoid!
- Electronic form can replace a written form requirement only in certain cases. The technical requirements must be observed and are quite strict in practice. Therefore, when in doubt, it is safer to stick to the classic written form.