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KEY DEVELOPMENTS FOR 2024

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Updated German legislation regarding working time records

In reaction to a landmark court ruling on recording working time in September 2022, the Federal Ministry for Labor and Social Affairs issued a draft bill in 2023. The draft bill stipulates a general obligation of employers to record the start, end and duration of daily working time, and that the recording must be carried out electronically on the day the work is performed. Records in other forms, such as timesheets, shall only be permitted in exceptional cases, most notably in cases of small businesses with less than ten employees. According to the draft bill, employers can delegate the recording to the employees. However, the employer remains responsible for proper record-keeping and must train and instruct employees on proper record-keeping if necessary. Unfortunately, the bill does not contain any provisions on making working hours more flexible in the light of "New Work".

It was expected that an official draft bill would be submitted to Parliament in summer 2023. However, the legislative process appears to have completely stagnated. Employers should proceed on the assumption that no bill on this matter will pass through Parliament at least until summer 2024. However, even without an amendment to the Working Hours Act and the planned introduction of electronic working time recording, employers are already obliged to record the working time of all employees.

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Easier access to the German labour market

In late 2023, the first provisions of the so-called Skilled Immigration Act (the “Act”) came into force. A new feature of the Act is the introduction of a so-called opportunity card (“Chancenkarte”) based on a points system that will come into force in March 2024. Skilled workers who want to immigrate to Germany with the help of the Act must provide proof of language skills, professional experience, age and a connection to Germany. In addition, their minimum salary will be reduced: in future, foreign skilled workers will only have to achieve a gross salary of around €43,800 instead of the previous €58,400 per year. Most notably, the Chancenkarte will allow jobseekers who can financially support themselves to live in Germany for up to a year while looking for work. Unlike current visas which bind applicants to certain positions, the Chancenkarte will also allow holders to switch jobs and engage in contingent work while they are looking for long-term employment. Also, asylum seekers who arrived in Germany before 29 March 2023 with a qualification and a job offer will be able to apply for a residence permit as a skilled worker if they withdraw their asylum application. Furthermore, anyone coming to Germany as a highly qualified skilled worker from outside the EU will be allowed to bring their spouse, children, parents and parents-in-law with them in the future. However, the prerequisite for family reunification is that the livelihood of the relatives is secured. German employers and their respective HR departments must remain aware of developments in immigration law due to their search for skilled labour.

 

KEY DEVELOPMENTS FOR 2023

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Mandatory recording of working time for German employers

On 13 September 2022, the German Federal Labor Court issued a ruling according to which all employees’ working hours must be recorded in Germany (1 ABR 22/21). In doing so, the Federal Labor Court refers to a ruling of the European Court of Justice of 14 May 2019, which concerned the interpretation of the Working Time Directive. According to the Federal Labor Court decision, this obligation can be derived from section 3 para. 2 no. 1 of the German Occupational Health and Safety Act (Arbeitsschutzgesetz), which is quite surprising, as this very vague provision only calls for a “suitable work organization” and does not mention recording of working time with a single word.

According to the BMAS, in order to effectively ensure compliance with the maximum working hours and the daily and weekly rest periods, German employers must record the beginning, end and duration of the daily working hours of each employee.

The BMAS has announced that it wants to present a draft bill on mobile work in the course of the year 2023. It should also be expected that the German legislator will amend the Occupational Health and Safety Act and / or the Working Time Act (Arbeitszeitgesetz) in 2023 or 2024 in accordance with the 13 September 2022 ruling of the Federal Labor Court.

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Extended documentation duties for new hires as of 1 August 2022

Based on EU Directive 2019/1152 on transparent and predictable working conditions in the European Union” (“Working Conditions Directive”), the German parliament has updated the German Notification Act (Nachweisgesetz) with effect of 1 August 2022. According to the bill, as of 1 August 2022, employers are subject to more extensive notification obligations in case of new hires. Most notably, information on termination procedures must be provided and the composition of the remuneration.

