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Employment Law Overview Germany


German employment law is divided into two areas: individual employment law and collective employment law. Individual employment law concerns relations between the individual employee and the employer, while collective employment law regulates the collective representation and organisation of employees as well as the rights and obligations of employees’ representatives.

German employment law is not consolidated into a single labour code: the main sources are Federal legislation, case law, collective bargaining agreements, works council agreements and individual employment contracts.

Key Points

  • Employees who are not from the EU/EEA require a residence title for the purpose of taking up employment.
  • A statutory minimum wage of 12.00 EUR (2022/2023) per hour currently applies to all employees in all sectors of business. Aside from the statutory minimum wage, there are special regulations and collective bargaining agreements within certain sectors.
  • Overtime pay is not expressly regulated by law, but is subject to the employment agreement, collective bargaining agreements and works council agreements.
  • Trade union representatives support employees and works councils, but do not have participation rights within a company.
  • Due to the high level of protection against dismissal, it is reasonably common for employment to be terminated by a separation agreement.
  • Severance payments are paid if a number of conditions are fulfilled.

German labour and employment law is not consolidated into a single labour code. Separate laws for particular issues exist – e.g. the Federal Vacation Act, the Working Time Act or the Maternity Protection Act. The main sources of German employment law therefore are Federal legislation, collective bargaining agreements, works council agreements and individual employment contracts. Many labour and employment law matters are heavily influenced by case law so that judicial precedent is an important part of the legal framework. Numerous separate laws and case law generally make German employment law difficult to navigate. There have been discussions about introducing a uniform Labour Code. The project was however abandoned and an introduction in the short- or mid-term is very unlikely.

New Developments

The COVID-19 crisis

The last corona protection measures in Germany expired on 7 April 2023. The COVID-19 crisis has obviously had a major impact on German companies. Apart from the practical side, companies had to deal with the legislative reaction to the crisis, which entailed observing fast-changing occupational health and safety requirements which often triggered considerable legal uncertainty and additional administrative effort.

One of the first and possibly most important measures taken by the German government to mitigate the economic effect of the crisis was to lower the requirements for companies to introduce short-term work, and at the same time, to increase the resulting entitlements of the employees. In previous economic crises, short-term work subsidies had proved to be a good measure to prevent mass dismissals and they were also widely used during the pandemic.

While there are not statutory restrictions for employers in place any more with regard to COVID-19, a practical impact of the past three years remains. In particular, the digitalization of the working world has increased significantly. Statutory accident insurance for occupational accidents has been extended to cover working from home. Works councils are permanently granted the option of holding virtual works council meetings. Similarly, virtual proceedings at the labour courts are increasingly taking place.

Immigration Law

Since 1 March 2020, the general conditions for the immigration of skilled workers from third countries (countries outside the EU/EEA) have been facilitated. As a result, the German labour market is now open not only to highly qualified individuals, but also to individuals with recognised vocational training.

As a result of the changes in the German Residence Act, the so called “job market test” is no longer required if an employment contract can be presented. With the “job market test” which, up to March 2020 had to be carried out for every application for a work permit, the Federal Labour Agency checked whether German/EU/EEA nationals or nationals with an unrestricted residence permit were also eligible for the job.

In addition, skilled workers from third countries can now immigrate to Germany for a limited period of time to look for a job, provided they can prove they have the necessary German language skills and can secure their living.

Work of Tomorrow Act

Participation in meetings of the works council and the adoption of resolutions by the works council, can now be carried out by means of video and telephone conferences, if (1) the requirements for such participation are set out in the works council’s Rules of Procedure, ensuring the priority of the face-to-face meeting, (2) there was no objection of at least one quarter of the members of the works council within a period to be determined by the chairman, and (3) it is ensured that third parties cannot take note of the content of the meeting.

Data Protection

The “Second Data Protection Adaptation and Implementation Act EU” of 21 November 2019, has relaxed the requirements for having a company data protection officer for smaller companies and voluntary associations. It is now mandatory for a company data protection officer to be appointed if 20 persons are regularly involved in the processing of personal data; previously the threshold was 10 persons.

