On 7 December 2021, the coalition partners signed the coalition agreement. The new coalition agreement offers a first insight into the new federal government’s plans with regard to labour law. The programme of the so-called “traffic light” coalition for the 20th legislative period of the German Bundestag is extensive and considerable changes to German labour law are expected. Experience with the coalition agreements of previous legislative periods has shown, however, that by no means all of the announced plans actually become law. We must therefore await the actual implementation, especially since the legislator is likely to be preoccupied with crisis management in the ongoing pandemic situation. This new Labour Law Focus contains an overview of the most important statements on labour law in the coalition agreement, as well as the amendments to the German Company Pensions Act [Betriebsrentengesetz – BetrAVG] and the German Social Code Book IV [Sozialgesetzbuch IV – SGB IV] that are definitely entering into force on 1 January 2022 and 1 April 2022, as well as our usual overview of the most important decisions of the labour courts. This fourth Labour Law Focus brings the year 2021 to a close.
We wish you and your families all the best for the New Year 2022. Stay safe!
1. New case law
1.1 Automatic reduction of the holiday entitlement in the event of short-time work zero
If short-time work zero has been validly introduced, employers may reduce their employees’ holiday entitlement on a pro rata basis during the course of a year. This was confirmed by the German Federal Labour Court [Bundesarbeitsgericht – BAG] in a judgement on 30 November 2021 – 9 AZR 225/21. For many employers, this is a decision that provides legal certainty – at a time of the pandemic when the Federal Ministry of Labour extended the reduction of the requirements for access to short-time work benefit again on 24 November 2021 until 31 March 2022 and when employees are increasingly working short-time again.
The sued employer had introduced short-time work zero by individual contractual agreement with the employee on grounds of a loss of work due to the corona pandemic. Because of the loss of working time arising from the short-time work, the employer had recalculated the holiday entitlement. The employee took legal action against this.
In its ruling of 30 November 2021 – 9 AZR 225/21, which is only available as a press release to date, the German Federal Labour Court (BAG) agreed with the previous instances. It confirmed that an employer can reduce the annual holiday entitlement on a pro rata basis because of short-time work zero introduced due to the economic situation. The loss of entire working days due to short-time work justifies a recalculation of the holiday entitlement. In a parallel decision, the BAG also found this to be the case for short-time work zero that was validly introduced on the basis of a shop agreement (ruling dated 30 November 2021 – 9 AZR 234/21).
With this decision, the BAG has created the legal certainty for employers that was previously lacking. It thus consistently follows its case law from 2019, with which the Erfurt judges had already determined that, in the event of a change in the number of working days in the calendar week during the course of the year due to part-time employment, the holiday entitlement is to be converted, taking into account the individual periods of employment and the weekdays with a work obligation attributable to them. Accordingly, the ruling of the BAG comes as no great surprise: although the accrual of the holiday entitlement exclusively presupposes an existing employment relationship; the scope of the holiday entitlement is governed by Sec. 3 (1) German Federal Holiday Act [Bundesurlaubsgesetz – BUrlG]. It is thus based on the distribution of working time over the days of the week, so that ultimately, as in the case of part-time work, the holiday entitlement can also be reduced proportionately in the case of short-time work zero. Here, the BAG’s ruling is in line with the case law of the ECJ. The ECJ had already ruled in 2018 that an employee is only entitled to paid annual holiday under the Working Time Directive for periods in which he or she also performed work.
The BAG’s ruling leaves unanswered the question of whether a reduction of the holiday entitlement can also be made if short-time work was not conducted in the form of short-time work zero. The Labour Court [Arbeitsgericht – ArbG] of Osnabrück rejected this in its ruling of 8 June 2021 – 3 Ca 108/21 due to the lack of a comparable legal situation to part-time employment law. An appeal is pending. As things stand at present, therefore, holiday entitlement should only be reduced in cases where short-time work zero has been validly introduced. Since the Federal Ministry of Labour further extended the facilitated access to short-time work benefit until 31 March 2022 on 24 November 2021, the ruling is likely to remain of great significance for numerous companies and their workforces.
