Employment Law Newsletter II/2018
As already presented in our last Newsletter, the Government has numerous plans for developing employment law. The Grand Coalition’s intention to provide employees with a legal claim to return from part-time to full-time work, which has already been a topic of extensive discussion in the media, is now taking tangible form with the draft bill of the Federal Ministry of Labour and Social Affairs [Bundesministerium für Arbeit und Soziales, BMAS] to amend the German Part-Time and Fixed-Term Employment Act [Teilzeitbefristungsgesetz, TzBfG] dated 17 April 2018. The essential contents of this draft bill can be found in our “Legal developments” section. As usual, the “Current case law” section contains important court decisions which affect the daily personnel work. Of particular relevance to business practice is the decision of the German Federal Constitution Court [Bundesverfassungsgericht, BVerG] regarding prior employment in case of contracts concluded for a limited term without material reason.
1. Current case law
1.1 Clarity by the BVerfG: “Prior employment” in case of contracts concluded for a fixed term without material reason is not limited to 3 years
1.2 Advocate General of the ECJ: heirs of a deceased employee are entitled to financial compensation for untaken annual holiday
1.3 No co-determination right of the works council in case of a “sanctions list” screening
1.4 Preferential treatment of works council members within the context of cancellation agreements
1.5 Termination of a direct insurance during an ongoing employment relationship
1.6 Works council election: deadline for submitting election proposals
1.7 Employees are not obliged to provide their private mobile phone number
1.8 Invalid termination through the deficient participation of the severely disabled employees’ representative
2. Legal developments
2.1 Statutory claim to part-time work for a fixed term
2.2 Rejection by the employer
Pursuant to Sec. 14 para. 2 TzBfG, the limitation of an employment agreement for up to two years without material reason is permitted if no employment agreement has “already previously” existed with the same employer. For quite some time, the jurisprudence of the employment courts has held diverging opinions on how to interpret this prohibition of prior employment.
Initially, the Federal Employment Court [Bundesarbeitsgericht, BAG] held that Sec. 14 para. 2 TzBfG encompassed a life-long prohibition of prior employment, which meant that the possibility of limiting an employment contract without material reason was restricted to the first time the employee was hired. In 2011 the BAG changed its case law and now proceeds on the basis that the prohibition of prior employment does not oppose a limitation of a contractual term without material reason if the former employment relationship already lies more than three years in the past (judgement dated 6 April 2011, docket No. 7 AZR 716/09). This change of case law was met with severe criticism in the legal literature on employment law and in the lower-court case law, as the three-year limit is irreconcilable with the wording of the law.
With its decision dated 6 June 2018 (docket No. 1 BvL 7/14, 1 BvR 1375/14), the BVerfG has now brought legal clarity to this disputed issue. The background of this decision was an referral order of the Employment Court [Arbeitsgericht, ArbG] of Braunschweig and the constitutional complaint of an employee. The BVerfG made it clear that the prohibition of prior employment is constitutional even if it restricts the limitation of a contractual term without material reason to the first-time hiring and therewith prohibits any and all new employment with the same employer concluded for a limited period without material reason. A general prohibition of contracts concluded for a limited term without material reason is only unacceptable if and insofar as there is no risk of a chain of fixed-terms contracts exploiting employees’ structural subordination. Such exceptional case exists if the prior employment lies very far in the past and was of an entirely different type or only of short duration. Deemed unconstitutional, in contrast, is an interpretation to the effect that a repeated limitation of the contractual term without material ground is always permitted if a period of three years lies between the employment relationships.
This welcome clarification for business practice will doubtlessly trigger an increased number of legal actions to have the fixed contractual terms lifted. For this reason, when hiring employees, employers are advised to take a closer look at the completeness of CVs and should specifically ask about any prior employment. The exceptions named by the BVerfG of the unreasonableness of the prohibition of previous employment should, in contrast, not be striven for a limitation of an employment contract without material reason until they have been further concretised by the case law.
