Newsletter Employment Law II/2017

 

II/2017
On 6 July 2017 the Act Advancing the Transparency of Pay Structures [Gesetz zur Förderung der Transparenz von Entgeltstrukturen, EntgTranspG] entered into force. We had already informed you of the essential content of the Act in our Newsletter I/2017. In the last Newsletter of 2016 we had also promised to discuss the Facebook ruling of the Federal Employment Court [Bundesarbeitsgericht, BAG] dated 13 December 2016 once the reasons for the decision had been published. We can now fulfil this promise in this Newsletter. We are also informing you of other interesting news from legislation and jurisprudence and, amongst other things, would like to draw your attention to the imminent shift in the Federal Employment Court’s jurisprudence on the binding nature of inequitable instructions given by employers.

 

1. Current jurisprudence

1.1 The binding nature of inequitable instructions – disagreement between the senates of the BAG

1.2 Specificity requirements for a termination pending a change of contract

1.3 “First work experience” not age discriminatory – or is it?

1.4 Impermissibility of limiting a widow’s pension to the “present” wife

1.5 Co-determination of the works council in case of the employer’s Facebook site

1.6 Lack of jurisdiction of a conciliation board in case of a planned business closure prior to the expiry of an agreement securing the site

1.7 No secrecy obligation of the works council in case of changes of business?

1.8 Assumption of a joint venture in case of enterprises within a group structure

1.9 Dynamic individual reference clauses also retain their dynamic applicability after a transfer of business – ECJ confirms previous jurisprudence of the BAG

2. Legal developments

 

1. Current jurisprudence

 

1.1 The binding nature of inequitable instructions – disagreement between the senates of the BAG

To date, according to the jurisprudence of the BAG, an employee was initially obliged to follow the instructions of his employer even if he was of the opinion that this instruction was inequitable and thus legally invalid. In such a case the employee was not allowed to ignore the instruction, being obliged instead to await a legally binding court decision on the instruction’s invalidity. This jurisprudence – essentially formed by the Fifth Senate of the BAG – has now been reviewed by the Tenth Senate with its decision of 14 June 2017 (press release No. 25/17, docket No. 10 AZR 330/16).

In the case up for decision by the Senate, an employee at the Dortmund site of the sued employer did not agree to a limited six-month relocation to the Berlin site. Following the employee’s failure to take up his work in Berlin, the employer cautioned the claimant twice and then declared the termination of his employment contract for conduct-related reasons. The claimant sought a court declaration to the effect that he had not needed to comply with the relocation to Berlin and that the cautions were to be removed from his personnel file. In further proceedings – currently pending before the Second Senate of the BAG – he now contests the termination of his employment agreement.

The Tenth Senate is of the opinion that the employee is not even temporarily obliged to follow an inequitable instruction and therefore asked the Fifth Senate whether it upholds its opinion. Should this be the case – which can presently be assumed –the Grand Senate of the BAG will have to decide which legal opinion is to be represented by all senates of the BAG on this issue in future.

We eagerly await the response of the Fifth Senate and any decision of the Grand Senate. Although the criticism of the previous jurisprudence is certainly justified, in particular that the temporarily binding nature of “evidently” inequitable instructions can represent a serious burden for the employees concerned due to the length of employment court proceedings, this jurisprudence was nevertheless deemed to be conclusively founded and dogmatically correct. It will be another couple of months before we learn whether or not the previous jurisprudence is going to be upheld, whether the opinion of the Tenth Senate will prevail or whether a conciliatory solution can be found.

Dr. Alexander Willemsen

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1.2 Specificity requirements for a termination pending a change of contract

When an employer declares a termination pending a change of contract [“Änderungskündigung”] he is terminating the employment relationship with the employee and simultaneously offering him the continuation of his employment relationship subject to different conditions.

