Newsletter Employment Law IV/2017
With our fourth employment law Newsletter of 2017 we are ending a year in which the decisions of the employment courts and the legislator significantly influenced personnel administration. The consequences of the German Transparency of Remuneration Act [Entgelttransparenzgesetz, EntgTransG], which entered into force on 6 July 2017, are likely to first be felt in the workplace as employees are able to assert their claim to information since 6 January 2018. What employment law legislation awaits us in 2018 will decisively depend upon the progress made in forming the government in Berlin. However, the employment courts can be relied on to continue inspiring new momentum, and we will of course keep you up-to-date in our customary manner.
As a final contribution for the year 2017, we would like to inform you of a number of decisions and amendments of employment law relevance.
By judgment dated 29 June 2017 (docket No. 8 AZR 402/15), the Federal Employment Court [Bundesarbeitsgericht, BAG] concretised the requirements for an employer’s rejection of a job application, which triggers the preclusive period pursuant to Sec. 15 para. 4 German General Non-Discrimination Act [Allgemeines Gleichbehandlungsgesetz, AGG]. In the case up for decision the claimant had successfully asserted a compensation claim pursuant to Sec. 15 para. 2 AGG due to ethnic discrimination nine months after having applied for the job. The legal action was based on the claimant’s application for a job requiring “mother tongue German”. From the application it was evident that the claimant was a native Russian speaker and spoke fluent German as a foreign language. The job advertisement was for a two-month fixed-term position until 17 May 2013.
The defendant gave the job to a different applicant. The claimant sent an e-mail to the defendant on 9 September 2013 requesting a response to his application. On 11 September 2013 the defendant informed the claimant that the position had been otherwise occupied. On 7 November 2013 the claimant then filed the compensation claim.
The defendant was of the opinion that the claim had not been filed in a timely manner within the two-month preclusive period of Sec. 15 para. 4 AGG. With a job application, the period begins to run with the receipt of a rejection from the employer. Due to the fixed term of the position, with the expiry of 17 May 2013 at the latest it should have been clear to an objective applicant that his application had been unsuccessful.
The BAG was of the opinion that the claimant had indeed asserted the claim in a timely manner on 7 November 2013. The period had begun to run on 11 September 2013 at the earliest because this was the day on which the claimant had first received the rejection from the employer. According to the BAG, a “rejection” within the meaning of the AGG presupposes a declaration by the employer with respect to the specific applicant which, from the perspective of an objective recipient, clearly shows that the application has no prospects of success. Silence or a lack of action on the part of the employer is insufficient to set the period in motion. This also applies if the job advertised was for a fixed-term position.
Employers should therefore fundamentally always notify applicants of unsuccessful applications in order to set the preclusive period of Sec. 15 para. 4 AGG in motion. Furthermore, the term “mother tongue”, as well as other terms associated with the reasons named in Sec. 1 AGG, should not be used in a job advertisement.
Barely two years after the introduction of the German Minimum Wages Act [Mindestlohngesetz, MiLoG] as per 1 January 2015 disagreement still exists over which wage elements fulfil the statutory minimum wage claim and which have to be paid in addition thereto. The BAG already ruled last year that payments which remunerate the work performance as such fulfil the minimum wage claim, whereas payments which are not dependent upon the work performance or which pursue a special statutory purpose should not count towards the minimum wage claim (BAG, judgement dated 25 May 2016, docket No. 5 AZR 135/16). On several further occasions during the second half of 2017 the BAG had to decide on which of these purposes the respective wage elements fulfilled.
The BAG’s decision dated 6 September 2017 (docket No. 5 AZR 317/16) was in respect of the complaint by an assembly helper whose wage, despite being just above the statutory minimum wage, consisted of a basic wage and a performance-based bonus. Contrary to the claimant’s opinion, the BAG ruled that contract-work and performance bonuses count towards the minimum wage. The performance bonus rewarded the claimant for her work performance and is in reciprocal relation to it. Moreover, the minimum wage remunerates not only the employee’s “normal work”. The minimum wage claim is not dependent upon whether or which success is associated with the work performance.
An attendance bonus can also count towards the hourly wage if the latter does not suffice to fulfil the statutory minimum wage claim (BAG, judgement dated 11 October 2017, docket No. 5 AZR 622/16). At the defendant’s business an attendance bonus was granted which was reduced depending on the number of days of the employee’s absence due to illness. The BAG ruled that this remunerated the work performance, as it was not paid for mere attendance at the business, but as financial motivation to work even in the event of (minor) health ailments.
