Newsletter Employment Law III/2017
In the last Newsletter (II/2017) we had drawn your attention to the upcoming shift in the case law of the Federal Employment Court [Bundesarbeitsgericht, BAG] regarding the employer’s right of direction. According to a BAG press release dated 19 September 2017, this is now actually going to take place. Whereas an employee previously had to follow what - in his opinion – was an unreasonable order until the invalidity of such order had been established by an employment court, in future he will be able to directly refuse to carry it out. In this case, however, he bears the risk of the employment court not only subsequently deeming the order to be valid, but also of his possible dismissal declared on grounds of his refusal. We will keep you informed of the further consequences of the shift in case law and provide you with the BAG’s arguments for abandoning its established case law as soon as the detailed reasons for the decision have become available. May we initially inform you in this Newsletter of the other new decisions of the employment courts that have practical relevance.
1. Current case law
1.1 Immediate dismissal of an employee for participating in a competing enterprise
1.2 Without proper company integration management, termination on grounds of illness invalid
1.3 Employees entitled to a regular pension merit far less protection in the social selection
1.4 Impermissible use of “keyloggers” in the employment relationship
1.5 ECHR concretises criteria for monitoring internet communication at the workplace
1.6 Material reason required to reduce term of an employment agreement concluded for a fixed term without material reason
1.7 Failure to notify the social plan privilege of the acquirer during a transfer of business is automatically remedied with the lapse of time
1.8 Time tracking without the works council’s participation?
2. 9th Employment Law Day at Oppenhoff & Partner on 16 November 2017
The Regional Employment Court [Landesarbeitsgericht, LAG] of Schleswig-Holstein had to decide on the immediate dismissal of an employee for participating in a competing enterprise (judgement dated 12 April 2017, docket No. 3 Sa 202/16).
The claimant had been working for the defendant, a telecommunications provider, since 2007. His most recent position had been that of executive officer for the logistics and operations division with power of general commercial power of representation [Prokura]. His employment contract contained a contractual restraint of competition which prohibited the claimant from participating in competing enterprises unless his shareholding did not permit him to exert any influence over the corporate organs of said enterprise.
Without the defendant’s knowledge, during the term of his employment relationship the claimant held a 50% participation in a company that operated in the field of telecommunication services. This company had carried out orders for the defendant, but also worked for other customers. Upon learning of the claimant’s participation, the defendant terminated his employment relationship without notice. The claimant asserted that he had not had a decisive influence over the business activities of the company.
The LAG confirmed the validity of the extraordinary termination. The claimant had violated his restraint of competition which prohibited him from competitive activities during his existing employment relationship. This also included participation in a competing enterprise if this led to a decisive influence over its business operations. With a participation of 50% such influence existed, since the shareholder could prevent resolutions of the company. The claimant’s misconduct was so serious that the defendant could no longer be expected to continue the employment relationship. This also applied in view of the position of special trust demanded of his function as general commercial representative of the company [Prokurist].
The decision shows that case law views contraventions of restraints of competition in employment contracts, especially a participation in competing enterprises, to be serious breaches of duty which can justify sanctions as serious as an extraordinary termination. Although employees are already bound by a statutory restraint of competition during their ongoing employment relationship, in sensitive cases it is certainly advisable to include express provisions on this issue in the employment contract.
A judgement of the LAG Berlin-Brandenburg dated 18 May 2017, docket No. 5 Sa 1303/16, impressively illustrates the importance of at least properly attempting company integration management measures [Betrieblichen Eingliederungsmanagements] (BEM) within the meaning of Sec. 84 Subsec. 2 German Social Code Book IX [Sozialgesetzbuch IX, SGB IX] and clearly shows once again that, even with considerable periods of incapacity due to illness, a dismissal on grounds of illness is no sure-fire success.
On grounds of her inability to work due to illness, the claimant had been off work on 102 work days in 2011, 175 works days in 2012, 56 in 2013, 84 in 2014 and 79 in 2015. Cause of her absence was, inter alia, psychological illnesses. The defendant held personnel talks with the claimant in the years 2011, 2012 and 2014, and examinations by a medical officer were conducted on virtually an annual basis. A medical opinion dated 2015 ultimately negated a favourable absenteeism prognosis and established the claimant’s limited performance capacity. No company integration management measures were conducted prior to the claimant’s dismissal on grounds of her illness.
The dismissal was deemed invalid by the LAG due to the lack of proper company integration management measures. Although the LAG confirmed a negative prognosis for the future on grounds of the claimant’s lengthy periods of illness, as well as the accrual of considerable costs for the defendant through the continued payment of her salary, it held that more milder means than dismissal came into consideration, such as her continued employment in a different position that better suited her ailment. This had not been adequately examined. The claimant had not been properly informed about the aims of company integration management in any of the personnel talks or letters, nor of the nature and scope of the data collected and used for this purpose, as is demanded by Sec. 84 Subsec. 2 sentence 3 SGB IX. Only if the corresponding information had been provided could there be any talk of an attempt to properly conduct company integration management measures.
