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The implementation of the Working Conditions Directive in Germany - Issues and practical tips for companies

30 June 2022

On June 23, 2022, the German Bundestag passed a bill that transposes the EU Directive on transparent and predictable Working Conditions ("Working Conditions Directive") into German law. 

This law, which comes into force on August 1, 2022, has significant practical implications for employers. The German Verification Act (NachwG) already obliges employers to record the essential terms of the employment contract and any changes to it, sign them by hand ("wet ink") and hand them over to the employee within one month after the start of the employment relationship ("verification obligation"). There are also further amendments to this in special laws, in particular the Employee Leasing Act, the Part-Time and Fixed-term Employment Act and the Employee Posting Act. Now, however, this verification obligation applies to further information. Violations of these requirements are now also subject to fines. 

We have summarized the most important questions, what this means in practice and what challenges you will face below.

Q&A - practical consequences and implementation

  1. What are the main changes?

The law brings two major changes:

Firstly, employers must from now on include significantly more (contractual) content in their documents in order to avoid fines. Many of these changes are already included in standardized employment contracts (end date for fixed-term contracts; duration of probationary period, remuneration for overtime, etc.), so the new regulation will not have any serious consequences. Others, on the other hand, will result in the mandatory adaptation of contract templates. We present this in detail under question 2.

The second change is actually not new: As in the previous version of the law, the duty to inform must still be fulfilled in writing, i.e. signed wet ink. Electronic signatures are expressly not permitted. However, violations of this requirement can now be punished with a fine (see question 11), so that the written form requirement is now much more binding than before.

  1. What does this mean in terms of content, what additional information obligations are there?

According to the law, the following information requirements are newly included. Partly, these are likely to have already been covered in previous sample contracts but others will require changes in the handling:

  • The end date for fixed-term contracts.
  • An indication that the employee is free to choose his/her place of work (if this is to be the case).
  • The duration of the agreed probationary period.
  • The remuneration for overtime and the method of payment of the remuneration.
  • The agreed rest breaks and rest periods as well as, in the case of agreed shift work, the shift system, the shift rhythm and the conditions for shift changes.
  • Special features of work on call pursuant to Section 12 of the Part-Time and Fixed-term Employment Act (TzBfG)
  • Possible claims to further training offered by the employer.
  • Possibility and prerequisite of overtime
  • Name and address of the pension provider, if the employer promises the employee a company pension through a pension provider.
  • The procedure for terminating the employment relationship, at least the written form requirement and the notice periods as well as the period of 3 weeks (starting from receipt of the termination letter) for bringing an action for unfair dismissal before the labor courts.
  • Reference to the collective bargaining agreements or works agreements applicable to the employment.
  • Special features of secondment agreements (see question 15)
  1. How can employees now be informed in a legally effective manner?

How the information requirements set out in question 2 are to be implemented in detail is unfortunately still partly open.

The following comments are made on some of the points in disput:

  • In our view, information about rest breaks and rest periods is only required if they have been expressly and bindingly agreed, but not if they can be determined by the employer's right to give instructions. A pure reference to the German Working Time Act is not necessary.
  • In our view, a binding right to further training should only be included if the employer wants to give the employee an unconditional entitlement, but not if the employer wants to decide on the suitability and appropriateness of the further training in individual cases.
  • According to the clear regulation, the procedure for termination should only include a reference to the written form requirement and the notice periods. Additional references to a necessary works council hearing, special protection against dismissal, etc. are dispensable in our view. In any case, a reference to the statutory provisions is sufficient, provided that these apply.
  • The same applies with regard to the necessary time limit for filing an action for protection against dismissal. Here, too, reference can and should be made to the statutory provisions or the wording of the law should be reproduced unchanged; this is expressly permitted.
  1. This means that all employment contracts must now be amended?

As of today, almost no employment contract meets the requirements of the new law, which are shown in question 2. Therefore, for new hires starting from August 1, 2022, the used employment contract templates must be updated.