In contrast thereto, night-work bonuses and bonuses for holidays and public holidays do not fulfil the statutory minimum wage claim, rather they must be paid in addition thereto (BAG, judgement dated 20 September 2017, docket No. 10 AZR 171/16). Furthermore, the basis for the calculation of these wage elements must at least be the applicable minimum wage at any time, since night-work bonuses and additional holiday remuneration fulfil non-work-performance related purposes and do not serve as remuneration for work services rendered.
Claims to paid annual leave do not lapse if the employee is unable to take this holiday for reasons lying within the sphere of responsibility of the employer. These claims can, according to a recent judgement of the European Court of Justice, be transferred and accumulated without limitation (ECJ, judgement dated 29 November 2017, docket No. C-214/16).
The subject matter of the decision was a case in Great Britain. From 1999 until his retirement in 2012 the claimant had worked at the defendant as a freelancer on a commission basis and without the granting of paid leave. Upon leaving the company the claimant demanded for his 13 years of work at the defendant the payment of a remuneration both for the unpaid leave taken as well as for leave he had not taken.
In the preliminary ruling of the British appeal instance, the ECJ held that claims to paid holiday which could not be taken in several consecutive reference periods due to the employer’s refusal to remunerate these holidays can be transferred and accumulated until the end of the employment relationship. According to the ECJ, namely, the employer must bear the consequences of not putting his employee into a position in which he can exercise his right to paid annual holiday. The employee is also not obliged to take his annual holiday before being able to establish whether or not he is entitled to paid holiday.
In practical terms this now raises the question of which effects the ECJ judgement will have on German employment law. It is unclear whether the limited transfer criterion of the German Federal Holiday Entitlement Act [Bundesurlaubsgesetz, BUrlG] is to be disregarded when an employee is hindered in exercising his right to paid holiday. Unlike German employment law, British law has no limited transfer period for annual leave that is not taken. In view of the employee-friendly jurisprudence, this is likely. It also remains to be seen whether the Luxembourg judges will also continue with their employee-friendly jurisprudence regarding the granting of holiday claims and payment in lieu thereof in their future decisions on the questions that have already submitted by the BAG regarding the heritability of claims to payment in lieu of holiday (C-569/16 and C-570/16) and on the lapse of holiday claims if the employee has failed to apply for such holiday (C-684/16).
Business practice is seeing an increasing amount of disputes over the remuneration of extra work. According to the established jurisprudence of the BAG, the burden of representation to date has been as follows insofar: to begin with the employee asserting the overtime must compile a detailed list of when he worked and for how long. In a second step he then has to represent the extent to which the employer prompted the overtime work or in what other way he can be attributed with this overtime. The overtime he has worked must also have been ordered, approved, tolerated or at least required to complete the work owed.
In this connection the Regional Employment Court [Landesarbeitsgericht, LAG] of Berlin-Brandenburg (judgement dated 28 June 2017, docket No. 15 Sa 66/17) had already appraised the abstract statement made by the employer in the court proceedings “that all of his managerial staff worked extra without additional pay” as an acknowledgement and thus implied toleration of the overtime work, with the consequence that the employer had to remunerate the claimant for the extra work. A toleration of overtime already exists if the employer, in knowledge of the overtime, accepts this overtime and does nothing to prevent it in future.
On grounds of the arguably imprudent statement of the employer, the LAG was able reach a decision in this case on the basis of the principles established by the BAG. Interestingly, however, the LAG indicates that it considers the previous jurisprudence of the BAG on the payment of overtime to be too rigid. To date, namely, overtime disputes have predominantly been rejected in particular because employees were unable to prove the toleration of overtime. The BAG argues the need for this second examination point because employers do not have to tolerate overtime being imposed upon them. In the opinion of the LAG, however, the employer is the “the boss of its own business”: if it does not organise its business in such a way that overtime is avoided, then this signifies that it is not concerned about any further hours being worked. This already suffices to have the hours worked also attributed to the employer.
The LAG therewith puts increased responsibility upon the employer and demands that it – should it not want to remunerate extra work – must actively (!) counteract it. Thus, there is a risk that the criterion of the burden of representation and proof could shift in the employee’s favour in such cases in future. In practice, employers will have to adapt accordingly and develop systems which actively prevent unwanted extra work.
The representative body for severely disabled employees sought a court declaration requiring the employer to also involve the representative body prior to declaring a caution to severely disabled or equivalent employees. This claim was based on Sec. 95 para. 2 sentence 1 German Social Code Book IX [Sozialgesetzbuch IX, SGB IX], pursuant to which the employer should notify the representative body for severely disabled employees extensively and without undue delay in all matters concerning the severely disabled persons and that the representative body should be heard prior to a decision.