For the employee to be able to decide whether or not he can accept the termination, accept the offer of the change of contract or judicially contest the same, the offer to change the contract must be so clear that it is easily evident to the employee which altered employment conditions are going to apply to him in future. By judgement dated 26 January 2017 (docket No. 2 AZR 68/16) the BAG concretised the specificity requirements.

The claimant had been employed as an electrical engineer at the defendant since 1997. His employment contract envisaged as one of his duties, inter alia, software programming. Following serious head injuries suffered by the claimant in 2001, the employer decided on the basis of a work test conducted by it that the claimant was no longer able to execute the complex programming duties. It therefore declared his termination pending a change of contract and offered the claimant further employment. In addition to working in the warehouse, the claimant was to declare his agreement to “working on building sites”. Moreover, instead of a monthly salary of € 2,709 the claimant was to only receive an hourly wage of € 8.50.

The Federal Court of Justice [Bundesgerichtshof, BGH] granted the claimant’s complaint of unfair dismissal pending a change of contract and declared its invalidity. It was also of no consequence that the offer to change the claimant’s work still referred to the claimant’s future activity as “electrical engineer”, because it could be assumed in the claimant’s favour that, on the basis of previous explanations, it was evident to him that he was no longer going to be employed at all as an electrical engineer. In all other respects, however, it was not sufficiently clear to the claimant what work duties would be expected of him in future. It was clear from the description of his duties as “work in the warehouse” that this meant auxiliary tasks. Whether or not he was also only to execute auxiliary tasks when “working on building sites” could not be derived from the letter of termination, since this term could cover all external work at customers. The claimant was also unable to conclude what activities were expected of him from the amount of his hourly pay, since no collective pay scheme existed at the defendant’s business.

In practical terms this means that, when wording a termination pending a change of contract, caution and great care must be taken when describing the new activity. It is especially important to distinguish between the duties offered and the previously executed duties and to sufficiently specify the new activities.

Madita Reimsbach

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1.3 “First work experience” not age discriminatory – or is it?

With its judgement dated 26 January 17, docket No. 8 AZR 73/16, the BAG highlights that a job description containing the terms “first work experience” [“erste Berufserfahrungen”] and “career entrants” [“Berufsanfänger”] is not automatically an indication of the assumption of a case of age discrimination.

The defendant published a job advertisement in which a “fully qualified lawyer (m/f)” with “first pertaining work experience” or a “career entrant” with a corresponding “focus of interest” was sought for extensive legal advisory services in commercial law. After being turned down for the position, the claimant – who was born in 1953 – demanded compensation pursuant to Sec. 15 Subsec. 2 German Non-Discrimination Act [Allgemeines Gleichbehandlungsgesetz, AGG] on grounds of age discrimination.

The BAG confirms its more recent jurisprudence on Sec. 15 Subsec. 1, Subsec. 2 AGG, pursuant to which the objective suitability of a candidate is no longer a precondition for the candidate’s status; rather, the mere fact of the actually undertaken application for the job suffices for this. However, the BAG saw no sufficient indications of any age-discrimination. Although a job advert which contains the phrases “first work experience” and “career entrant” can be an indication of an indirect age discrimination, it is not per se suited to establish the presumption pursuant to Sec. 22 AGG of the existence of a causal connection between the action and grounds for the discrimination pursuant to Sec. 7 Subsec. 1 AGG. The interpretation of the overall job advert is decisive. In the opinion of the BAG, in the present context the terms “first work experience” and “career entrant” are references to the professional expertise and not primarily to age. The claimant had not represented any other indications which might have suggested age discrimination against the claimant.

The BAG’s decision can fundamentally be welcomed because it shows that not all even indirect references to a younger age automatically have to constitute a discrimination of older candidates. The BAG accepts that older candidates can also be career entrants in certain fields of work and thus not only young candidates are meant thereby. However, employers should not rely on having a favourable interpretation of the job advert by a more or less understanding court; this would be a gamble. Rather, even after this decision it remains advisable to avoid any and all direct or indirect references to age in job adverts, even if this increases the efforts required to evaluate the applications received. In view of the financial consequences of a damage claim and the possible harm to reputation, this is the preferential option.