  1. Are there other ways of implementation besides updating the contract templates?

The employer has two options for implementation. The most practicable option is probably to draw up a new standardized employment contract that already contains all the information required under the Verification Act (see question 2) and to handover the employee a version signed by the employer with wet ink (option 1).

Note: In our view, however, it is sufficient for effective information if the employment contract is signed unilaterally by the employer wet ink. An additional signature of the employee is not necessary for the information.

Alternatively, employers may (in addition to the employment contract) also prepare a separate information letter containing all the information required by law, which is signed by hand (wet ink) and handed over to the employee (option 2). Such a procedure would have the advantage that only in this case an electronic signature of the employment contract would be permissible. Even the mere sending of a pdf file would be conceivable in this constellation.

Note: If employment contracts were previously signed electronically, this is no longer permissible if, as in option 1, the information is to be provided at the same time. If employment contracts should continue to be signed electronically, which is possible (except for fixed-term contracts and contracts containing a post-contractual non-competition clause requiring a wet ink signature or a qualified electronic signature), option 2 must be selected.

  1. Are there deadlines for the fulfillment of the recording and information obligation?

The records of information - such as the names/addresses of the contracting parties, the amount of remuneration and the agreed working hours - must be handed over to the employee on the first working day. This is not a problem if all the information is included directly in the employment contract (which must then be signed with wet ink) (see option 1 under question 5), as this should always be concluded and signed before the employment relationship begins.

  1. Does the above also apply to amendment agreements?

In the future, amendments to the main terms and conditions of the contract must be notified by handwritten signature on the day on which the amendment comes into force. The same applies here as to question 5. Here, too, both options are conceivable.

However, in this case the duty to inform the employee about the content relates solely to the content of the amendment itself. Amendment agreements in the previous form (which merely highlighting the changes and further refer to the previous employment agreement for unchanged clauses) thus remain possible.

Note: This means that any clauses in the employment contract that provide for an electronic form requirement for contract amendments are no longer recommended. In written form clauses, the electronic form should be expressly prohibited.

  1. Does the law also apply to employment relationships existing before August 1, 2022?

For employment relationships that already existed before the new law came into force on August 1, 2022, the contracts do not have to be adjusted automatically.

Rather, the law only stipulates that the employer must provide the employee at his request with information on the essential terms and conditions of employment within seven days of the employee's request.

Of course, employers may (if they wish for reasons of efficiency) provide this information uniformly to all employees - even without their request.

It is also important to note that, according to the statutory regulations, information only has to be provided on those points that were not yet included in the original written employment contract (see question 2 in particular). In many cases, the information can therefore be very brief.

Note: Employers should in any case prepare to be able to provide the essential information to employees who started before August 1, 2022. Samples should already be prepared for this purpose. Even if the obligation to provide information relates solely to the information that was not included in the original contract, consideration should be given to providing information on all terms and conditions for reasons of standardization. This can prevent the need to check which information has already been provided, especially when different employment templates were used.

  1. What does the new regulation mean for existing contracts that were not signed by hand ("wet ink")?

In general, the same applies here as in question 8. There is no obligation to inform the employee without being requested to do so. However, there are specific aspects if the employee asserts his right to information.

In this case, the employee must be informed about all the contents provided for in the law (with a wet ink signed document), i.e. also about those which were already regulated in the (not wet ink signed) employment contract.

  1. Which provisions apply to employment contracts concluded by August 1, 2022, if the employment relationship commences only after August 1, 2022?

In principle, the Act does not apply to employment contracts concluded before August 1, 2022.

However, if the employment relationship begins after August 1, 2022 (i.e., at a time when the Act already applies), there are doubts as to whether the information obligation does not nevertheless apply, as this must be fulfilled "no later than the first day of the performance of the work". There is no clear regulation on this. In any case, however, the risk with regard to the fine should be extremely low even if the information is not provided.