1.2 Employment claim after entrepreneurial decision
An employee whose employment relationship has been terminated does not, in the event of a successful action for protection against dismissal, have a claim against the employer according to which the employer must reverse its organisational decision which led to the loss of the employee’s former job (BAG dated 15 June 2021 – 9 AZR 217/20).
The sued employer terminated the plaintiff’s employment as executive assistant for operational reasons after the reassignment of the plaintiff’s duties elsewhere and the resulting elimination of the employment position. During and after the conclusion of the unfair dismissal proceedings, the defendant, which was defeated in this case, employed the plaintiff as a sales clerk. The plaintiff subsequently filed a second action for reinstatement to her former position with her original duties as an executive assistant.
The plaintiff was also unsuccessful in her appeal on points of law before the BAG. Although the plaintiff was fundamentally entitled to employment in her previous position under Secs. 611a, 613 BGB in conjunction with Sec. 242 BGB, this does not give rise to any guarantee of employment. Thus, the claim may be ruled out if the employer, on the basis of a lawful entrepreneurial decision, undertakes a reorganisation as a result of which the employment claimed is no longer possible. The employer can neither be required to renounce the decided organisational measure if it is not legally objectionable, nor can it be forced to “modify” its organisational decision with a view to achieving an employment opportunity. Such entrepreneurial decision is not subject to a judicial review of its factual justification or expediency, but only as to whether it is manifestly unobjective, unreasonable or arbitrary.
The fact that the BAG is strengthening the employer’s freedom of organisation can be welcomed. Moreover, the BAG clarifies that there is no guarantee of employment in the employment relationship. Thus, an employer is neither in breach of duty nor liable for damages if it adheres to its entrepreneurial decision, the implementation of which leads to the impossibility of employing the employee in accordance with the contract. Furthermore, the employee cannot demand that the employer reverse its entrepreneurial decision.
Nevertheless, the BAG’s decision must not lead to misconceptions. If unfair dismissal proceedings are lost after a termination – for operational reasons – was declared, the contractual (continued) employment of an employee regularly leads to increased difficulties. This is because the employee’s interest in employment will regularly outweigh the opposing interest of the employer if the basically required weighing of interests goes in the employee’s favour or the employee can even prove existing – alternative – employment possibilities within the company. This is also the case if the previous job has been eliminated due to an entrepreneurial decision. Employers are therefore strongly advised to rule out alternative employment opportunities in the company before giving notice of termination for operational reasons.
1.3 Forfeiture of the right to object in the event of a transfer of business
It has always been disputed how long employees who are affected by a transfer of business and have received a faulty notification letter can object to the transfer of their employment relationship to the acquirer of the business. The BAG now gives us grounds to hope that the requirements for a valid notification letter will be somewhat reduced in the future and that these cases of subsequent objections could become less frequent.
The ruling concerned the transfer of part of a business in 2011. Although the employees concerned had received a notification letter at the time, this did not contain any information about the liability system, the prohibition of dismissal and the blocking period pursuant to Sec. 613a German Civil Code [Bürgerliches Gesetzbuch – BGB]. For this reason, the notification was legally invalid. In the absence of a proper notification in accordance with Sec. 613a (5) BGB, the one-month period for declaring the objection had therefore not yet commenced. The plaintiff objected to the transfer of his employment in June 2019 – that is to say more than eight years after the transfer of business.
In its ruling dated 22 July 2021 – 2 AZR 6/21, the BAG decided that the plaintiff’s objection was invalid because it had been forfeited. Forfeiture is a special case of the inadmissible exercise of rights (Sec. 242 BGB), which excludes the disloyally delayed assertion of rights. Already according to previous case law of the BAG, the employee’s objection to the transfer of his employment relationship – with his initially unopposed continued employment at the acquirer over a period of seven years – can already prove to be incompatible with the principles of good faith due to the lapse of time. In this respect, the BAG has adhered to its line of case law. Hence, certainly after seven or eight years, no trouble can be feared in case of faulty notification letters.