Violations of the aforementioned notification obligations do not render employment contracts invalid (but can result in a fine of EUR 2,000 imposed against the employer). Also, not all information must be included in the employment contract itself. It is also permissible to inform employees of the essential terms of the contract in a separate letter.

Although one would assume that we live in a digital world, all notification obligations – regardless whether included in the employment contract or in a separate letter – must be made in written form which means that all essential terms and conditions of employment as stipulated in the Notification Act need to be presented to employees in “wet ink”. This comes as quite a surprise which was heavily criticized, as German law does not require an employment contract to be concluded in writing (unless the employment contract provides for certain limitations, most notably for a fixed term employment or for a post-contractual non-compete covenant).

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State of the German whistleblower legislation

The EU Whistleblower Protection Directive (2019/1937) should have been implemented by all member states by 17 December 2021. This deadline was missed by the German legislator; as a result, the EU has already initiated late penalty proceedings against the Federal Republic of Germany. On 27 July 2022, the German cabinet approved the government’s draft for a new Whistleblower Protection Act (Hinweisgeberschutzgesetz) which, however, still needs to pass parliament.

The draft bill of the Whistleblower Protection Act provides extensive protection by prohibiting reprisals and retaliation against whistleblowers in companies with more than 50 employees. If a whistleblower suffers disadvantages in connection with his or her professional activities, it is presumed pursuant to the draft bill that this disadvantage constitutes reprisal on account of the whistleblower’s report. The burden of proof is thus shifted in favor of the whistleblower. Companies are threatened with claims for damages if they cannot prove that adverse action was taken independently of the whistleblower’s report.

Furthermore, companies will according to the concept of the draft bill risk a fine of up to EUR 100,000 for preventing or attempting to prevent a report or subsequent communication. The same fine framework shall apply if an unjustified reprisal is taken against a whistleblower or if a breach of confidentiality occurs. In addition, a fine of up to EUR 20,000 is foreseen if an internal reporting system is not set up or not operated.

It is expected that the Whistleblower Protection Act will come into force at the beginning of 2023. According to its current concept, the bill will, once enacted, apply immediately at companies with at least 250 employees whereas companies with between 50 and 249 employees will still have until 17 December 2023 to implement the law.

 

KEY DEVELOPMENTS FOR 2021

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Draft Bill containing legal entitlement to work from home

The Federal Minister for Labour and Social Affairs, the social democrat Mr. Hubertus Heil, announced in April 2020 that a draft bill that would foresee a legal entitlement of German employees to work from home, provided that their job is suitable to be performed remotely. The draft bill was eventually published in October 2020 and largely criticized by employers and employer's associations who argued that remote work of up to 24 days per years was too much, and that working from home should not be governed by law. The coalition partner of the social democrats, Chancellor Merkel's Christian democrats, joined this outcry.

In 25 January 2021, the Federal Minister for Labour and Social Affairs released a decree according to which, in the case of office work or comparable activities, all German employers are to offer employees the opportunity to perform these activities in their homes if there are no compelling operational reasons to the contrary. The decree was due to cease to be in force on 15 March 2021 unless prolonged.

Although the decree stipulates that it does not grant office workers an enforceable right vis-à-vis their employers to work from home, in context of the pandemic a strong signal has been set what employers might have to expect in the long run with regard to remote work, also for times when Covid will (hopefully) no longer be an issue.

Employers should expect that general legislation on remote work will be introduced in the coming years.

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German labour courts likely to provide further guidance on COVID-19 vaccinations

COVID-19 vaccinations are currently still voluntary in Germany. Accordingly, there is no legal obligation to vaccinate employees, especially those in special occupational groups. Also the flu vaccinations, which are partly carried out by employers in their companies, have so far been voluntary and cannot be ordered unilaterally by the employer. The reason for this is that the employee's personal rights outweighed the possible medical consequences (e.g., fever, aching limbs, cough, infection of other employees) as well as the economic consequences.