The LAG Baden-Württemberg rejected this by decision dated 7 April 2017 (docket No. 7 TaBV 1/17), stating that if the caution was in no way whatsoever connected with the severe disability of the employee in question, then such caution affects the disabled employee in the same way as a caution of an employee without disability. Hence, there was also no reason to give the severely disabled employee special protection before declaring the caution. The aim of the statutory regulation in Sec. 95 para. 2 sentence 1 SGB IX is only to compensate for disadvantages arising through the disability. Moreover, no right of involvement could be derived from other provisions of the SGB IX.
The decision of the LAG Baden-Württemberg can be welcomed as it once again shows the meaning and purpose of the special provisions of the employment law provisions on the severely disabled in the SGB IX. Their purpose is to compensate the disadvantages suffered by severely disabled or equivalent employees as a result of their disability and should not lead to any form of preferential treatment of this group of persons. The compensation of disadvantages resulting from the disability must be the guiding principle when interpreting and applying the special protective provisions of the SGB IX in the employment relationship. Disciplinary measures can only be subject to increased requirements if and to the extent the employee’s severe disability plays a role in this connection. In cases of misconduct which could equally be displayed by any other employee, however, and where any connection with the disability is thus absent, the employee does not merit special protection. Conversely, however, this also means that if an employee’s misconduct is based on his disability – and this is not actually such a remote possibility in case of impairments of a mental or emotional nature – the special protective provisions of the SGB IX must be considered. In this case, this can also include the due and proper inclusion of the representative body for severely disabled employees before the declaration of a caution.
In an interesting decision the LAG had to deal with the interpretation of a provision in a social plan regulating the calculation of the severance pay (judgement dated 12 October 2017, docket No. 17 Sa 1124/17). The judgement gives grounds to illustrate the considerable risk potential that arises from the combination of complex negotiating issues and the particular burden this puts upon the negotiators.
On grounds of a reduction in personnel for operational reasons, a central works council and the sued employer had negotiated over the conclusion of a social plan which also contained a severance pay formula. According to this formula, the severance was to be calculated on the basis of the gross monthly salary multiplied by a factor and the term of service with the company; the latter was defined as being “full months of service with the company […] divided by twelve”. At the last meeting of the conciliation board, a draft social plan had been submitted which no longer contained the addition “divided by twelve”, whereby this amendment – unlike changes made in other places - had not been marked as such. The business partners signed the social plan with this wording.
The claimant initially received a severance in the aggregate gross amount of EUR 97,300, but subsequent sought payment of a further severance sum in the gross amount of EUR 102,700, with the result that the maximum amount envisaged in the social plan of a gross aggregate sum of EUR 200,000 was achieved. In his opinion, the calculation of the severance sum according to the formula was based on his term of service which was calculated according to months (205) as opposed to years (17.08). The wording of the social plan was clear insofar, which meant that no room for any other interpretation existed. The Employment Court [Arbeitsgericht, ArbG] of Dortmund dismissed the case in the first instance. The claimant appealed against the judgement before the LAG Hamm.
The LAG decided in the defendant’s favour – the claimant’s claim to a further severance payment could not be derived from the social plan. The formula for calculating the severance contained an editorial error and was to be understood in such a way that the term of service was to be calculated according to full months divided by twelve. Although one should proceed on the basis of the – at first glance clear – wording of the provision, one also had to consider the true intention of the business partners and their intended purpose, pursuant to which the term of service with the company should be calculated according to years. This could also be derived from examining the severance pay formula in association with further norms within the social plan. Thus, a severance sum in the asserted amount contradicted the purpose of the social plan because the actual economic disadvantages associated with the loss of the job would be overcompensated – a severance sum based on months would be higher than the remuneration received by the dismissed employee if he had continued working for the defendant. An editorial error could also be concluded from the fact that no dispute amongst the business partners over the calculation of the term of service with the company according to years could be derived from the course of the negotiations.
This decision clearly illustrates what mishaps can occur during social plan negotiations, which often take the parties involved to the very limits. Even minor mistakes – such as an editorial error as in this case – can have considerable financial consequences. We must once again advise employers to take extreme care and pay exceptional attention when negotiating complex social plan provisions.