Noteworthy, however, is a remark made by the BAG that was per se not necessary for the decision of the legal dispute, but which indicates a certain shift in the case law: the BAG remarks that a different approach might be needed in case of errors in the notification letter that are regularly not relevant to the process of the employee’s formation of his will. This indicates that the BAG might “turn a blind eye” to such errors in notification letters in the future. Up to now, the case law of the BAG applied a very strict standard, according to which practically every error in the notification letter led to the invalidity of the notification letter, for example even the incorrect indication of the managing director’s forename.
The decision makes it clear that the 2nd Senate, which is now the responsible body for the law on transfers of businesses, seems to be willing to adapt the case law on the requirements for the notification letter. Until the beginning of the year, the 8th Senate had been responsible for these legal issues for several decades. The decision discussed here, however, had not yet given it any opportunity to do so. In practice, however, there is the prospect that the “liability trap of notification letters” will be somewhat defused in future. Hopefully, it will soon become clear exactly how much leeway the BAG is giving employers.
Dr. Alexander Willemsen
1.4 Mass dismissal notification – § 17 KSchG also applies to dismissals due to illness
The question of the necessity of a mass dismissal procedure pursuant to Sec. 17 of the German Unfair Dismissals Act [Kündigungsschutzgesetz – KSchG] is of essential importance in the case of planned reorganisations and the associated staff cutback measures. In addition to the numerous procedural challenges associated with a notification of collective redundancies, the Regional Labour Court [Landesarbeitsgericht – LAG] of Düsseldorf has now also focused on the scope of application of the mass dismissal procedure in its judgement of 15 October 2021 – 7 Sa 405/21. According to this, it may also be necessary to issue a mass dismissal notification on grounds of dismissals declared for personal or behavioural reasons.
In the proceedings at issue, the parties disputed the validity of two ordinary notices of termination on grounds of illness that had been issued by the defendant on 27 November 2020 and 22 January 2021. The background to the terminations was several short-term illnesses suffered by the plaintiff between 2018 and 2020. The defendant, which regularly employs more than 500 employees, issued notices of termination on grounds of illness to a total of 34 employees during the period from 25 November 2020 to 22 December 2020. The defendant did not file a mass dismissal notice pursuant to Sec. 17 KSchG.
The LAG Düsseldorf held that the two dismissals at issue were invalid. The first termination of 27 November 2020 had already been legally invalid because the required mass dismissal notification to the Employment Agency [Agentur für Arbeit] was lacking. According to the wording, systematics and purpose of Sec. 17 KSchG, such notification must also be made in cases of mass dismissals declared on grounds of illness.
According to Directive 98/59/EC (“Collective Redundancies Directive”), on which the German provision of Sec. 17 KSchG is based, only dismissals for operational reasons are covered by the requirements of the mass dismissal procedure. However, according to Art. 5 of the Collective Redundancies Directive, it is also possible for member states to enact regulations that are more favourable to employees. Sec. 17 KSchG makes no differentiation with regard to the grounds for dismissal. On the contrary, the legislator did not take up the explicit suggestion in the legislative procedure to exempt dismissals for personal or behavioural reasons from the notification obligation. For this reason, in the opinion of the LAG Düsseldorf, dismissals based on personal and behavioural reasons are also covered by Sec. 17 KSchG.
The need for a notification of mass dismissals solely for dismissals declared for personal or behavioural reasons – as in the proceedings at issue here – is likely to be rare in practice. However, the ruling is also relevant for staff cutback measures and related terminations for operational reasons. Dismissals for personal or behavioural reasons often occur at short notice. If the number of planned dismissals for operational reasons is just below the threshold values of Sec. 17 (1) KSchG, there is a risk that a notification obligation will be triggered by the occurrence of individual unplanned dismissals for personal or behavioural reasons that are pronounced within 30 days of the terminations for operational reasons. In light of the fact that all dismissals would be invalid if the threshold values are exceeded and a mass dismissal notification has not been made, it may therefore make sense in individual cases to make a mass dismissal notification as a precautionary measure and to conduct a consultation procedure or to somewhat postpone the dismissal that would trigger a mass dismissal notification.