At present, it is widely held that these principles should also be applied to the COVID-19 vaccination. However, due to the more serious medical, but also economic effects of an infection with the coronavirus in relation to other (mass) infectious diseases, the personal rights of certain groups of employees (such as nursing staff in retirement homes) might have to take a back seat with regard to an obligation to vaccinate.

In fact, the case of a German old-age home that fired seven nurses who refused to be vaccinated has become public, was reported in the media recently and it is expected that German labour courts will have to rule on this and similar questions in the months to come. These rulings will provide for further guidance what employers can do if members of their staff don not get vaccinated, whether employers could impose a vaccination duty on their staff, etc.

 

KEY DEVELOPMENTS FOR 2020

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Right to work from home?

Although many companies have traditionally been cautious to allow employees to work from home, this changed due to the spread of COVID-19. Millions of employees worked from home, and many still continue to do so. Therefore, it came as no surprise when Federal Secretary of Labour and Social Affairs Hubertus Heil announced in April that he would present a draft bill in Autumn 2020 setting out the prerequisites for a legal entitlement to work from home. Details of the draft bill have not yet become public at the time of writing, but it is expected that the draft bill may also address questions of occupational safety and whether employers are required to contribute towards homeworking costs.

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Difficulties posed by recent employment trends in Germany

The rather dated German employment and labor law landscape is a tricky terrain when it comes to trends such as crowd work, micro jobs and the on-demand economy. No special provisions exist for these new types of work in German legislation, although almost 5% of all German employees are already involved in crowd work. In 2019, the first labor court rulings dealt with the question of whether crowd workers are employees or self-employed contractors. In late 2019, the Regional Labor Court Munich held that an individual who secures small mystery shopping jobs within a defined region through a smart phone app is not an employee. It seems that additional types of new work will be put to the test before the labor courts in the foreseeable future, which employers should follow closely to determine whether it has an impact on its existing business structure.

 

KEY DEVELOPMENTS FOR 2019

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Employee data protection

The EU General Data Protection Regulations 2016/679 (“GDPR”) will remain a key topic in 2019. We anticipate a large number of lawsuits where employees will assert violation of their GDPR rights. Employee data protection has a particular impact on areas such as access control and time recording, video surveillance, voice recording as well as employee assessments and background checks.

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Remote working and employee monitoring

The rising cross-industry trend of (partial) relocation of workplaces from traditional offices to the employee’s home office, together with the increasing use of mobile electronic devices enabling employers to monitor their employees’ work behaviour, regardless of their current location, raises various legal concerns. Employers need to be mindful and establish a suitable legal basis for such monitoring.

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Remuneration conversion agreements

There is still a need for employers to implement the comprehensive reform of the company pension scheme introduced in 2018. The reform allows the employer to convert the remuneration of the employees thereby saving social security contributions. The employer is then obliged to pass these savings (lump sum of 15 per cent) on to his/her employees in order to increase their company pension. The reforms applies to new remuneration conversion agreements from 1 January 2019 and to existing agreements from 1 January 2022 onwards.

 

KEY DEVELOPMENTS FOR 2018

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Legal framework for Establishing Gender-Related Pay Equalization (Entgelttransparenzgesetz)

On June 30, 2017 a new law was introduced requiring employers with more than 200 employees to provide equal pay to women and men for comparable work. Employees have the right to request information regarding the level and amount of remuneration for comparable positions. With respect to companies with more than 500 employees, additional reporting obligations have been introduced, such as reporting requirements on the status of pay equalization in the company.

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New Legislation - Company Pensions

Employers are obliged to pay a contribution to a pension fund but are not obliged to guarantee a minimum pension amount. Consequently, the employees bear the investment risk if the pension fund generates poor profits.

In the case of deferred compensation (Entgeltumwandlung), the employer has to contribute an additional amount of 15% of the compensation contributed by the employee (Arbeitgeberzuschuss).