The Federal Employment Court (BAG) has once again submitted to the European Court of Justice by court order dated 18 October 2016 (docket No. 9 AZR 196/18) practically relevant questions concerning the remuneration of holiday entitlement in the event of the employee’s death during an ongoing employment relationship. The submitted questions are directed at the continuation of the ECJ’s case law in the matter “Bollacke” (judgement dated 12 June 2014, docket No. C-118/13). In this judgement the ECJ clarified that the employee’s holiday claim does not expire without replacement in the event of his death and a claim to holiday compensation still exists. In the BAG’s opinion, the inheritance law effects of this decision remained unclear. Since 29 May 2018, the conclusions drawn by the Advocate General are available in respect of two cases (docket Nos. C-569/16 and C-570/16).
The cases in question concerned legal actions brought by two widows who sought compensation payments for paid annual holiday which their spouses had not taken. According to its established jurisprudence, the BAG held that the deceased person’s holiday claim could not be converted into a remuneration claim pursuant to Sec. 7 para. 4 German Federal Holiday Entitlement Act [Bundesurlaubsgesetz, BUrlG], because it had already lapsed with the employee’s death. Accordingly, a claim to remuneration in lieu of holiday could not become part of the deceased’s estate pursuant to Sec. 1922 para. 1 German Civil Code [Bürgerliches Gesetzbuch, BGB]. In contrast hereto, the Advocate General states that Art. 7 of the Directive 2003/88 (“Work Time Directive”) demands payment of compensation to the heirs of the deceased employee, and namely independently of contradictory national inheritance law. This outcome is the necessary conclusion of the decision in the “Bollacke” case, because the practical validity of the claim to remuneration in lieu of holiday, which continues to exist after the employee’s death, would otherwise become redundant.
In cases where national inheritance law excludes a financial compensation claim of the heirs - as is currently the case in Germany – such claim can be derived directly from Union law. In this case, public sector employees can directly plead Directive 2003/88, whilst the claim for employees working in the private sector can be derived directly from Art. 31 para. 2 of the Charter of Fundamental Rights.
Especially in questions concerning holiday entitlement law, the ECJ has concurred with the proposed decision of the Advocate General in the majority of cases. For this reason we can assume that its current statements will also become binding. In this case, the decisive factor for enterprises will be the question of the retroactive effect. In our opinion, the applicable basis will be the date of the referral to the ECJ, i.e. 18 October 2016.
By decision dated 19 December 2017 (docket No. 1 ABR 32/16), the BAG ruled that the automated comparison of employees’ names against names on so-called sanctions lists does not represent a control of performance or conduct within the meaning of the shop constitution and is thus not subject to the works council’s co-determination.
The employees working at the sued group company were subjected to a so-called automatic comparison of their first names and surnames against a so-called sanctions list with the aid of special software. According to a Regulation of the UN Security Council, this list contains the names of natural persons who are assumed to have a connection with terrorist activities. If a name corresponds to one on the list, the payment of remuneration must be discontinued and the competent authority notified. In the opinion of the group works council and a works council of the sued company, the automated comparison of data could be classed as a technically assisted control of conduct pursuant to Sec. 87 para. 1 No. 6 German Shop Constitution Act [Betriebsvereinbarungsgesetz, BetrVG] and was thus subject to co-determination.
Although the BAG qualified the software as a technical installation, this was exclusively aimed at matching names. Nothing as to the employee’s actual conduct could be derived from this. All that arose from a match of an employee with one of the names on the sanctions list was the prohibition of payments to said person. Consequently, according to the court this was not a technical control of conduct, even if further investigations permitted conclusions on – possibly terroristic – conduct of the employee.
Hence, in exceptional cases sanctions list screening is one of the few exceptions where an automated data processing at the business does not trigger a co-determination right. The employer is thus not obliged to conduct what could possibly be drawn-out negotiations on a corresponding shop agreement first, which could jeopardise the observance of statutory obligations. In the opinion of the Federal Tax Court [Bundesfinanzhof, BFH] (judgement dated 19 June 2012, docket No. VII R 43/11), sanctions list screenings are necessary for purposes of the employment relationship and thus also permissible pursuant to data protection law; there, Sec. 26 para. 1 sentence 1 German Federal Data Protection Act [Bundesdatenschutzgesetz, BDSG]. Some nevertheless deem the conclusion of a shop agreement to be the sensible option, since this could increase the legal certainty of terror-list screenings as an independent permission criterion within the meaning of the BDSG.