1.5 Overtime premiums for part-time employees according to the TVöD-K
Part-time employees in the public sector are only entitled to an overtime premium once the regular working hours of a full-time employee have been exceeded, according to the BAG in its ruling of 15 October 2021 – 6 AZR 253/19. This does not constitute discrimination against part-time workers.
The plaintiff is employed by the defendant, a clinic operator, as a nurse on rotating shifts with a weekly working time of 32 hours. As both parties are bound by a collective bargaining agreement, the provisions on the remuneration of overtime and extra work of the Collective Agreement for the Public Services Sector – Hospitals [Tarifvertrag für den öffentlichen Dienst – Krankenhäuser -TVöD-K] apply to their employment relationship. In the first half of 2017, the plaintiff worked additional hours beyond her contractually agreed working hours, but never exceeded the regular weekly hours of full-time employees. The defendant compensated for these hours worked, but did not pay an overtime premium because they did not reach the working hours of a full-time employee.
The BAG does not see any discrimination against part-time employees in this. First of all, abandoning its previous case law (rulings of 25 April 2013 – 6 AZR 800/11 and 6 AZR 161/16), it found that the relevant special provision in Sec. 7 (8) lit. c TVöD-K on the accrual of overtime for employees who work alternating shifts or shifts, both for full-time and part-time employees, violates the requirement of normative clarity and is therefore invalid. Thus, only the provision of Sec. 7 (6) TVöD-K (extra work), which applies to part-time employees and does not provide for the payment of overtime premiums, is relevant for the plaintiff. A differentiation between full-time and part-time employees was valid in the specific case, since the TVöD-K had created completely different regulatory systems for extra work and overtime.
As a result, the BAG is no longer adhering to its older case law according to which part-time employees are discriminated against if overtime only accrues once they reach the working hours of a full-time employee (ruling of 23 March 2017 – 6 AZR 161/16). Working time which falls short of the working time of a full-time employee but exceeds the working time of a part-time employee is, according to the recent decision of the BAG – at least in the context of the applicability of the TVöD-K – merely extra work. This working time, defined as extra work, is not to be remunerated with overtime premiums. Part-time employees are therefore only to be paid an overtime premium in the case of shift work and alternating shift work within the scope of Sec. 7 (7) TVöD-K.
With its change in case law, the BAG is not only strengthening the collective bargaining autonomy of the parties to the collective bargaining agreement, as a different treatment of full-time and part-time employees with regard to overtime compensation in a collective bargaining agreement is now considered non-discriminatory. Also outside the scope of application of the TVöD-K, the principles set out are likely to have practical relevance in cases where, for example, different regulatory systems for extra work and overtime have been created at the works level by shop agreements or within the framework of employment contracts, and premiums are only linked to work in excess of full working hours. In this case, a violation of the prohibition of discrimination against part-time employees pursuant to Sec. 4 German Act on Part-time Work and Fixed-Term Employment Contracts [Teilzeit- und Befristungsgesetz – TzBfG] need not be feared.
1.6 Works council elections: contesting and aborting elections – let the games begin
Not only the changes brought about by the German Works Council Modernisation Act [Betriebsrätemodernisierungsgesetz – BReModG], but above all two recent court decisions give us cause to take a look at the works council elections due to take place in 2022.
In recent years, case law has developed the contours for legal action against a works council election. With the entry into force of the German Works Council Modernisation Act (BReModG) on 18 June 2021, the legislator has amended Sec. 19 of the German Shop Constitution Act [Betriebsverfassungsgesetz – BetrVG], which is relevant for contesting elections. The already restrictive regulation was supplemented by Sec. 19 (3) BetrVG, according to which a works council election can only be contested on the grounds of the incorrectness of a voters’ list if the possibility of objecting to the voters’ list was previously used – without success.
