Employment Law Newsletter I/2018

  

I/2018

 

With the SPD’s successful member voting on 4 March 2018, it is now clear that the Coalition Agreement of 7 February 2018 will form the basis of the governmental action of the Grand Coalition in the current legislative period. In order to provide you with a better overview, this first Newsletter of the year 2018 summarises again the content of the Coalition Agreement that is of employment and social law relevance. And as usual, you will find current decisions of the European Court of Justice [ECJ] and German Federal Employment Court [Bundesarbeitsgericht, BAG] that are of relevance to business practice.

1. Current case law

1.1 Standby services that have to be rendered at home can count as “working time”

1.2 Limitation of the extension of an employment relationship beyond the regular re-tirement age limit

1.3 Fulfilment of the compulsory quota protects against discrimination actions brought by severely disabled candidates

1.4 No age discrimination through age difference clauses in company survivor’s pensions

1.5 No reinstatement claim at small businesses

1.6 Replacement of a total commitment with a central shop agreement

1.7 Works council elections: the employer is not prohibited from expressing criticism about the previous works council or its members

2. Legal developments

Summary of the significant employment regulations of the Coalition Agreement of 7 February 2018

1. Current case law:

1.1 Standby services that have to be rendered at home can count as “working time”

By judgement dated 21 February 2018 (docket No. C-518/15), the ECJ established that callout/standby times can be viewed as working time in specific situations.

A fireman living in Belgium had rendered guard duties and standby services. The standby services envisaged, in particular, that he had to be at the place of work within 8 minutes and that his standby services were to be rendered at the place of residence. On this basis the employee sued for compensation for what, in his opinion, was working time he had rendered. The employment court in Brussels put the case to the ECJ with the question of whether this was deemed working time.

In its decision, the ECJ pointed out that the definition of “working time” in Art 2 of Council Directive 2003/88/EC (so-called Working Time Directive) cannot be deviated from and that it is therefore authoritative. On the basis of the definition contained in the Directive, the ECJ ruled that standby service represents “working time” in such strict circumstances. Especially on grounds of the fact that the employee is unable to freely determine his own whereabouts but is obliged to render the standby services at home and be available at the workplace within eight minutes, the employee is restricted in the structuring of his own interests to a particularly high degree and “working time” therefore has to be assumed.

The Working Time Directive 2003/88/EC was essentially implemented into German law through the German Working Time Act [Arbeitszeitgesetz, ArbZG]. In contrast to Belgian law, upon which the question referred to the court was based, the German Working Time Act contains a clear definition of “working time” which does not deviate from the requirements of Art.2 of Council Directive 2003/88/EC. However, the effect of the ECJ judgement upon the German legal system insofar is such that, when the standby services are rendered at a place determined by the employer and with the possibility of the employee being deployed within the shortest time, there can be no deviating assessment to that of the ECJ. In these circumstances, the standby time is deemed working time.

In practice, this means above all that employers should check their callout regulations. If these regulations contains strict requirements as regards the whereabouts and presence of the employee at a specific place (of performance) within the shortest of times after the call, then as a consequence of the ECJ judgement the complete callout duty must counted as “working time” within the meaning of the German Working Time Act.

Jörn Kuhn

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1.2 Limitation of the extension of an employment relationship beyond the regular retirement age limit

 

Upon the reference of the Regional Employment Court [Landesarbeitsgericht, LAG] of Bremen for a preliminary ruling, the ECJ ruled on 28 February 2018 (docket No.: C‑46/17) that Sec. 41 sentence 3 German Social Code Book VI [Sozialgesetzbuch VI, SGB VI] does not violate the prohibition of age discrimination (Council Directive 2000/78/EC) or the framework agreement on fixed-term employment agreements (Annex to Council Directive 1999/70/EC).