In the light of the established case law of the BAG on the consequences of failing to conduct company integration management measures, the LAG had no choice but to declare the invalidity of the dismissal. The BAG had already made it quite clear in its key decision in 2014 (BAG dated 20 November 2014, docket No. 2 AZR 755/13) that the employer has a significantly increased burden of proof in such cases. Employers should thus ensure in all events, in careful observance of the statutory requirements, that the employee concerned is offered in writing company integration management measures, so as to be able to document this offer in the event of a lawsuit. Only in this case does the employer have any chance whatsoever of having the termination due to illness declared valid.
By judgement dated 27 April 2017 (docket No. 2 AZR 67/16), the BAG ruled that, in case of a termination for operational reasons an employee who is entitled to a regular pension merits far less protection with respect to the criteria “age” within the scope of the social selection than an employee who does not yet have a retirement pension claim.
The claimant had worked as a legal assistant at the sued employers’ association since 1981. At the time of his termination for operational reasons by his employer he was 66 years old and already drew a regular retirement pension. Amongst his five comparable colleagues was an employee born in 1979, married with a dependent child, who had worked at the defendant for less than three years. In the social selection the claimant drew the shorter straw, also vis-à-vis this colleague, because – according to the employer’s reasoning – he was financially secured through his retirement pension.
The claimant’s unfair dismissal action was successful in the first two instances, but the BAG has now ruled in the employer’s favour.
In the event of terminations required for operational reasons, the aim of the social selection is to dismiss those employees who are the least dependent upon the employment relationship. This must be exclusively assessed on the basis of the following criteria: years of service with the company, maintenance obligations, age and severe disability. The consideration in the social selection of the employee’s age is directly linked to the employee’s chances of finding work on the employment market and thus simultaneously the legislator’s intention to reduce expenditure for unemployment benefit. Employees who already draw a regular retirement pension, however, have a permanent substitute income. Such employees have no claim to unemployment benefit in any event. The BAG’s interpretation also does not contradict Union law, since any indirect unequal treatment on grounds of age was materially justified by the aim of a fair distribution of employment.
The BAG’s clarification of the issue is definitely to be welcomed. Far more frequent than the case mentioned here, however, is that of an employee who is only close to retirement, who thus only has a claim to a retirement pension in a few years. In the light of the demographic changes and the shortage of experts, we will certainly no longer be able to reflexively assume that older employees generally have little chance of finding employment. This aspect will also have to be considered by the BAG in its deliberations on the social selection in future.
By judgement dated 27 September 2017 (docket No. 2 AZR 681/16) the BAG has ruled that findings gained via a “keylogger” regarding the private activities of an employee may not be used in court proceedings.
The claimant worked as a web developer at the defendant. In connection with a network clearance the defendant notified its workforce that the entire “internet traffic” and system use was going to be “simultaneously logged”. So-called “keylogger” software was subsequently installed, also on the claimant’s office PC, which recorded all keystrokes and took regular screen shots. Following an assessment of the data collected by the defendant in this connection, the claimant admitted at a meeting that he had also used the office PC for private purposes during work hours. The defendant then declared the immediate and extraordinary termination of the claimant’s employment relationship, alternatively its ordinary termination.
The BAG ruled – as the previous instances before it – in the claimant’s favour. The termination was disproportionate and thus invalid. Data collected by means of a “keylogger” could not be appraised in the unfair dismissal action. By using the software the defendant had infringed the claimant’s right of self-determination with regard to information (Art. 2 Sec. 1 in conjunction with Art. 1 Sec. 1 German Constitution [Grundgesetz, GG]). The collection of information was therefore not justified by Sec. 32 Subsec. 1 German Federal Data Protection Act [Bundesdatenschutzgesetz, BDSG]. At the time of using the “keylogger” there had been neither any suspicion of a criminal offence based on facts nor any other serious breach of duty. Rather, the measure had been taken “randomly”. Furthermore, the employee had not been given a prior warning.
The decision is as yet only available as a press release. The press release suggests, however, that the BAG essentially agreed with the arguments of the prior instance. Prior to carrying out the measure the defendant had failed to explain the scope of the operation to the effect that every keystroke was going to be recorded, irrespective of whether the PC was used for work or for private purposes. Such a secret measure as this represented a particularly grievous infringement of constitutional rights.
Even though the employer’s conduct was not approved in this case, it is still a fact that if specific technical-organisational installations are observed and the legal requirements adhered to, the use of keyloggers inter alia in enterprises can be permissible.
By judgement of 5 September 2017 (docket No. 61496/08) the European Court of Human Rights (ECHR) has established strict requirements for the monitoring of the company internet connection by the employer.