In its decision of 30 June 2021, the BAG (7 ABR 24/20) once again outlined the prerequisites for contesting an election in distinction from the prerequisites for establishing its nullity. The employer primarily wanted to have the nullity of the election established because, on the one hand, the definition of the term “business” (Betrieb) had been misunderstood and, on the other hand, the works council had not drawn up a list of voters but rather a “fantasy list” based on a mere telephone list. The employer contested the election only as an alternative measure. The BAG first clarified that nullity, which would result in the invalidity of the election from the outset, is only given in special cases. There must be an obvious and particularly gross violation of electoral regulations, resulting in a denial of the protection of the legitimate expectation of the validity of the election. The works council election must “have nullity stamped on its forehead.” The BAG rejected this here – in contrast to the previous instance (LAG Thuringia, decision of 24 June 2020 – 4 TaBV 12/19). However, the BAG considered the challenge to be well-founded, since material provisions of the electoral law had been violated. With this consequence, the elected works council remained in office until it was legally contested.
An employer can also apply to the courts for an ongoing works council election to be aborted if errors already become apparent during the election procedure. However, the hurdles for a successful action are high, as the LAG Berlin-Brandenburg recently confirmed (decision dated 23 November 2021 – docket No. 13 TaBVGa 1534/21). In preliminary injunction proceedings, the employer, an “animal” delivery service, wanted to force the abortion of the works council election. The company had argued, inter alia, that there were formal deficiencies in the initiation of the election process. However, the LAG Berlin-Brandenburg did not agree with this line of argument. According to the press release, the court held that a works council election could only be aborted by a court if the election committee was obviously not in office when the election was initiated or if the deficiencies in the election procedure to be established would lead to a null and void election. The employer was advised of the possibility of contesting the concluded election.
Even though the courts are reluctant to rule on the abortion of an election or even declare an election null and void, the employer should follow the election closely and, if necessary, also take legal action against it. Incorrectly elected employee committees can have a massive negative impact on the internal organisation and also cause high costs. Companies should monitor works council elections with their own checklists and directly address any mistakes made during the election. Have no fear, however! Employees are all too happy to make accusations – often unfounded in practice to date – of obstructing the election of works councils.
1.7 Transfer within city limits – when does the works council have a right of co-determination?
What readily applies to metropolises such as London or Paris also applies to tranquil towns in Bavaria: if the route to work is significantly lengthened through the assignment of a workplace in another part of the city, this can trigger co-determination rights of the works council. What is surprising, however, is what the Regional Labour Court of Nuremberg already considers to be a significant change.
The employer in question operated a service company for Klinikum Nuremberg. This is divided over two locations in the Nuremberg city area, north and south. The employer assigned two employees who had previously worked in the transport of patients and goods at the south location to the north location for three months and one employee who had previously been employed at the north location to work at the south location. In terms of content, there was no change in the employment activities of these employees. The sites are 12 kilometres apart. The employer did not obtain the consent of the works council. The works council objected to this and demanded that the measures be cancelled, since these constituted transfers that were subject to co-determination pursuant to Sec. 99 BetrVG. The employer considered the distance between the locations to be insignificant, especially since both were within the same political municipality.
Both the ArbG Nuremberg and the LAG Nuremberg ruled in the works council’s favour and obliged the employer to cancel the transfers. For this was what they were, in the opinion of the LAG Nuremberg (decision dated 10 May 2021 – 1 TaBV 3/21). The employer had assigned the employees a “different area of work” within the meaning of Sec. 95 (3) BetrVG. It was true that there would be no relevant change in tasks or responsibilities. Nor would the position and place of the employees within the company organisation change either. However, the distance of 12 kilometres between the previous and the new place of work in itself gives the activity an entirely overall character. This is no longer a ‘trivial matter’, since employees may have to travel considerably longer distances between their place of residence and the place of work. The location within the same political municipality is irrelevant here.
