Germany: Is the Digital Employment Contract Coming?

In Germany, legal efforts are finally being made to allow for the digitalization of the employment contract. Up to now, this has primarily been prevented by the amended German Verification Act from summer 2022. Accordingly, essential working conditions must be verified in writing, i.e., in a document signed by the employer in wet ink. While it is possible to provide this verification in a separate document to the employment contract, the required information is, in practice, often integrated into the employment contract itself to avoid the administrative burden of drafting an additional individual document for each new employee. Hence, the current requirements of the Verification Act lead to a de-facto written form requirement for employment contracts if employers want to be fully compliant. In practice, this is a significant restriction for modern, fast-moving businesses.

On 21 March 2024, the German Federal Minister of Justice announced that it would be possible to conclude employment contracts completely digitally in the future. While this sounds promising at first, there are unfortunately remaining obstacles for employers, as explained below.

 

Formal requirements for employment contracts

Employment contracts themselves are not subject to any statutory or formal requirements. However, the law links formal requirements to specific contents of the employment contract.

In particular, the written form (i.e., wet ink signature of both parties, no scan, DocuSign, copy, or else) is a mandatory requirement for a fixed-term employment contract to be effective. According to the case law of the German Federal Labour Court, the standard clause whereas the employment relationship shall terminate automatically upon the employee reaching the statutory retirement age is also regarded as a fixed term. As such clause is contained in almost all employment contracts, and the written form requirement for fixed-term contracts has high practical relevance. Furthermore, the agreement for a post-contractual non-competition clause is also only possible in writing.

 

Obligations under the Verification Act

The intended legal changes concern the German Verification Act, which, in principle, is independent of the employment contract. It requires proof of the essential working conditions of the employment relationship to be provided to the employee.

If the employment contract and the verification remain separate, there are no formal requirements regarding the employment contract arising from the Verification Act, but only the verification itself has to comply with the formal requirements. As an alternative to a separate verification, all required information can also be included in the employment contract. Thus, combining the employment contract and the verification. The planned new regulation allows providing the verification in text form, i.e., in readable form, on a durable medium. Meaning, an employment contract containing the verification would no longer have to be concluded in written form for the purpose of compliance with the Verification Act.

Practical Points

• The intended change to the Verification Act lifts the written form requirement associated with this specific law.
• However, for fixed-term employment contracts, the written form must still be observed. The employment contract can then still not be concluded digitally in a valid manner, not even with a qualified electronic signature.
• In addition, further clarification is required in the legislative process regarding the requirements for proof of transmission and receipt. In particular, it is questionable whether a simple email from the employer to the employee fulfils the new requirements.