In the case underlying the decision, a Rumanian employee had set up a Yahoo-Messenger account at his employer’s request, via which he was to answer customers’ questions. He was prohibited from using the e-mail account privately. Without informing the employee, the employer recorded the correspondence processed via the Messenger and became aware of its regular private use by the employee. The employee was subsequently dismissed on this ground. Having unsuccessfully contested his dismissal before the Rumanian courts, the employee filed an appeal with the ECHR, which rejected an infringement of the right to the observance of privacy and correspondence (Art. 8 ECHR). Following the referral of the case, the Upper Chamber of the ECHR then decided on the case.
The Upper Chamber affirmed an infringement of Art. 8 ECHR and set up a number of criteria against which surveillance by an employer must be measured. Prior to surveillance, the employee must be notified of its type and scope. There also needs to be a legitimate reason for the surveillance. Finally, within the scope of the reasonableness of the measure, one must also check whether milder surveillance measures do not come into consideration. The ECHR also pointed out that a termination is not always the appropriate sanction.
As the decision was pronounced against another contracting state of the ECHR, there are no immediate legal consequences for Germany. However, the German courts will also have to at least consider or orient themselves on the decisions of the ECHR.
Following this decision of the ECHR, company regulations on the use of the internet at work or also the use of work e-mail addresses need to be reviewed. Is it sufficiently clear and transparent that employees are being monitored and, if so, in which scope and in what way?
Whilst the Rumanian employee had not been informed at all about the employer’s surveillance and this essentially caused the infringement of his rights, in the above decision of the BAG dated 27 July 2017 (docket No. 2 AZR 681/16) the concrete use of the keylogger by the employer was impermissible, irrespective of the fact that employees were notified thereof.
According to Sec. 14 Subsec. 2 German Part-Time and Fixed-Term Employment Act [Teilzeit- und Befristigungsgesetz, TzBfG] it is possible to limit the term of an employment agreement for a period of up to two years without this requiring a material reason. The extension of a fixed-term employment agreement a maximum of three times up to an overall period of two years without material reason is also permissible.
Against this background the decision of the BAG dated 14 December 2016 (docket No. 7 AZR 49/15) is surprising: the parties had originally concluded an employment agreement which had permissibly been concluded for a fixed term without material reason, the termination of which was envisaged as per 31 July 2014. During the trial period the contractual parties subsequently agreed on the reduction of the contractual term to 31 July 2013. The other conditions of the employment contract remained unchanged. The employee filed a legal action against the fixed term of his employment agreement and claimed the invalidity of the limitation.
Although the agreed reduction of the fixed term did not exceed the maximum fixed-term contractual period, the BAG was of the opinion that the prerequisites for a new permissible limitation had not been fulfilled. The BAG based this on the prohibition of a follow-up contract of Sec. 14 Subsec. 2 sentence 2 TzBfG, pursuant to which a limitation of the contractual term without material reason is only permissible if no employment relationship already existed with the same employer prior thereto. The BAG was of the opinion that the reduction of the original term constituted a new agreement of a limited term, which required a material reason since a fixed-term employment agreement had already existed at the time of its conclusion. The limitation of a contractual term without material reason was only permissible in case of new appointments or extensions of contracts, but not in case of reductions of contractual terms. The BAG therefore deemed the limitation of the contractual term to be invalid, with the result that the employment contract became an unlimited employment contract.
This decision of the BAG once again shows the pitfalls of the law on limiting contractual terms. In case of uncertainty regarding contractual terms, employers are advised to keep them short and extend them where necessary, rather than exhaust the “whole” contractual limitation period from the very outset. A reduction of the contractual term should only be considered in cases where there is provably a material reason for the limitation. One could consider a cancellation agreement as an alternative. Here one must remember that the termination notice period may not be excessively exceeded and that the usual provisions of a cancellation agreement (such as the release from duties, reference letter, compensation clause) are agreed.
It is a known fact that the failure to notify the social plan privilege of the acquirer pursuant to Sec. 112 a Subsec. 2 German Shop Constitution Act [Betriebsvereinbarungsgesetz, BetrVG] within the scope of the notification of a transfer of business results in the faultiness of the notification letter (BAG 14 November 2013, docket No. 8 AZR 824/12). In consequence, the opposition period pursuant to Sec. 613 a Subsec. 6 sentence 1 BGB is not set in motion. Pursuant to the new case law of the BAG dated 15 December 2016 (docket No. 8 AZR 612/15), this flaw is remedied by force of law with the expiry of the privilege period of 4 years as of the foundation of the acquirer and hence, with the time lapse of the 4-year social plan privilege, a one-month opposition period is automatically set in motion without this requiring a new notification.