This decision once again shows the imponderables to which the employer is exposed when it comes to the question of whether the exercise of the employer’s right to issue instructions does or does not trigger co-determination rights on the part of the works council. In 2006, the BAG decided that the assignment of a different place of work “just a few kilometres away” – at that time it was three kilometres – within a political municipality did not constitute a transfer that was subject to co-determination (BAG of 27 June 2006 – 1 ABR 35/05). Since the Regional Labour Court may have deviated from the Federal Labour Court’s case law in its decision, it allowed the appeal on points of law to the BAG. In all events, it remains completely unclear as of what distance between the old and new place of work a transfer requires the consent of the works council and whether the city limits even still represent an essential aspect. This is a dilemma for the employer: if it initiates the consent procedure pursuant to Sec. 99 BetrVG, it exposes itself to the risk that the works council will refuse this and that a legal dispute will have to be initiated by way of proceedings in substitution of consent pursuant to Sec. 99 (4) BetrVG. If it disregards Sec. 99 BetrVG, it faces coercive payment proceedings by the works council pursuant to Sec. 101 BetrVG to procure the cancellation of the measure.
1.8 Home office and co-determination
If the assignment of an employee working in the home office changes to a workplace, in the opinion of the Regional Labour Court of Hesse the works council nevertheless has a right of co-determination pursuant to Sec. 99 BetrVG – even if neither the content of the activity, nor the workplace at the home office, nor the employee’s superior changes. The forms of work promoted by the pandemic – home office, co-working, matrix structures or agile organisations – will therefore doubtlessly be scrutinised more critically by the works council in future.
Pursuant to Sec. 99 (1) BetrVG, the employer must inform and obtain the consent of the works council before every transfer. If the employer fails to do so, the transfer is invalid under individual bargaining law, which in turn enables the employee to refuse to work under the changed conditions.
In the case decided by the LAG Hesse on 14 January 2020 – 4 TaBV 5/19, the employer initially merged three business locations into one new business location. In the course of this, 34 employees moved to the home office. In the course of a subsequent further relocation of the business, the employer informed the works council about the transfer to the new business establishment and the assignment to a permanent home office. The works council objected to the transfer. In the subsequent proceedings brought in substitution of consent, the employer applied, inter alia, for a declaratory judgement to the effect that the transfer to a new workplace was not subject to co-determination within the meaning of Sec. 95 (3) BetrVG.
While the labour court was still of the opinion that the transfer was not subject to co-determination, the works council was successful at appeal instance. The LAG Hesse found that the permanent reassignment to another workplace changed the personal position of the employees within the company organisation. The fact that neither the tasks nor the superior had changed and that the employee – as before – still worked from the home office, was not decisive. The assignment of a different workplace also changed the area of work, since the employee would be technically assigned to a different part of the company organisation. The LAG Hesse emphasised in this respect that the assignment of a different area of work presupposes that – for an observer who is familiar with the situation at the business – the employee’s activity has the appearance of being a different one.
In future, employers should therefore not only consult the works council in accordance with Sec. 99 BetrVG when an employee transfers “into” or “out of” the home office, but also as a precautionary measure in the event of a “transfer on paper” without any spatial change. In case of the mere assignment of a home office workplace to a different business establishment than before, whilst retaining the employment activity, the workplace (home office) and the employee’s superior, a “familiar observer? would, in our view, tend to reject a change in the area of work and thus a transfer under shop constitution law. Nevertheless, the very formal approach of the LAG Hesse grants the works council a right of co-determination in this case as well.
Furthermore, the requirement to involve the works council not only exists in case of a change in the assignment of an employee in the home office in an individual case. Rather, the works council’s right of co-determination pursuant to Sec. 99 (1) BetrVG must also be observed in case of the implementation of operational changes pursuant to Sec. 111 BetrVG, e.g. if, in the case of reorganisations, employees are assigned to another business establishment due to changed organisational structures whilst retaining their place of work.