Dr. Alexander Willemsen
Works council members may not be put at a disadvantage or advantage on grounds of their office. This is regulated in Sec. 78 sentence 2 BetrVG. However, can severance payments within the context of a cancellation agreement represent an advantage? Here, freedom of contract fundamentally applies.
In all events, the BAG also decided to this effect in respect of a cancellation agreement which was concluded in order to avoid a dismissal on grounds of conduct, (judgement dated 20 March 2018, docket No. 7 AZR 590/16). Severe accusations of sexual harassment were brought against the suing employee, who had worked at the business for 31 years and, moreover, was the chairman of the works council at his employer. Since the works council had refused its required consent to his extraordinary termination, the employer concluded a cancellation agreement with the works council chairman. This envisaged a ca. 2 ½ year expiry period with a paid release from duties as well as a severance in the net amount of € 120,000.
The BAG saw no unreasonable advantage herein. The financially favourable negotiating position of the works council member was based solely on the statutory exclusion of the possibility to ordinarily terminate works council members pursuant to Sec. 5 German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG].
We must agree with the BAG’s decision, for in this case the employer has a legitimate interest in “buying itself out of” the special protection against dismissal and avoiding the risk of having to pay wage costs over a lengthy period of time on grounds of an invalid dismissal. The question of preferential treatment will probably arise with greater frequency in case of severance provisions within the context of social plans. It is conceivable for the social plan itself to envisage an additional severance for works council members. In the case at hand, the ArbG Nuremberg (judgement dated 27 January 1997, docket No. 12 Ca 7897/96) did not see any justification for an agreement between the employer and the works council on such an improved position for the works council. The temporal connection with the compromise of interests was already an indication that the employer wanted to use this very clause to induce the works council to approve the compromise of interests.
No decision has been reached to date on how the situation should be appraised if the employer only concludes a cancellation agreement with a works council member after the conclusion of the social plan and the agreement envisages a severance higher than that stipulated in the social plan. Here as well, what ultimately matters is whether the employer pays the higher severance on grounds of the works council member’s activities or whether it merely wants to buy itself out of the special protection against dismissal enjoyed by the works council.
By judgement dated 26 April 2018 (docket No. 3 AZR 586/16), which is currently only available as a press release, the BAG ruled for the first time that the employee’s need for funds does not establish a claim against the employer to terminate the direct insurance concluded on the employee’s behalf for purposes of the company pension by way of deferred compensation vis-à-vis the insurance company.
In the year 2001 the claimant had concluded with the sued employer an agreement on the deferral of compensation for a company pension. Hereunder, the employer, as the policyholder, was obliged to pay ca. EUR 1000 per year into the direct insurance existing in the claimant’s favour. Since the claimant had encountered financial difficulties, he demanded that the defendant terminate the insurance contract, which had already been suspended since 2009, so that he would be able to receive the surrender value.
In its judgement, the BAG concurred with the previous instances and dismissed the claim. In the opinion of the BAG, the claimant had no protectable interest in the striven termination. The purpose of the deferral of compensation regulated in Sec. 1a German Company Pensions Act [Gesetz zur Verbesserung der betrieblichen Altersvorsorge, BetrAVG] was to at least partially secure the employee’s standard of living during retirement. It would be irreconcilable with this purpose if the employee were able to demand from the employer the termination of the direct insurance simply in order to use the capital he had already saved up for his pension to settle debts.
Since a unilateral right to deviate from the agreed deferral of compensation is not legally provided, the employee’s termination of a direct insurance contract for a company pension requires the consent of the employer. The regional employment courts have to date ruled differently on a claim to the consent to termination. With its judgement, the BAG has created legal certainty insofar as it has clearly denied any obligation on the part of the employer to consent to the termination of the insurance contract in order to settle debts. Despite the BAG’s decision, employers are nevertheless still free to consensually agree to the employee’s wish to terminate the contract. In this case, however, extreme caution is required with a view to any difficulties that might arise through the contract reversal, in particular through the accrual of additional social security payment obligations.