Kathrin Vossen

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1.4 Impermissibility of limiting a widow’s pension to the “present” wife

The BAG had to rule on the question of whether, in a pension promise, the employer may limit the commitment to provide a widow’s pension to the “present” marriage, that is to say to the marriage existing at the time of granting the pension promise (BAG dated 21 February 2017, docket No. 3 AZR 297/15).

In the underlying pension promise (form) the employer had promised to provide a widow’s pension to the “present” wife of the employee under the condition that the marriage still existed at the time of his death. After the end of the employment relationship the marriage which had existed at the time of the pension promise was terminated by divorce and the employee remarried. The parties disputed over whether the new wife was also entitled to the pension.

The BAG ruled that the limitation of the promise of a widow’s pension to the marriage which existed at the time of the pension promise constituted an unreasonable discrimination within the meaning of the law governing general terms and conditions [AGB-Recht] (Sec. 307 Subsec. 1 sentence 1 BGB) and was therewith invalid. Although, pursuant to Sec. 307 Subsec. 3 sentence 1 BGB, provisions which do not deviate from the statutory provisions are fundamentally not subject to control, this does not apply to provisions which limit substantial, typical contractual rights and obligations to the detriment of the contractual partner. Typical of the survivors’ pension is that it secures a certain category of persons who have a definable, close relationship with the employee. By restricting the pension to the “present” wife, the promise deviates from the contract’s typicality for the care of non-divorced wives. This unreasonably discriminates the employee, who has an interest in also having the corresponding security for the wife with whom he is married at the time of his death. In its limitation of the financial risks under the pension promise, the employer may not apply mere contingencies such as questions concerning the employee’s personal lifestyle.

Jurisprudence is increasingly limiting the employer’s freedom to freely stipulate the group of survivors entitled to the pension. Not only can discrimination prohibitions lead to the invalidity of limitations (BAG dated 4 August 2015, docket No. 3 AZR 137/13), but in case of pension promise forms, also to violations of the law governing general terms and conditions. If a limitation is impermissible, the group of beneficiaries can be extended accordingly. In case of pension promises prior to 1 January 2002 a protection of legitimate expectations is conceivable. The effects of the decision upon collectively regulated pension promises i.e. in shop agreements or collective bargaining agreements, in contrast, are still unclear, since such promises are assessed on the basis of other criteria.

Alexander Heider

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1.5 Co-determination of the works council in case of the employer’s Facebook site

In a high-profile decision dated 13 December 2016 (docket No. 1 ABR 7/15) the BAG established that the co-determination rights of the works council most certainly can extend to the employer’s Facebook site. The practical effects of this decision are considerable and are as yet not totally foreseeable.

The defendant operates a national blood donor service and has a Facebook page on which users could post their own comments via the “visitors’ contributions” function. Via this function, several users complained about purportedly unprofessional examinations and procedures during blood donations conducted by employees of the defendant. The group works council was of the opinion that the Facebook site in general, and the possibility of posting “visitors’ contributions” in particular, constituted a technical device for monitoring the performance and conduct of the employees and demanded on grounds of a failure to observe its codetermination right pursuant to Sec. 87 Subsec. 1 No. 6 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG] the total deletion of the Facebook page; alternatively, at least, the deactivation of the posting function “visitors’ contributions”.

Although the BAG deemed the Facebook page as such not to be a technical device for monitoring the performance and conduct of the employees because the available evaluation function did not enable an individualisation of the relevant employee – whether as a user or as an administrator of the Facebook page – and because the defendant did not (any longer) use personal log-ins for the administrators but a uniform access for all employees of its marketing department, the activation of the optional “visitors’ contributions” function could, however, in the BAG’s opinion, be qualified as a technical device suitable for monitoring purposes pursuant to Sec. 87 Subsec. 1 No. 6 BetrVG and that it is subject to company codetermination. The posting function enabled all Facebook users to make statements on the conduct and performance of the employees with a concrete personal or situation-related connection in a public and permanently stored manner. For this reason, the question of whether the function is activated and possibly curated was subject to codetermination.