2. Legal developments
2.1 Coalition agreement
The coalition agreement of the “traffic light” coalition was published on 24 November 2021 and signed on 7 December 2021. The new federal government under Chancellor Olaf Scholz has been in office since 8 December 2021. Under the title “Dare more progress”, the new government promises to shape a modern world of work that reconciles security and flexibility. Here are the most important labour law statements made in the coalition agreement.
- “We are upholding the principle of an 8-hour day in the German Working Hours Act [Arbeitszeitgesetz – ArbZG]. Within the scope of a temporary regulation with an evaluation clause to be adopted in 2022, we will make it possible for employees to organise their working hours more flexibly within the framework of collective agreements, subject to certain conditions and within deadlines to be observed.” (p. 68 of the coalition agreement)
- “Furthermore, we want to create a limited possibility to deviate from the currently existing regulations of the German Working Hours Act with regard to the maximum daily working hours, if collective agreements or shop agreements based on collective agreements provide for this (room for experimentation). In dialogue with the social partners, we are examining the need for adjustments in the light of the case law of the European Court of Justice on working time legislation. Here, flexible working time models (e.g. trust-based working time) must remain be possible.” (p. 68)
- “We are making a legal distinction between the home office as a mobile work option and telework and the scope of applicability of the German Workplace Ordinance [Arbeitsstättenverordnung – ArbStättV].” (S. 68)
- “Employees in suitable jobs shall be given a right to discuss mobile working and home office. Employers can only object to the employees’ wishes in case of opposing operational interests. This means that a rejection may not be extraneous or arbitrary.” (p. 69)
- “In order to avoid chains of fixed-term employment, we are restricting contracts that are limited in term for a material reason with the same employer to six years. Only in narrowly defined exceptions is it possible to exceed this maximum term.” (p. 70)
- “Contracts for work and for the provision of temporary workers are necessary instruments. We are preventing structural and systematic violations of labour law and employment protection through more effective law enforcement.” (p. 71)
- “We will continue to develop co-determination. Works councils shall decide for themselves whether to work in analogue or digital form. Within the framework of the constitutionally required standards, we will be testing online works council elections in a pilot project. We are creating a contemporary right of unions to digital access into workplaces that matches their analogue rights.” (p. 71)
- “We want to prevent an abusive circumvention of applicable co-determination law. The federal government will work towards ensuring that corporate co-determination is further developed, so that there will no longer be a complete avoidance of co-determination as SE companies increase (freezing effect).” (p. 72)
- “Applications submitted in full to the Integration Office are deemed to have been approved after six weeks without a decision (fictitious approval).” (p. 79)
2.2 Practical implementation difficulties – The mandatory employer contribution to deferred compensation in occupational pension schemes
As of 1 January 2022, employers are obliged to subsidise the deferred compensation of their employees for a company pension – irrespective of the date on which the deferred compensation agreements were concluded. This applies insofar as the employer saves social security contributions through the deferred compensation, Sec. 1a (1) 1a in conjunction with Sec. 26a German Company Pensions Act [Betriebsrentengesetz – BetrAVG]. The granting of the employer’s contribution is complex in its practical implementation.
Employees who are compulsorily insured under the statutory pension insurance scheme are entitled to a company pension by means of deferred compensation in accordance with Sec. 1a (1) sentence 1 BetrAVG. If an employee decides to defer compensation, the employer and the employee conclude a deferred compensation agreement. Under insurance law, the employer often implements deferred compensation in the form of direct insurance. The deferred part of the work remuneration reduces the employee’s gross remuneration and at the same time reduces the employer’s social security contributions. According to the German Social Security Remuneration Ordinance [Sozialversicherungsentgeltverordnung – SAvEV], deferred compensation up to the limit of Sec. 1a (1) BetrAVG does not count as remuneration subject to social security contributions, for which reason no social security contributions are payable by the employer.
From 1 January 2022 onwards, the employer must “pass on these saved social security contributions – insofar as they are incurred – as the employer’s contribution to the pension fund [Pensionfonds], the pension insurance fund [Pensionskasse] or the direct insurance [Direktversicherung]“.