In the case to be decided by the BAG a business was transferred to an acquirer which had been founded as per 1 January 2008. The claimant had been notified by the seller of the business by letter of 16 November 2007; no reference to the social plan privilege of the acquirer pursuant to Sec. 112 a Subsec. 2 BetrVG had been contained in the notification. After the acquirer decided in the spring of 2013 to discontinue its business operations as per 31 December 2013, the claimant opposed the transfer of business by letter of 14 March 2013. In support of his opposition he stated that the notification of 16 November 2007 had been flawed on grounds of the failure to mention the acquirer’s social plan privilege and that the period of Sec. 613 a Subsec. 6 BGB therefore could not have been set in motion.
In the opinion of the BAG, however, through the expiry of four years i.e. as of 1 January 2012, the social plan privilege no longer applied and could no longer jeopardise the economic security of the employees at the acquirer. Consequently, this could no longer be an essential criterion for a possible opposition by the employee to the transfer of his employment relationship to the new business owner. In this case the flaw in the notification had been remedied by force of law, with it being understood that, unlike in case of the correction of errors, it no longer required a new notification. Rather, the loss of the social plan privilege through the lapse of time meant that the initially incomplete notification insofar now became complete by force of law.
In view of the very strict requirements for the validity of a notification pursuant to Sec. 613a BGB, this decision of the BAG can be especially welcomed and can possibly also be transferred to other constellations, e.g. in the absence of a reference to the lack of dismissal protection at the small business of the acquirer which has occurred through the transfer of the business (unit), where at a later date this business reaches the threshold value pursuant to Sec. 23 I German Act Against Unfair Dismissals [Kündigungsschutzgesetz, KSchG]. Alternatively, however, in constellations where notifications are initial lacking, the employer can theoretically also set the opposition in motion by making a subsequent notification, respectively correction. Whether or not this is a sensible option needs to be assessed in the individual case. In general, employers are still advised to be as accurate as possible when drafting the notification obligation.
It is not uncommon for the regulation of work hours to develop into a point of contention between the employer and the works council. In a decision of practical relevance, the LAG Berlin-Brandenburg (decision dated 22 March 2017, docket No. 23 TaBVGa 292/17) had to rule on the extent to which the employer can record employees’ times of absence and work without this triggering codetermination rights of the works council.
After an automated time tracking that had previously been used in the business in question had been ruled out, without any follow-up agreement being reached with the works council, the employer instructed his employees to henceforth individually and manually document their times of absence and work. The times were to be documented on the basis of control slips with which the employees had to report to their superior at the beginning and end of each shift, and on which the superior then made the corresponding entry.
The works council had not participated in the introduction of the manual time tracking system. It was of the opinion that it had a codetermination right pursuant to Sec. 87 Subsec. 1 No. 1 BetrVG, since the stipulated recording process concerned the employees’ organisational conduct at the business, which was subject to codetermination, and tried to prohibit this practice by interim injunction. The employer rejected a codetermination right of the works council by arguing that this was merely a measure concerning work conduct – which was not subject to codetermination.
The LAG ruled that the introduction of a manual time recording system is fundamentally not subject to codetermination. The measure applied in this case was used to check the fulfilment of employment duties and thus concerned work conduct – accordingly the works council had no codetermination right pursuant to Sec. 87 Subsec. 1 No. 1 BetrVG. In this respect it was also irrelevant that the employees participated in the tracking of their times of absence according to their employer’s instructions.
The decision confirms that, at least in case of a manual time tracking system, the works council generally has no codetermination rights. If an agreement between the works council and the employer, for example on the introduction of a time tracking system, is not reached (in a timely manner), then the employer can resort to its own corresponding measures. Caution is required, however, if the manually drafted time tracking slips are “processed further” – if they are processed using IT, it is possible that the works council might have to be involved after all pursuant to Sec. 87 Subsec. 1 No. 6 BetrVG.
Dr. Alexander Willemsen
As we had already announced, the 9th Employment Law Day is being held at our offices in Cologne on 16 November 2017. In addition to taking a perspective look at the development of employment law following the German parliamentary election, we will be focussing on employment law issues at international groups as well as the legislative amendments in company pensions law, the regulations governing severely disabled employees and data protection law. The upcoming works council elections in the spring of 2018 as well as current employment law jurisprudence round off the range of topics. We would be pleased to have you join us for a day of interesting lectures and lively discussions.
Dr. Gilbert Wurth
Telephone: +49 221 2091 351 / 381
Telefax: +49 221 2091 333
Telephone: +49 221 2091 351
Telefax: +49 221 2091 333
Telephone: +49 69 707968 140
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Telephone: +49 221 2091 348
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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
Telefax: +49 221 2091 333
Telephone: +49 (0)69 707968 184
Telefax: +49 (0)69 707968 111
Telephone: +49 221 2091 346
Telefax: +49 221 2091 333