Note: In order to avoid any risk, we nevertheless recommend using amended contract templates at an early stage - i.e., already before August 1, 2022.

  1. Are there any fines if employers do not comply with the record-keeping and information requirement?

A fine of up to EUR 2,000 is imposed on anyone who fails to comply with the obligation to provide information, or fails to do so correctly, completely, in the prescribed manner or in good time. Such a fine may be imposed individually in each case, i.e. each individual employee or employment contract.

However, this does not mean that the maximum possible fine must be paid in each case. Rather, the authorities are to examine in each individual case how serious the violation is and whether the employer acted intentionally or negligently. Especially at the beginning of the period of validity of the law, it is therefore not to be expected that high fines will be imposed immediately.

  1. Can terminations be invalid if the employer does not properly fulfill the corresponding information obligation?

As stated under question 2 and 3, the employer must inform about the procedure to be followed when terminating the employment relationship and the deadlines for the termination, as well as the deadline for filing an action for protection against dismissal.

The new regulation clarifies that failure to provide information about the three-week period for bringing an action for protection against dismissal before the labor court (Sections 4, 7 German Dismissal Protection Act) does not affect the running deadlines for employees in the proceedings for protection against dismissal. Once the three-week period has expired, the termination is deemed to be legally effective from the beginning, even if the information provided is insufficient. Therefore, incorrect information does not have a negative effect on the notice of termination.

Whether this also applies to all other information about the termination procedure is left open by the legislator. However, we do not assume that incorrect information on this will lead to the termination being invalid. Nevertheless, it is to be expected that plaintiffs will raise this issue in court until the Federal German Labour Court clarifies the matter.

  1. What special characteristics exist in the case of fixed-term contracts?

In the case of part-time work or fixed-term employment contracts under German Law, the employer is to be obliged to provide a reasoned response within one month to employees (with a minimum employment of 6 months) who have expressed their wish for a change or for an unlimited employment relationship in text form. Unfortunately, this regulation is terminologically misleading, since for companies it is completely unclear how an effective reasoned response looks like and what information is necessary in this context.

Also, the probationary period for fixed-term employment relationships may only be in proportion to the duration of the fixed term and the type of activity.

Note: What this means is still unclear. In particular, it has not been clarified whether this is an alteration from the case law of the Federal Labor Court, according to which a six-month probationary period is always permissible. Consequently, it is not yet possible to make a legally reliable assessment here.

  1. What special characteristics apply to temporary workers?

The same obligation to provide information and justification as for part-time employees is to apply to hirers under the German Temporary Employment Act (AÜG) if temporary workers who are hired out to them for at least six months indicate their wish to conclude an employment contract..

Note: What exactly the hirer has to answer is not regulated.

  • It would be in the interest of the employer either to promise the conclusion of an employment contract at a specific and justifiable point in time or to justify why an employment contract will not be concluded.
  • Even if the employer has to consider the individual case in case of doubt, the requirements for justification must not be set too high against the background of the freedom of contract protected by fundamental rights.

In addition, the obligation to provide proof in the case of temporary work is to be extended to include the obligation to provide proof of the hirer's identity (name and address).

  1. What special characteristics must be observed in the case of contracts for the posting of employees?

There are also a number of changes to be observed in posting agreements.

While the specification of the country or countries in which the work is to be performed abroad and the planned duration of the work as well as the cash and non-cash benefits to be paid and the arrangements for return can still be included in the posting agreement quite easily (and usually already are), the statutory regulation also contains additional obligations. The remuneration to which the employee is entitled under the law of the posting state must be stated, as well as a link to the single national website that the posting state operates on the posting.

This is likely to involve additional organizational effort in any case.

We hope to give you a good overview of the above-mentioned topic and the complex legal situation. If you have any questions on the above-mentioned topic and on the COVID management in your company, please do not hesitate to contact our colleagues in our offices in Berlin, Düsseldorf, Munich and Cologne by telephone or e-mail.

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