This is where the implementation difficulties begin. An increase in the insurance contribution paid by the employer to the insurance institution is de facto ruled out. Insurance institutions are opposed to such top-ups, as this would increase their obligations in the case of insurance contracts with a high guaranteed interest rate. Nor are there many insurance institutions that will conclude a separate insurance contract with employers for just the mandatory employer’s contribution, since this amount is likely to be below the collectively agreed minimum amounts of the insurance institutions.
Nevertheless, it is possible for employers to implement this as per 1 January 2022. The reduction model offers the most practicable implementation option. This requires an amicable adjustment of existing deferred compensation agreements between employer and employees. For this purpose, the employer and the employee agree on a reduction of the deferred compensation amount. The reduced deferred compensation amount is in turn increased by the employer’s contribution and transferred to the insurance institution. The advantage is that no change to the insurance contracts is required, as the insurance amount paid out ultimately remains unchanged. If this method is chosen, employers must ensure that the employee receives an increased gross salary as a result of the reduced deferred compensation. All these factors must be taken into account and implemented in the contractual adjustment of existing deferred compensation agreements.
Employers who have voluntarily granted contributions to deferred compensation in the past are recommended to review the deferred compensation agreement as to possible crediting options.
Due to the complexity of the changes, employers should review their deferred compensation agreements and adjust them in the short term.
2.3 Reform of the status determination procedure through the German Act Strengthening Accessibility [Barrierefreiheitsstärkungsgesetz – BFSG]
At the end of the legislative period, a reform of the status determination procedure under social insurance law (Sec. 7a German Social Code Book IV [Sozialgesetzbuch IV – SGB IV]) was passed – almost unnoticed. This enters into force on 1 April 2022 and pursues the aim of providing the parties in question in a quicker and simpler manner in future with certainty as to whether they are in dependent employment or self-employment. We have summarised for you below the main innovations of this reform, which will initially be valid until 30 June 2027.
In future, the status determination procedure will enable a decision to be made on the so-called employment status, i.e. the determination of whether the person concerned is employed or self-employed. This does not (or no longer) include(s) the determination of the insurance obligation.
In future, the examination of triangular relationships will extend not only to the contractual relationship between the contractor and the client, but also to the agreement between the client and the end customer. In particular, in constellations in which a service provider (client) employs a specialist (contractor) at a third party (end customer) within the framework of a contract for services or work, a status determination will thus be made in future with regard to all of the parties involved. The prerequisite for this is that there are indications pointing towards the contractor’s being integrated into the work organisation of the end customer and being bound by the latter’s instructions. The other insurance carriers are also bound by the decision of the Deutsche Rentenversicherung (DRV). In future, end customers will also be able to initiate such a status determination procedure. In this case, the client may also be involved in the procedure against its will.
According to the new legal situation, an application can – in contrast to the previous situation – already be submitted before the employment activity is taken up. This aims to clarify legal doubts about the classification of the employment status by providing an early decision. If the agreement or the circumstances surrounding the performance of the contract change within one month of the start of the employment activities, an immediate reporting obligation exists. If this leads to an amendment of the forecast decision, this is fundamentally only effective for the future, in order to protect the parties involved. This does not apply in the case of intent or gross negligence. If the changes occur after the one-month period, the general rules apply.
Also new is the instrument of so-called group determination, which can be considered if the contracting parties are identical, e.g. in the case of a framework agreement, or if the contracts are implemented on the basis of essentially uniform conditions. In this case, the DRV will, upon request, merely give an expert opinion (without binding effect) on the employment status of contractors in several identical contractual relationships.
Application for an oral hearing
In opposition proceedings, it will be possible in future to request an oral hearing.
Although the reform does not contain legal clarity on the substantive legal distinction between dependent employment and self-employment, which would have been desirable, the reform does contain several procedurally helpful practical approaches for creating legal and planning certainty, especially in triangular relationships.