According to the decision of the BAG dated 16 January 2018 (docket No. 7 ABR 11/16), it is permissible for the election committee, also in companies with shift work, to limit the expiry of the deadline for submitting election proposal lists to the last day either at the end of the working hours at the business or at the end of the work hours of the election committee, unless this is before the end of the work hours of the majority of the employees. The matter in dispute during the present legal appeal was the validity of a conducted works council election. In the election notice the employees had been ordered to submit election proposal lists to election committee by 21 February 2014, 14:00 hrs. at the latest. The election was contested on grounds that the deadline for submitting the election proposals should not have ended until 24:00 hrs. on the date of the expiry of the deadline.
The BAG repealed the contested decision and referred it back to the regional labour court [Landesarbeitsgericht, LAG]. In accordance with Sec. 6 para. 1 sentence 2 Electoral Regulations [Wahlordnung, WO], proposal lists must be submitted to the election committee before the expiry of 2 weeks as of the issue of the election notice. The calculation of the deadline is not at the disposition of the election committee. However, the election committee can limit the timely “receipt” of the lists on the day of the expiry of the deadline to the end of the work hours at the business or to the end of the work hours of the election committee, unless this is before the end of the work hours of the majority of the employees. Election committee members exercise an honorary office which they exercise during work hours. For this reason, an obligation to be active in this capacity beyond the end of the business work hours, respectively the work hours of the majority of the workers, does not exist. This also applies at businesses operating in shifts. However, in the case at hand the BAG was unable to conclusively determine whether the election committee could legitimately have “forecast” that the work hours of the majority of the employees would end on 21 February 2014 at 14:00 hrs at the latest. Decisive for this calculation was the work hours of the majority of the employees forecast to be present on the date of the expiry of the deadline at the time of issuing the election notice, whereby those employees on non-working shift, those with their shift end on the next day or employees absent due to holiday, illness, further educational training or a release from duties had to be disregarded from the calculation.
This question has been disputed to date in the case law of the lower courts, which means that the decision creates clarity for election committees and gives pleasingly clear instructions on actions for calculating the work hours of the “majority of the employees” and the relevant examination date for this.
Employees are fundamentally not obliged to give employers their mobile phone numbers. This principle emerges from the decision of the Thuringian Regional Employment Court (judgement dated 16 May 2018, docket No. 6 Sa 442/17; 6 Sa 444/17). Underlying the decision were the legal actions brought by employees of a municipal health authority who wanted to have warning notices removed from their personnel files.
The sued defendant has reorganised the system of its on-call service and, in the course thereof, had demanded that its employees disclose their private landline and mobile phone numbers. This was to ensure that the employer would also be able to reach the employees in an emergency outside of their on-call hours. The employees in question were willing to give their private landlines, but not to disclose their private mobile phone numbers. They subsequently received a warning notice from the employer.
The legal actions brought by the employees to have the warning notice removed from their personnel file were successful. As can be derived from the court press release, the LAG was of the opinion that the employees had rightfully refused to give the employer their private mobile phone numbers. In substantiation hereof, it stated that their constant reachability during their leisure time constituted a considerable encroachment upon the employee’s right to informational self-determination arising from Art. 2 para. 1 German Constitution [Grundgesetz, GG] in conjunction with Art. 1 para. 1 GG. In order to justify this encroachment, the employer must have a particular, prevailing interest in the disclosure of the private mobile phone number. Due to the severity of the encroachment, such justification could only be assumed in very special circumstances, for example if the sensible organisation of the employee’s work duties were not possible in any other way.
The decision makes it clear what importance is given to the data protection of employees and their need for rest and leisure time. Employers cannot force employees to disclose their private mobile phone numbers against their will, unless particularly prevailing legitimate interests of the employer exist herefor.
The parties disputed the legal validity of an ordinary termination for operational reasons of the severely disabled claimant. On 27 June 2017 the employer applied to the competent integration office for its consent to the intended termination and did not hear the severely disabled employees’ representative and the works council until two days later. Subsequent to the consent of the integration office at the end of September, the defendant declared the termination on 16 October 2017.