The BAG once again makes it clear which superordinate value is gives to protecting employees against the pressures of monitoring or slurs on their reputation. Employers are well-advised to abstain from using the posting function insofar as no agreement can be reached with the works council on the handling of third-party postings concerning employees. The decision states nothing as to the so-called comment function, with which comments can be left regarding postings. Unlike the third-party postings, the comment function cannot be deactivated by the employer. Doubtlessly a decision will soon follow on whether or not the possibilities of the comment function, analogue to the posting function, likewise trigger codetermination rights and could de facto mean that there will be no way around the works council’s involvement when an enterprise wishes to present itself on Facebook.

Dr. Alexander Willemsen

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1.6 Lack of jurisdiction of a conciliation board in case of a planned business closure prior to the expiry of an agreement securing the site

According to a decision of the Higher Regional Employment Court [Landesarbeitsgericht, LAG] of Cologne dated 11 May 2017 (docket No. 8 TaBV 32/17), an existing agreement to secure the site of the business rules out the premature closure of the business and thus a negotiation obligation of the works council on a corresponding compromise of interests. The employer therefore cannot enforce the involvement of a conciliation board for purposes of negotiations on a compromise of interests in connection with a planned business closure before the date of expiry of the securing of the site.

In the situation up for decision by the LAG, the appellant intended to close its business with ca. 180 employees in the year 2017 despite having concluded an agreement for the securing of the site with the works council in 2014, in which the appellant had undertaken to maintain said site until 31 December 2019. The agreement to secure the site stated concretely: “The securing and maintenance of the production site with at least the organisational units listed in Annex 3 up to and including 31 December 2019 is guaranteed. In this period terminations for operational reasons are excluded, except for the personnel measures described in Sec. 14.1 and Sec. 14.2. In the event of a lack of work due to the economic situation, the statutory and collectively bargained instruments for securing employment are to be used. Should staff cut-backs be unavoidable in the employer’s opinion, the parties undertake to negotiate on this.”

After the works council had rejected the appellant’s proposal, the latter applied for the judicial involvement of a conciliation board. The LAG dismissed this application, however, since the shop agreement concluded in 2014 to secure the site until the end of 2019 ruled out a closure of the business prior to the expiry of this deadline. The conciliation board therefore obviously had no jurisdiction for negotiations on an earlier closure.

The decision shows the practical importance of also including in agreements to secure a site provisions on an extraordinary termination right or at least the obligation to recommence negotiations if the economic circumstances subsequent to the conclusion of the agreement should deteriorate significantly and on a sustained basis.

Isabel Hexel

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1.7 No secrecy obligation of the works council in case of changes of business?

The confidentiality obligation of shop constitution law, pursuant to which the members and substitute members of the works council may neither disclose to third parties nor utilise business and trade secrets made known to them, has been clearly limited by a recent decision of the LAG Hesse (20 March 2017, docket No. 16 TaBV 12/17) in case of changes of business. As of the time of the commencement of the codetermination proceedings pursuant to Secs. 111, 112 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG], individual works council members may notify all information to third parties, for such information is no longer subject to a secrecy obligation as of this time.

In the case underlying the decision, the employer and the works council sought the exclusion of a works council member from the works council. The works council member had given the union information on a staff cut-back which the employer had initially notified to the chairman of the works council for purposes of instigating the codetermination proceedings. In the opinion of the works council which filed the application, the works council member should have first awaited the works council meeting addressing the staff cut-back before arbitrarily notifying the union.

