Newsletter Labour Law, I/2011

The year 2011 has been ushered in with a number of legislative projects and legal developments which have direct consequences for business practice: amendments of the law on temporary agency work, the extension of the unrestricted free movement of workers to include Eastern European countries as per 1 May 2011 and the amendment of the German Act on European Works Councils (Europäisches Betriebsrätegesetz, “EBRG”) will define the development of employment law this year.

Besides the above, the Federal Labour Court (Bundesarbeitsgericht, “BAG”) has published its long-awaited decision on the collective-bargaining capacity of the Collective Bargaining Union of Christian Unions for Temporary Work and Manpower Services Agencies, the Tarifgemeinschaft Christlicher Gewerkschaften für Zeitarbeit und Personalserviceagenturen (“CGZP”). Below, we explain the consequences of this decision for the legal protection of bona fide acts as well as inform you of current judgements of interest to the personnel services sector.

1. Case Law

1.1 The CGZP does not have the capacity to conclude collective bargaining agreements

As already reported in our last Newsletter, by decision dated 14 December 2010 (docket no. 1 ABR 19/10), the BAG denied the CGZP the capacity to conclude collective bargaining agreements. Now that the written reasons for the judgement have become available, we would like to comment on this judgement again in greater detail as questions have since arisen as to whether all collective bargaining agreements actually concluded by the CGZP are null and void and whether legal protection for bona fide acts is ensured.

In the opinion of the BAG, the CGZP is neither an association of employees with the capacity to conclude collective bargaining agreements within the meaning of Sec. 2 para. 1 German Collective Agreements Act (Tarifvertragsgesetz, “ TVG”), since, according to its by-laws, it does not organise workers, nor is the CGZP an umbrella organisation with the capacity to conclude collective bargaining agreements as its members have not fully transferred their capacity to conclude collective agreements to the CGZP (indivisibility of the capacity to conclude collective agreements). Moreover, according to the CGZP’s by-laws, the organisational scope of the CGZP is more extensive than that of its members (expansion of the capacity to conclude collective agreements).
Although the tenor of the decision has a topical reference, the reasons for the decision also make references to the past, since the wording of the 2009 CGZP by-laws that form the basis of the decision correspond in the disputed points to that of the prior CGZP by-laws of the years 2005 and 2002. Thus, all collective agreements concluded by the CGZP since its foundation in December 2002 have been null and void from the outset.

The BAG did not address the issue of the legal protection of bona fide acts in the said judgement. However, pursuant to a decision of the BAG dated 15 November 2006 (docket no. 10 AZR 665/05), good faith in the association’s capacity to conclude collective agreements is not protected. In addition thereto, in the case at hand the CGZP’s capacity to conclude collective agreements had already been disputed from the outset, with the result that the enterprises concerned can hardly claim protection of an act conducted in good faith. The German temporary agency work branch will therefore find itself faced with supplemental claims which could cost it billions. Moreover, the hirers of temporary workers could also face considerable financial damages, as they bear subsidiary liability for the social insurance contributions pursuant to Sec. 28 e II Fourth Book of the German Social Code (Sozialgesetzbuch IV, “SGB IV”).

Isabel Kreienbrock

1.2 Data protection officers – no revocation of the appointment on grounds of an organisational decision

Pursuant to Sec. 4 f German Federal Data Protection Act (Bundesdatenschutzgesetz, “BDSG”), every employer with at least ten employees must appoint in writing a data protection officer. This officer enjoys special protection both as far as the continued existence of his employment relationship and his appointment as data protection officer are concerned: his employment relationship cannot be terminated by ordinary termination, that is to say he can only be terminated for a “good cause” (aus wichtigem Grund) within the meaning of Sec. 626 German Civil Code (Bürgerliches Gesetzbuch, “BGB”). This particular protection against dismissal is also upheld for a further year after his appointment has ended. The revocation of the appointment with the simultaneous continuation of the employment relationship can also only be validly enforced in the event of a good cause within the meaning of Sec. 626 BGB. The purpose hereof is to make it possible for data protection officers to ensure as independently as possible that the provisions of the BDSG as well as other provisions on data protection are observed within the enterprise. The obligation to appoint a data protection officer applies to each enterprise within a group. The intra-company privilege of having the parent company appoint a single data protection officer for all group companies is a concept unknown to the BDSG.