The claimant was employed with the City of Bremen as a teacher and applied before reaching the regular retirement age for further employment beyond this limit. The City of Bremen initially declared its agreement to a fixed-term extension of the employment relationship. When the claimant demanded an extension of this fixed-term period, the City refused and the claimant took legal action, arguing that the limitation of the extension of the employment relationship violated Union law. The LAG Bremen put the question to the ECJ for a preliminary ruling.

Sec. 41 sentence 3 SGB VI enables the parties to an employment agreement, without further prerequisites and without time limitation, to postpone the time of the end of the employment relationship (if need be also several times). The Court of Justice does not understand this regulation as a discrimination of those people who have not yet reached retirement age, since the provision regulates an exception to the principle of the automatic end of the employment agreement upon reaching the regular retirement age and both contractual parties must consent thereto. An employee who reaches the regular age to draw the state retirement pension also differs from other employees in that he is socially secured and generally does not have the alternative of an unlimited contract. Moreover, it is ensured that he is further employed at the original conditions and retains his claim to a retirement pension. Ultimately, according to the Court of Justice, the limited extension of the employment relationship has to be seen just as a contractual postponement of the originally agreed retirement age.

The provision of Sec. 41 sentence 3 SGB VI will doubtlessly gain in practical relevance, as demographic changes and lower pension rates will increasingly lead to employees working beyond the regular retirement age. It remains to be seen whether the reform of fixed-term employment law envisaged in the Coalition Agreement will also intensify this situation in this connection.

Dr. Alexander Willemsen

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1.3 Fulfilment of the compulsory quota protects against discrimination actions brought by severely disabled candidates

 

The BAG (judgement of 28 September 2017, docket No. 8 AZR 492/16) had to decide on whether a severely disabled claimant was entitled to compensation pursuant to Sec. 15 para. 2 German General Non-Discrimination Act [Allgemeines Gleichbehandlungsgesetz, AGG] on grounds a discrimination due to disability. The defendant, which did not fulfil the compulsory quota for employing severely disabled employees (Sec. 154 SGB IX new version) decided in favour of another candidate with the agreement of its representative of the severely disabled employees after conducting hiring proceedings. The claimant felt discriminated against, since was had not been informed without undue delay pursuant to Sec. 164 para. 1 sentence 9 SGB IX new version of the grounds for his rejection

The claim was unsuccessful in the last instance. The BAG established the non-fulfilment of the requirements for applying Sec. 164 para. 1 sentence 9 SGB IX new version, pursuant to which, in cases where a severely disabled candidate is turned down, he must be notified without undue delay about the reasons for his rejection under specific circumstances. Such a duty to give reasons for the rejection only existed if both relevant prerequisites of Sec. 164 para. 1 sentence 7 SGB IX new version were simultaneously fulfilled. The fulfilment of just one requirement did not suffice. If the representative of the severely disabled employees consents to the hiring of another candidate or if the statutory employment quota for severely disabled persons is met, no obligation to give reasons for the rejection arises. In this case, lacking any violation of the procedural provisions of Sec. 164 para. 1 SGB IX, no indication of a discrimination within the meaning of Sec. 22 AGG could be affirmed either.

It has not yet been decided at supreme court level whether, in business practice, the sensitive issue of the obligation to give reasons can already be eliminated by fulfilling the employment quota. Now, we have clarity in this respect. The fulfilment of the compulsory quota of Sec. 154 SGB IX new version (employment of severely disabled persons in at least 5% of the jobs) is controllable by the employer. In this case, the reaction of the representative of the severely disabled employees, which regularly cannot be foreseen by the employer, is therefore no longer decisive. The procedural provisions of Sec. 164 SGB para. 1 IX new version on the due and proper treatment of job applications of severely disabled persons are per se already complex and sufficiently prone to error in their observance. That a violation of these provisions is always deemed to be an indication of discrimination on grounds of disability intensifies the situation for employers. For this reason the BAG’s decision can most certainly be welcomed.