The LAG Hesse initially established that no general secrecy obligation exists for works council members pursuant to the BetrVG, rather, that such only exists in case of a business or trade secret; a staff-cut triggering a compromise of interests notified to the works council did not constitute a business or trade secret, however. This is primarily due to the fact that no general secrecy obligation from the beginning of the participation proceedings to the conclusion of the proceedings on the compromise of interests comes into consideration. It must be possible for the works council to exchange information and opinions on the measures with the work force in order to be able to exercise the codetermination and participation rights in a due and proper manner. For this reason, the works council must be able to talk about the concrete measure with the employees once the notification has been made.

The LAG’s decision must be criticised and cannot be applied as such to other factual situations. It entirely fails to recognise that the uncontrolled announcement of a reorganisation or restructuring can have significant negative consequences on products and sales. It was ultimately for this precise reason that the legislator stipulated the secrecy obligation.

Jörn Kuhn

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1.8 Assumption of a joint venture in case of enterprises within a group structure

In its judgement dated 12 January 2017 (docket No.: 5 Sa 208/16) the LAG Schleswig-Holstein had to address the question of the conditions under which a joint venture can be assumed in case of enterprises which are integrated within a group structure. The statements made by the LAG are of decisive practical importance.

The employee and the employer disputed over the validity of a termination, whereby a primary issue was the applicability of the German Unfair Dismissal Act [Kündigungsschutzgesetz, KSchG]. The employer worked in a small company with less than 10 employees, yet pleaded that a joint venture existed with at least one other enterprise of the group, with the result that the KSchG applied due to the correspondingly increased number of employees. The sole shareholder of the employer was an enterprise which was in turn affiliated with a further group enterprise on grounds of a profit and loss transfer and control agreement. In the claimant’s opinion a joint venture existed between this enterprise and the employer.

The unfair dismissal complaint was unsuccessful in its entirety. This has initially confirmed the fact that a joint venture can be assumed if two or more enterprises have combined to the jointly manage a business in such a way that a uniform business-specific management apparatus exists which exercises the core employer social welfare and personnel related functions.

However, the court also ruled that a uniform management apparatus does not arise from either a joint internet presence, a joint company address in the Commercial Register [Handelsregister] or from the fact that the two companies at issue are managed by the same managing director as one of several managing directors. In particular, the LAG emphasized that obligations and requirements of the group pursuant to group company law did not suffice as indications of a joint venture. The profit and loss transfer and control agreement between the sole shareholder of the employer and another affiliated enterprise did not, in the LAG’s opinion, allow any conclusions whatsoever to be drawn as to the existence of a joint venture in the relationship between the employer and the other enterprise.

Jörn Kuhn

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1.9 Dynamic individual reference clauses also retain their dynamic applicability after a transfer of business – ECJ confirms previous jurisprudence of the BAG

According to previous jurisprudence of the BAG, the dynamic nature of a dynamic reference clause to an individual collective agreement [“klein dynamische Bezugnahmeklausel”] in an employment contract which is not to be interpreted as an equal footing agreement [“Gleichstellungabrede”] is also upheld after a transfer of business (unit). This means that the acquirer remains bound by said clause, irrespective of whether it itself is able to exert influence over these collectively bargained contract conclusions.

Within the scope of a BAG reference for a preliminary ruling, the ECJ has now ruled that this jurisprudence is reconcilable with union law and has therewith confirmed the much criticised “eternal bond” of said clauses following a transfer of business (ECJ, judgement dated 27 April 2017, docket No. C-680/15 (“Asklepios”); BAG 17 June 2015, doc. No. 4 AZR 95/14).

In its earlier Alemo-Herron decision the ECJ had still rejected the continued dynamic applicability of a collective bargaining agreement for an acquirer, because such acquirer was “no longer able to exert any influence” over collective bargaining negotiations after a transfer of business.