In a judgment of 23 March 2011 (docket no.: 10 AZR 562/09), the BAG recently commented on the “good cause” requirements in the event of a revocation of an appointment. The case up for decision was that of an employee who had been appointed data protection officer of the group parent company and a wholly-owned subsidiary. The two companies revoked the plaintiff’s appointment on the basis of a corporate decision to have the tasks of the data protection officer carried out uniformly throughout the group by an external third party in future. The employee objected to the revocation of the appointment and did not deem the corporate organisational decision to be a good cause within the meaning of Sec. 4 f BDSG. In contrast, the employer’s side was of the opinion that the decision to outsource the group-wide data protection was protected by its corporate freedom of decision and thus constituted a sufficient cause.

The BAG agreed with the plaintiff and ruled that the revocation was invalid. According to the available press release, the BAG ruled that the employer is free in its initial choice of data protection officer. However, once it has decided in favour of an internal data protection officer it may not detach itself from such decision through a subsequent organisational decision to outsource the data protection. The organisational decision itself did not constitute a good cause which would make it unreasonable for the employer to continue the legal relationship.

The BAG has set a further limit to the organisational sovereignty of the employer. In practice this means that the undertaking must apply considerable farsightedness when making its initial decision to appoint an internal data protection officer and must carefully weigh this against the appointment of an external data protection officer. If such data protection officer acts for the undertaking within the scope of a contract for services, Sec. 626 BGB does not apply and the employer retains greater, albeit possibly more costly, leeway in its formal arrangements.

Kathrin Vossen

1.3 Qualifying date clause is not validly introduced as an element of standard company practice through the actual exclusion of employees in a terminated employment relationship

If it is standard company practice for an employer to grant a special payment without having made it clear to the employees that this benefit will only be granted to employees in an non-terminated employment relationship pursuant to the model of a regulation of a qualifying date, then the mere fact that employees in terminated employment relationships are actually always excluded from the benefit does not lead to the conclusion of the creation of groups of company employees which distinguish between beneficiaries and employees excluded from the benefit. Rather, even in case of the establishment of a standard company practice, the introduction of a qualifying date clause requires – as in the case of an express promise of a benefit – a corresponding limitation of the declared intent to undertake such obligation.

This was the decision reached by the Regional Labour Court (Landesarbeitsgericht, “LAG“) Hamm in its judgement of 11 November 2010 (docket no. 8 Sa 643/10). In the case at issue, the employer had oriented itself in the past on the collectively bargained rules of the metal industry with respect to its payment of a Christmas bonus. In deviation from the collective agreement, however, employees with terminated employment relationships had always been excluded from the bonus. Accordingly, it also refused to pay the desired bonus to the plaintiff, whose employment relationship had already been terminated at the time of disbursement.

In the opinion of the LAG Hamm, the plaintiff was entitled to demand the payment of the Christmas bonus despite his already terminated employment relationship because the qualifying date clause asserted by the defendant had not become an element of the standard company practice. From the viewpoint of the employees receiving the benefit, no limitation of the payment obligation to employees in non-terminated employment relationships was evident solely on the basis of actual practice of excluding terminated employees.

In order to avoid the establishment of a standard company practice, employers should always ensure that the voluntary nature of the benefit is always clearly indicated both in the employment contract as well as in the event of collectively granted voluntary payments. It is therefore advisable to include either an explicit reservation of the voluntary nature of the benefit or a double written form requirement clause in standard employment contracts. Please note, however, that double written form requirement clauses as have customarily been used in employment contracts to date were deemed invalid by the BAG in its decision of 20 May 2008 (docket no 9 AZR 382/07) and therefore require revision. Thus, when drafting a double written form clause in future one must remember that amendments to a contract by way of individual contractual agreements within the meaning of Sec. 305 b BGB are still valid without the written form. In order to be on the safe side, all special payments should be granted subject to the proviso of the voluntary nature of the benefit. Once a standard company practice has been established, the employer can only detach itself again from this practice by concluding an amending agreement or – hardly practicable – through a dismissal pending a change of contract (Änderungskündigung).

Isabel Kreienbrock

1.4 Dismissal on grounds of suspicion – required prior consultation of employee

Pursuant to established case law, an employer can terminate an employment relationship – where applicable without notice – not only on grounds of a proven breach of contract but also already on grounds of a severe suspicion of a punishable act or other form of misconduct. However, a prerequisite of such dismissal on grounds of suspicion is, inter alia, that the employee has been given the opportunity to state his case prior to the declaration of the termination. Only then is the employer deemed to have taken all reasonable measures to clarify the situation. A dismissal on grounds of suspicion declared without a due and proper consultation with the employee is invalid for this reason alone.