Kathrin Vossen

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1.4 No age discrimination through age difference clauses in company survivor’s pensions

 

An age difference clause in a company pension code which envisages a survivor’s pension only for a spouse who is no more than 15 years younger than the pension beneficiary does not constitute a case of age discrimination in violation of the German General Non-Discrimination Act [Allgemeine Gleichbehandlungsgesetz, AGG].

The BAG’s decision (judgment of 20 February 2018, docket No. 3 AZR 43/17) was based on a legal action brought by a widow against Pensions-Sicherungs-Verein VVaG for claims to a widow’s pension. The claimant’s husband, who died in 2011, had been promised a survivor’s pension by his employer. Since the company survivor’s pension envisaged that spouses of the pension beneficiary may not be more than 15 years younger than the pension beneficiary and the claimant was 18 years younger than her deceased husband, Pensions-Sicherungs-Verein rejected any and all claims of the claimant to a widow’s pension.

The BAG deemed the age difference clause to be valid. A direct age discrimination arising from the age difference clause is justified. The BAG supported its reasoning with the employer’s legitimate interest in limiting the financial risk associated with the promise of a company survivor’s pension. The disputed age difference clause is, in the opinion of the BAG, also necessary and reasonable. With an age difference of over 15 years, the shared part of the spouses’ lives by nature is such that the survivor will spend a part of his or her life without the pension beneficiary. Furthermore, only spouses whose age difference vis-à-vis their spouses considerably exceeds the usual difference are excluded from a company survivor’s pension by way of age difference clauses.

Against the background of the BAG’s case law (judgement dated 4 September 2015 – 3 AZR 137/13), which ultimately left open the reconciliation of age difference clauses with the AGG, the BAG’s current decision can be welcomed. Company pension codes can now be validly structured with age difference clauses under aspects of the AGG. Insofar, the current BAG decision provides legal certainty. What remains unclear, however, is whether age difference clauses still retain their legal validity pursuant to the AGG once a specific age difference has been exceeded.

Cornelia-Cristina Scupra

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1.5 No reinstatement claim at small businesses

 
According to established case law of the BAG, an employee whose employment has been terminated for operational reasons can have a claim to reinstatement if, unforeseeably, before the expiry of the termination notice period, either his job is not lost after all or a new possibility of further employment arises. By judgement dated 19 October 2017 (docket No.: 8 AZR 845/15) the BAG ruled that this reinstatement claim can only be asserted by employees who enjoy protection pursuant to the German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG].

The claimant and all employees of a pharmacy were dismissed by ordinary termination as per 30 June 2014 as their employer intended to give up the pharmacy. The claimant did not enjoy protection against dismissal pursuant to the KSchG because the number of employees at the pharmacy did not exceed the required threshold for this. After the planned closure date, the employer initially continued running the pharmacy with three employees, to which the claimant did not belong, and subsequently sold it to the defendant.

The claimant demanded reinstatement from the successor and was defeated with this claim before the BAG. In the senate’s opinion, a reinstatement claim is fundamentally excluded at small businesses. The claim represents compensation for the fact that a termination for operational reasons is not only first possible with the actual loss of the job, but that it can also be based on the future development of the business’s situation, if it can be assumed that the possibility of employment will no longer exist by the expiry of the ordinary termination notice period. Should the relevant circumstances change after the declaration of the termination, this can justify further employment. In cases in which the termination requires no reasons, specifically in the absence of any protection against dismissal, later developments are of no consequence.

The BAG left open whether a reinstatement claim comes into consideration on grounds of dismissals that are unethical or contrary to good faith because the business was not closed as original stated by the employer. For this, the claimant should have sued the original employer.

The BAG’s decision is consistent and creates legal certainty. The dispute over the fundamental existence of a claim to further employment at a small business has now been clarified at supreme court level. However, even at small businesses it cannot be ruled out that, taking into consideration the stipulations of Union law, a reinstatement or further employment claim arises in an exceptional case if the business is transferred to a new employer by way of a transfer of business. The further case law on this issue thus remains to be seen.