However, the ECJ has now confirmed the previous jurisprudence of the BAG on the continued dynamic effect, pointing out that the dynamic reference clause is ultimately the result of a private, autonomous regulation of the contractual parties. Moreover, the dynamic reference to collective agreements could be changed by the acquirer at any time with the mutual agreement of the employee and could, if need be, also be unilaterally adjusted by the acquirer through a termination pending a change of contract – in observation of the statutory requirements (Sec. 2 KSchG). This did not unilaterally disadvantage the acquirer, since “the national law stipulates both mutually agreed as well as unilateral adjustment possibilities for the acquirer”.

It suppresses the fact that this, in practice, concerns merely theoretical possibilities of the acquirer to adjust the contract. After all, the requirements set by jurisprudence for the validity of a termination for operational reasons pending a change of business are extremely high and, in particular, demand a reduction of remuneration in order to avert an imminent closure of the business or distinct staff cut-backs. This is certainly not a route which can be taken to increase the business’s profitability (BAG, NZA 2010, 333). Ultimately, therefore, great caution continues to be required during the contractual configuration of reference clauses to collective agreements if one is to avoid such “eternal bonds” of the acquirer in case of a transfer of business.

Isabel Hexel

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2. Legal developments

 

Act Reinforcing Company Pensions imminent

The Bundestag adopted on 1 June 2017 at the 2nd and 3rd reading the German Act Reinforcing Company Pensions [Betriebsrentenstärkungsgesetz, BRSG]. The new provisions are to enter into force as per 1 January 2018. The Bundesrat is expected to approve the Act at the beginning of July. The new provisions concern, in particular, the introduction of a simple contribution promise.

In detail:

  • For the first time there is to be the possibility of a simple contribution promise, where the employer is merely liable for the payment of the contributions into a pension institution but not for the rendering of the performance (“pay and forget”). This is possible if the employer, through a collective agreement or on grounds of a collective agreement in a shop agreement, is obliged to pay into a pension institution (pension fund, pension scheme or direct insurance) (Sec. 1 Subsec. 2 No. 2a Draft Company Pension Act [Betriebsrentengesetz-Entwurf - BetrAVG-E]). The parties to the collective agreement must participate in the execution and management of the pension institution (Sec. 21 Subsec. 1 BetrAVG-E), e.g. in the form of a representation on its supervisory board. A guaranteed contribution of the employer into the institution is to be agreed in the collective agreement. In cases of deferred compensation, to the extent the employer saves social insurance contributions here, an employer’s supplement of at least 15% of the deferred remuneration into the pension institution is to be regulated in the collective agreement (Sec. 23 BetrAVG-E). Employers not bound by collective agreements can agree on an individual contractual basis on the application of relevant collectively agreed provisions (Sec. 24 BetrAVG-E). New provisions of supervisory law are being created for the pension institution (Secs. 244a to 244d German Insurance Supervision Act [Versicherungsaufsichtsgesetz, VAT, Secs. 33 to 42 Pension Fund Supervision Ordinance [Pensionsfonds-Aufsichtsverordnung, PFAV]). In particular, the institution is prohibited from giving performance guarantees.
  • An opting-out system for the deferral of remuneration is also being introduced (Sec. 20 Subsec. 2 BetrAVG-E). According to this, the introduction of an automatic deferral of remuneration by the employer can be regulated by collective agreement. If the employee fails to object hereto in good time, then under certain circumstances his consent is deemed given. Employers not bound by collective agreements can agree on an individual contractual basis on the application of the pertinent collective regulation.
  • In the event of insolvency the employee is given, under certain circumstances, the opportunity to enter into a reinsurance contract concluded on his life and to claim the benefits from this instead of the benefits of the Association for Securing Pensions [Pensions-Sicherungs-Verein, PSVaG] (Sec. 8 Subsec. 3 BetrAVG-E).
  • For income up to a monthly gross amount of € 2,200, a tax premium for the company pension is being created (Sec. 100 EStG-E).
  • The basic allowance for Riester contracts will be increased from currently € 154 to € 175 per year.


Jörn Kuhn and Alexander Heider

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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

Jamilia Becker

Associate

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

jamilia.becker@oppenhoff.eu