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New Legislation on Temporary Employment (Arbeitnehmerüberlassung)

From April 1, 2017 temporary workers can be employed up to a maximum period of 18 months, however, collective agreements (Tarifvereinbarungen) and company agreements

(Betriebsvereinbarungen) allow for deviations. Furthermore, after 9 months of work, temporary workers have to be paid the same as permanent employees.

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Proposal to Reduce Minimum Wage Bureaucracy

In order to reduce bureaucratic hurdles the bill provides for less documentation for employers relating to minimum wages obligations.

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Increase of the social security contribution ceiling

There has been an increase in the social security contribution ceiling for statutory health insurance of up to EUR 59,400 with effect from January 1, 2018. The ceiling for the general pension insurance has been increased to EUR 6,500 per month in Western Germany and EUR 5,800 per month in Eastern Germany.

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General Data Protection Regulation

The new Federal Data Protection Act (Bundesdatenschutzgesetz) will come into force simultaneously with the General Data Protection Regulation (Datenschutzgrundverordnung) on May 25, 2018. The Federal Data Protection Act has been completely revised and, in particular, increases the requirements for consent. In addition, the General Data Protection Regulation increases the obligations on employers regarding documentation, processing, storage and the erasure of personal data.

 

KEY DEVELOPMENTS FOR 2017

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The national minimum wage was increased to EUR 8.84 as of 1 January 2017

A general statutory minimum wage was introduced in 2015 by the Minimum Wage Act (Mindestlohngesetz). As of 1 January 2017 this was increased to EUR 8.84. Transition periods which applied for collective bargaining agreements and certain sectors ended in 2016.

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Strengthening of maternity laws

Employed women are protected by law during pregnancy and after childbirth (e.g., dismissal protection, employment prohibition, and workplace design). As a result of the revised Maternity Protection Act (Mutterschutzgesetz) these protections will also apply to students and trainees as of 1 January 2017. Mothers shall not be employed until eight weeks after childbirth and until 12 weeks in the case of premature, multiple births or the birth of a disabled child. Dismissal of women during pregnancy and in the first four months following childbirth is unlawful. This will also apply for women who have suffered a miscarriage.

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Revisions to the financial services sector’s remuneration guidelines

The European Banking Authority (“EBA”) guidelines on sound remuneration policies (based on CRD IV (Directive 2013/36/EU)) applies as of 1 January 2017 to financial institutions across the EU, including subsidiaries which are not directly subject to CRD IV. The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) implemented the requirements of the guidelines into the revised Remuneration Ordinance for Institutions (ROFI). As a result, the obligation to identify risk-takers applies for all CRR-institutions and not only for significant institutions and variable remunerations (such as bonuses) will be subject to deferral and reduction regulations and clawbacks.

 

KEY DEVELOPMENTS FOR 2016

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Implementation of 30% quotas of women (Frauenquote) on supervisory boards of listed companies

The law applies to companies that are listed on the German stock exchange and have a supervisory board subject to co-determination on a parity basis. Present board members can keep their positions until the end of the term but the quota has to be considered for newly appointed board members. If a company currently does not meet this quota, it is required to set targets for its implementation in supervisory boards.

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New laws in relation to temporary employment and service contracts effective as of 1 April 2017

In November 2016 the revised German Temporary Employment Act (Arbeitnehmerüberlassungsgesetz) was passed. For temporary employment and service contracts effective as of 1 April 2017, the law distinguishes more clearly between service contracts and usual work contracts. Additionally, temporary employment is now limited to a maximum duration of 18 months and temporary employees will receive the same salary as regular employees after nine months.

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The General Data Protection Regulation (“GDPR”) was published

The GDPR will apply from 25 May 2018 but it still allows EU Member States to provide more specific rules in respect of the processing of employees’ personal data in the employment context. The Federal Data Protection Act (Bundesdatenschutzgesetz) will be revised completely to ensure compliance with the GDPR. The first draft law is currently under discussion; significant changes can be expected.