The Employment Court of Hagen established the invalidity of the declared termination pending a change of contract pursuant to Sec. 95 para. 2 sentence 3 German Social Code Book IX [Sozialgesetzbuch IX, SGB IX] (now: Sec. 178 para. 2 sentence 3 SGB IX). The participation of the severely disabled employees’ representative had not been conducted properly since the notification had not been made without undue delay. The notification is only deemed to have been made without undue delay if the employer has heard the severely disabled employees’ representative without culpable delay (sec. 121 para. 1 BGB) as soon as it has formed the intention to terminate. By applying for the consent of the integration office that is required pursuant to Sec. 85 SGB IX (now: § 168 SGB IX), the decision on the termination had already been reached, i.e. the formation of the intention had already been concluded and the intention evidently manifested externally.
In view of the amendment of the SGB IX already as per 30 December 2016 through the introduction of a new invalidity consequence in case of the absence of the participation of the severely disabled employees’ representative, it is only a matter of time before this also becomes established practice of the employment courts. Hence, the application to the integration office in itself will no longer suffice. The (due and proper) participation of the severely disabled employees’ representative before the declaration of a termination therefore acquires the same value as the prior hearing of the works council pursuant to Sec. 102 para. 1 BetrVG. In case of the required extensive notification and hearing of the severely disabled employees’ representative, lacking any alternatively worded statutory requirements, it is advisable for employers to orient themselves on the principles of Sec. 102 BetrVG; this also applies to the deadline for the response of the severely disabled employees’ representative. The time at which the notification must be made to the severely disabled employees’ representative, however, is entirely different, for the required lack of undue delay of the notification is only demonstrated if the employer involves the severely disabled employees’ representative before making the application to the integration office, and not only before declaring the termination. A change in the sequences at the company’ personnel department is thus urgently recommended.
As already presented in our last Newsletter, the government has numerous plans for developing employment law. The Grand Coalition’s intention to grant employees a statutory claim to return from part-time to full-time employment, which has already been a topic of extensive discussion in the media, is taking tangible form with the draft bill of the Federal Ministry of Labour and Social Affairs [Bundesministerium für Arbeit und Soziales, BMAS] to amend the German Part-Time and Fixed-Term Employment Act [Teilzeitbefristungsgesetzes, TzBfG] dated 17 April 2018.
- The draft bill provides in Sec. 9a TzBfG nF (new version) a claim of the employee to reduce his contractually agreed work hours and to subsequently return to the originally agreed work hours (so-called “Brückenteilzeit”, bridging part-time).
- The period striven for this reduction must be between at least one year and a maximum of five years and must be stipulated in advance.
- If an employee already works in “bridging part-time” employment, then during this period he cannot enforce any further reduction or extension of his work hours.
- A prerequisite for the statutory claim is that the employment relationship existed longer than six months and the employer regularly employs more than 45 employees.
- The employer is not obliged to accept any and all demands for “bridging part-time work”, however.
- Firstly, the employer can turn down this demand to the extent it is opposed by operational reasons.
- Secondly, the draft bill contains a “reasonableness threshold” for employers who employ more than 45 but no more than 200 employees.
- The “bridging part-time” can be denied if, at the time of the beginning of the desired reduction, already at least 1 employee per commenced 15 employees already works “bridging part-time” pursuant to the TzBfG
- Furthermore, it is envisaged that the employer is always obliged to discuss a desired change of the duration or scheduling of the work hours with the employee.
- This duty exists independently of the current scope of the work hours and the number of employed employees.
The amendment of the law shall, according to the intentions of the BMAS, enter into force by 1 January 2019 at the latest. We will keep you informed of corresponding developments.
Dr. Gilbert Wurth, Kathrin Vossen, Jörn Kuhn, Isabel Hexel, Dr. Alexander Willemsen, Anja Dombrowsky, Jamilia Becker, Madita Reimsbach, Cornelia-Cristina Scupra, Alexandra Groth
Dr. Gilbert Wurth
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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
Telephone: +49 221 2091 551
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