In its decision dated 16 December 2010, which has now been published (docket no.: 2 Sa 2022/10), the Regional Labour Court of Berlin-Brandenburg has further specified the requirements of a due and proper consultation. In the case of an employee who was suspected of sexual harassment, the employer visited the employee at his private flat under the pretext of wanting to talk to him about additional services. There, the employer confronted the employee with the serious allegations, despite the fact that family members of the employee were present. The LAG Berlin-Brandenburg deemed this consultation to be inadequate and ruled that the declared dismissal on grounds of suspicion was invalid for this reason. The employer had deliberately deceived the employee about the reason for and content of the imminent meeting. Moreover, the employer had given him no prior opportunity whatsoever to prepare himself for the actual content of the meeting – the allegations of a severe breach of contract – and if necessary to even call in a lawyer. The further circumstances of the consultation in the private rooms of the employee and in the presence of family members was also inappropriate and meant that the “confession” given by the employee could not be used.

The decision of the LAG Berlin-Brandenburg once again makes it clear that employers should not surprise employees with the consultation in cases of an intended dismissal on grounds of suspicion. Although it fundamentally will not be possible to demand that prior notice of the nature and subject of the imminent consultation be provided to the employee prior to every consultation, in view of the clear case law insofar, not only of the Regional Labour Court of Berlin-Brandenburg, we must urgently advise against calling the employee to a consultation on grounds of false information and especially against seeking the employee out in his home environment.

The specific scope of the required prior information and preparation time ultimately depends on both the relevant circumstances in the individual case and on whether the employee should always be given the opportunity to call in a lawyer. The latter was suggested by the Federal Labour Court in a decision in 2008. Thus, if the employer does not wish to risk the invalidity of the dismissal on grounds of suspicion due to an inadequate consultation, it would be well advised to announce the personal meeting to the employee and to at least indicate the existence of specific allegations. The meeting should be held at the premises of the employer or on “neutral” territory (seminar centre, hotel, or the like).

Kathrin Vossen

2. Current legislative projects

2.1 Amendment of the German Act on European Works Councils

The Federal Government has submitted a bill on the amendment of the German Act on European Works Councils (Europäisches Betriebsrätegesetz, “EBRG”). The draft is based on the new Directive 2009/38/EC and, according to the explanatory memorandum, serves to strengthen the employee’s right of information and consultation, to establish unions as authorised experts of the employee representation, as well as to regulate the necessary training measures of members of the special negotiation bodies and of the European Works Council (EWC).

The German Act on European Works Councils still distinguishes between two different types of EWC – EWCs established by force of agreement and EWCs established by force of law. Certain obligations which have thus far applied only in connection with EWCs established by force of law will now also apply to EWCs created by agreement. The amendments will lead to increased information and cost obligations on the part of the employer in enterprises in which an EWC has been established by force of agreement.

In future, EWCs established by force of agreement will also already have jurisdiction in cases concerning at least two businesses or two enterprises in various member states. With this amendment, the previous jurisdiction of EWCs established by force of law now also applies to EWCs established by agreement. Moreover, more detailed requirements for the information and consultation of employees will be set for both forms of EWC. Pursuant hereto, the notification and consultation of employees must already take place in a form that is suited to its purpose in terms of timing, nature and content, and must enable the employee representatives to make a detailed assessment of the possible consequences, where necessary to prepare the consultation with the employer and to submit comments on the proposed measures underlying the consultation within a reasonable period. The employer will henceforth be obliged to respond to these comments and simultaneously state its grounds.
Also new is a regulation of the handling of substantial structural amendments. It is now proposed that negotiations be commenced if the structure of the undertaking or the corporate group substantially changes and if no provisions for such event are contained in the existing agreements or if these provisions are contradictory. If the negotiations on a corresponding amendment of the agreement should fail, the amended version of the German Act on European Works Councils provides for the establishment of a European works council by force of law – in these cases the former privileged EWC structures will be lost. In particular, undertakings which have EWCs on grounds of a voluntary agreement (so-called Article 6-Agreements) would be well advised to check these agreements and to confirm their continued existence in cooperation with the EWC prior to the entry into force of the amending law. The bill additionally provides that the special negotiation body (in the foundation phase of the EWC) and the EWC can call in union agents as experts. However, the employer’s statutory cost obligation is limited to just one expert, albeit that this can be extended by agreement.