In addition, to simplify the process of obtaining the employees’ consent to data processing, this can now also be done by e-mail (instead of wet ink signature). Text form for example includes e-mail.

Formal Requirements

Since 1 January 2023 the electronic certificate of incapacity to work replaces the previous paper certificate. The health insurers inform the employer electronically upon request, about the beginning and duration of the incapacity to work for employees insured in the statutory health insurance.

In addition, the notification of the employer’s decision in response to an employee’s wish to work part-time under the Part-Time and Fixed-Term Employment Act, is now also possible in text form (instead of wet ink signature). Therefore, e-mail will also now comply with the form requirements.

Immigration – A1 certification

In principle, all employees are subject to the legislation of the member state within the European Union in which they perform their work activities. Therefore, if an employee is only temporarily working in another member state within the European Union (so-called posting), the law of the posting country still applies as an exception, and the employee can prove whether he/she is subject to the law of his/her country of residence (sending country) or the regulations of the foreign country with a so-called A1-certificate.

Also, an employee regularly working in several member states needs an A1-certificate. The advantage of this, is that simultaneous payment of social security contributions in several member states, and switching between social security systems, is avoided. An A1-certificate may also be issued in the event that Germany has signed a bilateral social security agreement with countries outside of the European Union (e.g. India, Brazil, United States of America).

Especially for short-term assignments, this has led to problems since the employee could not prove that his/her employer applied for the A1-certificate.

Therefore, the employer now has the option of having the proof that the application has been issued, which the employee can use to prove that his employer submitted an application for an A1 certificate prior to the posting. This should facilitate short-term assignments of up to one week.

Maximum compensation for members of the Board of Management (ARUG II)

The remuneration of members of the Board of Management, in particular of the Board of Management of large listed stock corporations, is the subject of ongoing discussions. The Supervisory Board determines the remuneration system for members of the Board of Management, whereas the General Meeting is responsible for concluding the contracts with members of the Board of Management and therefore, decides on the compensation of the members of the Board of Management.

Now, the Supervisory Board additionally has to determine the maximum compensation of the members of the Board of Management as part of the compensation system (containing inter alia, also detailed provisions regarding fixed and variable remuneration elements). Current contracts are not affected by this.

The Whistle-blower Protection Act (HinSchG)

On 23 October 2019, the EU Whistle-blower Directive 2019/1937 was transposed into national law with the new Whistle-blower Protection Act. Employers with generally more than 50 employees will be obliged to set up internal reporting offices as of 17 December 2023. Employers with more than 250 employees are already required to do so since 2 July 2023. The internal whistleblowing units act as an access point for reports and evidence of breaches of the law relating to the employment relationship. Employers can choose whether they operate the reporting system themselves with appropriate qualified personnel or whether they outsource it to an external service provider. In addition to the internal reporting systems to be operated by employers/service providers, the legislator has also established a reporting system with the Federal Office of Justice as an additional option for whistle-blowers.

The second important element of the HinSchG is a prohibition of discrimination against whistle-blowers. Employers always bear the burden of proof that a reprisal (e.g. dismissal) of a whistle-blower has not occurred as a result of the whistle-blower’s report.

Recording of Working Time

As a result of the well-known ECJ ruling (14 May 2019, C-55/18), the German Federal Labour Court (13 September 2022, 1 ABR 22/21) has decided that there is a mandatory obligation for employers in Germany to record all working hours (beginning and end of working time as well as rest periods), which arises from the general obligations employers have in terms of occupational health and safety. Currently, German statutory law only expressly requires employers to record working hours worked beyond eight hours per working day, as well as any work performed on Sundays or on public holidays. Hence, the Federal  Labour Court ruling has caused legal uncertainty for employers. Amendments to the German Working Time Act (ArbZG) are currently under discussion.

Any questions

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