Madita Reimsbach

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1.6 Replacement of a total commitment with a central shop agreement

 

If an employer announces that it intends to grant each employee an additional payment in future (so-called total commitment), it is fundamentally bound by this payment promise. A unilateral change of such a promise generally only comes into consideration if it is made with the reservation of its revocation. If this is not the case, the employer can only release itself from the commitment with the employee’s agreement, since a termination pending a change of contract only has prospects of success in the rarest of cases. For this reason it is advisable to structure total commitments in such a way that they open to replacement by shop agreements.

That the replacement of a total commitment by shop agreement is not subject to any strict requirements is illustrated by the BAG’s decision of 24 October 2017 (docket No. 1 AZR 846/15). In the case up for decision the employer had announced by circular, with the agreement of the central works council, that it would be disbursing an anniversary bonus to each employee who had worked a certain number of years with the company. The employer subsequently concluded a central shop agreement with the central works council which henceforth contained the regulation on the disbursement of anniversary payments. Years later the central shop agreement was terminated again. An employee subsequently demanded the disbursement of the anniversary bonus. The employer contested such a claim. It asserted that the original total commitment had been validly replaced through the central shop agreement. This had been terminated before the employee had reached the required number of years of service.

The BAG shared the employer’s opinion. It made it clear that the replacement of a total commitment by shop agreement is generally possible. For this it suffices that it is structured impliedly subject to modification or cancellation by shop agreement. Anything to the contrary only applies if the total commitment expressly excludes the possibility of replacement. The BAG reasoned in support of this principle that total commitments, with their collective reference, are always aimed at standardising matters regulated at the business. Employees cannot rely on such regulations never being replaceable again by shop agreements. This is especially the case if the total commitment is made with the works council’s agreement. With this, the total commitment was open through shop agreement to a change that was less favourable for the employees.

Anja Dombrowsky

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1.7 Works council elections: the employer is not prohibited from expressing criticism about the previous works council or its members

 

In good time before this year’s regular works council elections, the BAG has published a very interesting decision on the required neutrality at works council elections. Pursuant to Sec. 20 para. 2 German Shop Constitution Act [Betriebsvereinbarungsgesetz, BetrVG], no-one may influence the election of the works council by causing or threatening disadvantages or by granting or promising advantages. However, this does not lead to any obligation on the part of the employer to refrain from expressing criticism about the existing works council or its individual members with regard to a future election (judgement dated 25 October 2017, docket No. 7 ABR 10/16).

In the factual situation up for decision by the BAG, the employer was accused of having influenced the election in a prohibited way in that the personnel manager had stated at a meeting of the non-tariff employees that the works council chairman obstructed the work of the enterprise. He had also suggested that a “sensible list” be drawn up for the upcoming works council election and told the managers to seek appropriate employees for it. He subsequently presented the d’Hondt highest averages method to the employees and stated that anyone who gave the previous works council chairman his vote again would be committing “treason”.

Whilst the prior instances perceived this as a violation by the employer of the prohibition of influencing the election, the BAG interpreted the norm of Sec. 20 para. 2 BetrVG strictly according to the wording of the Act. No threat of disadvantages could be perceived in the described conduct of the personnel manager, and the employees were therefore still able to freely decide in the election without this having any consequences whatsoever. Works council elections would face an excessively high risk of contestation if employers were obliged to refrain from expressing any criticism whatsoever about the existing works council.

For employers this means that, in the event of works council elections, they are fundamentally also able to express criticism about the existing works council and are allowed to directly address candidates they deem suitable. To be borne in mind in this connection, however, is that these actions may neither contain the threat of disadvantages nor the granting or promise of advantages.