Dr. Alexander Willemsen
For shop constitution law and the law regulating corporate codetermination, the reform of the German Temporary Employment Act [Arbeitnehmerüberlassungsgesetz, AÜG] through the new Sec. 14 para. 2 AÜG has now certainly brought clarity on whether and, if so, to what extent, temporary workers must be considered in the “threshold values” named therein. However, it is still disputed whether temporary workers should also be “counted” within the framework of Sec. 17 para. 1 German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG] in the size of the business and thus in the obligation to notify mass dismissals. The BAG has now used this opportunity to present this question to the ECJ for a preliminary ruling pursuant to Art. 267 TFEU (BAG judgement dated 16 November 2017, 2 AZR 90/17 (A)). The ECJ has jurisdiction here because the provision in Sec. 17 KSchG on notifiable mass dismissals implements the Mass Dismissals Directive 98/59 EC and uniform jurisprudence must be ensured insofar.
In the situation up for decision by the BAG the defendant had terminated the employment relationship of the claimant and additionally declared at least a further 11 additional terminations. No notification of the mass dismissal was made. The claimant filed an unfair dismissal action and asserted that no more than 120 employees worked at the business. Hence, twelve terminations would already mean that the defendant had dismissed 10% of the employees who regularly worked at its business on a permanent basis, with the result that – lacking the prior mass dismissal notice, their termination was invalid. The defendant, in contrast, was of the opinion that the four temporary workers who were employed at its business had to be included in the calculation of the number of employees, which meant that a mass dismissal notice was not actually necessary.
The action was dismissed by the ArbG and granted by the LAG. The BAG decided to stay proceedings and present the ECJ with the decisive question of whether and, if so, under which conditions, temporary workers should be included in the determination of the number of employees working at a business within the meaning of Sec. 17 para. 1 sentence 1 No. 2 KSchG.
The ECJ’s expected decision will be of considerable practical relevance because, as the present case shows, temporary workers can swiftly “tip the scales” in the calculation of threshold values and thus the need to notify a mass dismissal. In practice we would advise constantly keeping a shadow account (with and without the consideration of temporary workers) until such time, and in case of doubt to preferably observe the mass dismissal provisions.
The year 2018 will bring us a multitude of amendments of which we have already informed you in detail through the course of 2017. Since the following amendments, in particular, will have significant consequences for business practice, we would like to summarise them for you again here:
Introduction of the Transparency of Remuneration Act
The German Transparency of Remuneration Act [Entgelttransparenzgesetz, EntgTransG] aims to enforce the equal pay of women and men doing the same or equivalent work.
Please note: employees in businesses regularly employing more than 200 employees at the same employer will first be able as of 6 January 2018 to demand information on the comparative wage of the respective other sex as well as on the wage determination criteria and processes.
Changes in company pension law
Through the German Act Implementing the EU Mobility Directive [Gesetz zur Umsetzung der EU-Mobilitäts-Richtlinie] as well as the German Act to Improve Company Pensions [Betriebsrentenstärkungsgesetz, BetrRSG] one of the greatest reforms of company pension law will become effective. The key changes are:
- Establishment of the defined contribution commitment (“social partner model”)
- Opting-out systems for deferred compensation
- Change in the regulation of non-forfeitability
- Extended information rights of former employees
Limitation of settlements for minimal pension expectancies
Implementation of the Federal Act to Improve the Participation and Autonomy of Disabled Persons
The Federal Act to Improve the Participation and Autonomy of Disabled Persons [Bundesteilhabegesetz, BTHG] aims to improve the lives of people with disability by promoting a more autonomous lifestyle.
- Provisions on severely disabled persons moved from Part 2 to Part 3 of the SGB IX
- Redefinition of “disability” within the meaning of Sec. 2 para. 1 SGB IX
Requirement of employers to appoint at least one integration officer who represents the employer in matters concerning several disabled people, Sec. 181 SGB IX new version.
Minimum Wages Act
The statutory minimum wage (EUR 8.84 per hour) applies by mandatory force and without exception in all branches
With the mandatory implementation of the EU General Data Protection Regulation (GDPR) and the entry into force of the new German Federal Data Protection Act [Bundesdatenschutzgesetz, BDSG] as of 25 May 2018 data protection law will be of even greater importance in personnel work.
The key driving force for enterprises is not the material changes, but the severely increased fines which can be imposed for breaches, namely up to EUR 20 million, respectively 4% of the global turnover.
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
Telefax: +49 69 707968 111
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: +49 221 2091 346
Telefax: +49 221 2091 333
Telephone: +49 (0)69 707968 184
Telefax: +49 (0)69 707968 111