The underlying directive provides for a transformation into national law by 5 June 2011. The responsible Federal Ministry for Labour and Social Affairs (Bundesministerium für Arbeit und Soziales, “BMAS”) thus already expects the new German Act on European Works Councils to enter into force in the summer of 2011.

Dr. Alexander Willemsen

2.2 Bill amending the law on temporary workers

On 24 February 2011 the Federal Government presented a bill amending the law on temporary workers (Gesetzesentwurf zur Änderung der Arbeitnehmerüberlassung, “AÜG-E”). The main focus of the bill is the transformation of the EU Temporary Agency Work Directive (2008/104 EC) into national law as well as the endeavours of the Federal Government to eliminate abusive practices in the temporary work sector. The bill (hereinafter “AÜG-E”) will, and this can be established in advance, lead to the need for manpower suppliers and hirers to amend their contracts with the planned entry into force of the law as per 1 December 2011. Below, the essential points of the bill are explained:

• One focus of the bill is the handling of the supply of manpower within a group of companies. To begin with, Sec. 1 para. 1 sentence 1 AÜG-E clarifies that intra-group personnel service companies which provide temporary workers to other group enterprises at cost price will require a licence in future. Accordingly, Sec. 1 para. 3 no. 2 AÜG-E contains a privilege for the intra-group supply of manpower if employees are loaned to another group company and these employees have not been hired and employed for purposes of the temporary work; in this case the supply of temporary workers does not require a licence. As the EU Temporary Agency Work Directive does not provide for a privilege of the intra-group supply of temporary workers, we must wait and see whether this regulation will retain its legal validity. It is more likely that in future every group company which supplies employees to other companies within the group will require a licence.
  
• A focus of the EU Temporary Agency Work Directive is the principle of equal treatment. The German legislator has already previously implemented this principle in the German Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, “AÜG”) and incorporated the escape clauses for collective bargaining agreements or references to collective bargaining agreements, Sec. 9 no. 2 AÜG. Recently, these collective escape clauses have been repeatedly attacked, especially in view of the (until recently unanswered) question of the applicability of the collective agreements of the CGZO and, in particular, considered by the unions to be a contravention of the EU Temporary Agency Work Directive.
• In future company practice one will have to accept the fact that temporary agency workers have an independent claim to information on available employment positions within the enterprise (Sec 13 a AÜG-E) as well as a claim to access to the common facilities and common services existing at the hirer (Sec. 13 b AÜG-E). The latter includes inter alia access to parking spaces, works apartments, works transport services and employee discounts facilities.
• A substantial focus of this bill is the so-called “revolving door clause”. This clause serves to prevent temporary agency workers who previously worked as employees at the employer from being employed by the employer below the former remuneration level. In terms of legislation, the bill provides that a deviating collectively bargained regulation does not apply to those employees who left an employment relationship with the employer or another employer within the hirer’s group in the last six months prior to the provision of their temporary agency work services to the hirer (Sec. 3 para. 1 no. 3 sentence 4 AÜG-E). A critical issue at present is that it is not clear from the bill whether this provision will enter into force on the day after the promulgation of the law or, as envisaged by the provision of Sec. 19 AÜG-E, to all temporary agency relationships concluded after 16 December 2010. Another questionable issue is whether this provision will achieve the purpose pursued by the legislator in its current version, since in this case temporary agency workers will quite simply not be supplied to the former employer for a period of six months.

In conclusion, may we add that the bill will certainly still be influenced at one place or another during the course of the ongoing legislative procedure by the current political discussions on temporary agency work. A significant moment in this respect will be the unrestricted free movement of workers for most of the Eastern European EU member states – with the exception of Rumania and Bulgaria – as per 1 May 2011. Against this background, during the second half of the year, after initial experiences have been made and can be evaluated, the bill will doubtlessly be discussed again in depth. The unions’ demand in this connection already clearly points towards a uniform minimum wage for the temporary agency branch which would then have to be regulated in the German Act on the Posting of Workers (Arbeitnehmerentsendegesetz), and would therewith be applicable to all temporary agency workers employed in Germany.

Jörn Kuhn