Isabel Hexel

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2.Legal developements

Summary of the significant employment regulations of the Coalition Agreement of 7 February 2018

 

  • Enterprises bound by collective agreements will be given room to experiment with self-determined working time of employees and operational flexibility. On grounds of these collective agreements, it should be possible through shop agreements to regulate more flexibly the maximum weekly working times in particular.
  • In businesses with 5 to 100 employees who are eligible to vote, the simplified election procedure will become obligatory. Businesses with eligible employees numbering between 101 and 200 will have the choice between the simplified and the general election procedure.
  • In collaboration with the social partners and the federal states, a national further education strategy is to be developed. Additionally, the works council’s general right of initiation in the area of further education will be strengthened further. The works council must consult with employers on professional education measures. If no agreement can be reached, then each side is free to call upon a moderator in order to achieve agreement. Agreement will not be compulsory, however.
  • The reintegration of long-term unemployed workers will be facilitated through contributions towards wage costs.
  • Fixed-term contracts without material reason will now only to be possible for a term of 18 months. Additionally, only one extension is going to be permissible. Furthermore, in enterprises with more
    than 75 employees, only 2.5% of the employment relationships may now be for fixed terms without material reason.
  • The fixed-term contract for a material reason is likewise being restricted. For this, a maximum period of five years will now be permissible. Several further fixed terms are still permissible during this period. There will only be an exceptional provision on grounds of the uniqueness of the employment relationship (such as artists, football players).
  • Temporary employment assignments will be counted towards the 5-year maximum term of the fixed terms. A new fixed-term employment relationship with the same employer is only possible again after a grace period of three years.
  • The law will stipulate that the share of extra work that can be called up and remunerated may fall short of the agreed minimum working time by a maximum of 20 percent and may exceed it by a maximum of 25 percent.
  • In enterprises with more than 45 employees, workers will in future be entitled for a time margin of between one and five years to claim the fixed-term reduction of their working time with a subsequent return to full-time employment. For enterprises employing 6 to 200 employees an acceptable limit is being introduced, pursuant to which the claim only has to be granted once for every commenced 15 employees. If this limit is exceeded the employer can turn down an application.
  • The introduction of the retirement pension obligation will be structured in a manner that is friendly to business founders. It shall apply to all self-employed persons who do not already have
    alternative compulsory insurance, e.g. in occupational pension schemes. Self-employed persons have the choice between the statutory and another appropriate type of insolvency and seizure-proof pension, which must lie above the basic insurance level.
  • As of 1 January 2019 contributions towards the health insurance companies will again be paid equally by employers and employees. The previous additional contribution will be financed equally by
    both parties.


Dr. Alexander Willemsen

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Dr. Gilbert Wurth, Kathrin Vossen, Jörn Kuhn, Isabel Hexel, Dr. Alexander Willemsen, Anja Dombrowsky, Jamilia Becker, Madita Reimsbach, Cornelia-Cristina Scupra

Dr. Gilbert Wurth

Partner

Telephone: +49 221 2091 351 / 381
Telefax: +49 221 2091 333

gilbert.wurth@oppenhoff.eu

Kathrin Vossen

Partner

Telephone: +49 221 2091 351
Telefax: +49 221 2091 333

kathrin.vossen@oppenhoff.eu

Jörn Kuhn

Partner

Telephone: +49 69 707968 140
Telefax: +49 69 707968 111

joern.kuhn@oppenhoff.eu

Isabel Hexel

Partner

Telephone: +49 221 2091 348
Telefax: +49 221 2091 333

isabel.hexel@oppenhoff.eu

Southeast Asia

Recent matters we advised on include:

Arbitration proceedings between a Belgian and a Singaporean company concerning the delivery of parts for a big industrial complex to be erected in China.

Dr. Alexander Willemsen

Partner

Telephone: +49 221 2091 551
Telefax: +49 221 2091 333

alexander.willemsen@oppenhoff.eu

Anja Dombrowsky

Partner

Telephone: +49 (0)69 707968 184
Telefax: +49 (0)69 707968 111

anja.dombrowsky@oppenhoff.eu

Jamilia Becker

Associate

Telephone: +49 221 2091 346
Telefax: +49 221 2091 333

jamilia.becker@oppenhoff.eu