Newsletter Employment Law I/2015

 

I/2015

With the German Minimum Wage Act [Mindestlohngesetz, MiLoG], the year 2015 has brought us a reform which has already had a major impact on many aspects of business practice. Even though an initial, as yet not legally binding decision of the Labour Court [Arbeitsgericht, ArbG] of Berlin has since been pronounced on the impermissible deduction of holiday pay and special annual payments from the statutory minimum wage, many specific questions on the MiLoG have not yet been clarified and will be occupying the labour courts over the next few years. We will naturally be monitoring these developments and reporting them to you on a regular basis. Our current Newsletter already contains a number of new decisions of the Federal Labour Court [Bundesarbeitsgericht, BAG] and Higher Regional Labour Courts [Landesarbeitsgericht, LAG] which are of particular relevance to everyday personnel issues.

 

Current Legal Developments

 

1. Employment of company pensioners – Federal Labour Court draws initial boundaries
2. Full holiday claim when changing from full-time to part-time employment
3. Holiday cannot be granted “as a precautionary measure”
4. Exclusion from dismissal in the social plan must also apply to employees opposing a transfer of business
5. Limitation of an employment term by court settlement
6. Transfer of business – right of opposition only vis-à-vis the former employer or new owner
7. Employee’s claim to the implementation of company reintegration management – but without legal counsel

 

Current Legal Developments
1. Employment of company pensioners – Federal Labour Court draws initial boundaries

 

The employment of company pensioners is nothing new. However this practice has distinctly increased over the last few years. The shortage of skilled employees is making enterprises increasingly keen to employ staff beyond pensioning age.

 

No special statutory basis exists upon which employment relationships can be concluded with company pensioners. In practice, therefore, fixed-term agreements are frequently concluded, giving both the enterprise and the company pensioner as much leeway as possible.

 

The Federal Labour Court (BAG) had to decide on 11 February 2015 (docket No.: 7 AZR 17/13) on an action filed by a 68-year-old employee for the lifting of the limitation of his employment term. The employee, who was born in 1945, had no provision in his employment contract on the termination of the employment relationship upon reaching statutory retirement age. The enterprise and the employee agreed - at a time when the employee had already reached retirement age - on the termination of the employment relationship on a specific effective date. The agreement, which was now for a limited term, was subsequently extended twice. In his legal action for the cancellation of the limitation of his employment term, the employee claimed that the employment relationship did not end on grounds of the last limitation as per 31 December 2011, but should be continued beyond this time on an indefinite basis.

 

The BAG decided that the employment relationship did not end on grounds of the limited term. According to the BAG, the fact that an employee draws a statutory retirement pension in itself does not justify the limitation of the term of the employment agreement as a reason inherent in the person of the employee (Sec. 14 Subsec. 1 sentence 2 No. 6 German Part-Time and Fixed-Term Employment Act [Teilzeit- und Befristigungsgesetz, TzBfG]. An additional requirement was that the purpose of the agreed limitation of the term was the specific planning of the employment of new junior staff in the enterprise.

 

Even with the peculiarity of this case that it was only after the employee had reached the age limit that the parties first agreed to end the ongoing employment relationship by agreeing on a limited term, age in itself can nevertheless not be a reason for limiting the employment term with the same employer. Thus, if an employee is also to be employed in the enterprise for a limited term at retirement age, a further-reaching and acknowledged reason for the limited term is required.

 

If the previous employment relationship terminated when the employee reached the regular age limit and the parties subsequently want to agree on a fixed-term employment on the basis of a new contract, then other reasons for limiting the term, such as the temporary need for work services at the business, must exist to justify the fixed term.

 

Other arrangements for employment with an enterprise after reaching retirement age, e.g. on the basis of contracts for works or services, are doubtlessly conceivable, but here as well one must ensure that an employment relationship does not actually exist in the individual case.

 

Jörn Kuhn

 

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2. Full holiday claim when changing from full-time to part-time employment

 

If part-time employees generally work fewer days per week than full-time employees, their holiday claim is determined proportionately. This means that the annual holiday that applies to full-time employees is recalculated for part-time employees pro rata in the ratio of the number of their weekly working days to the number of weekly working days of a full-time employee. According to the previous case law of the BAG, if an employee changed from a full-time to a part-time position, then the holiday was also recalculated in such a way that the holiday claims that had already been acquired by the employee had to be adjusted according to the ratio of the new number of weekly working days to the former number of weekly working days. This case law has now been rejected by the BAG in its judgement dated 10 February 2015 (docket No.: 9 AZR 53/14 [F]). According to this, an employee retains the holiday claim he has already acquired in full if he changes from full-time to part-time and was unable to take any holiday before changing his working hours.

 

In the case up for decision, the Collective Agreement for the Public Service Sector [Tarifvertrag für den öffentlichen Dienst, TVöD] applied to the employment relationship between the parties. Pursuant to Sec. 26 Subsec. 1 sentences 1 and 2 TVöD, employees are entitled to paid annual holiday of 30 days when they work a five-day week. In case of an allocation of the weekly working hours other than the five-day week, the holiday claim increases or decreases accordingly (Sec. 26 Subsec. 1 sentence 3 TVöD). The claimant had worked at the defendant on a full-time basis until 15 July 2010. As of 16 July 2010 he changed to part-time employment and henceforth only worked a four-day week. During his full-time employment in 2010 he had not taken any holiday. Upon application, the defendant granted the claimant 24 holiday days for the calendar year 2010 after he had changed to part-time. It based this entitlement on the fact that the collectively agreed holiday for a five-day week of 30 days had to be reduced by one fifth in accordance with the reduction of his weekly working time to four days. The claimant was of the opinion that he was entitled to 27 days’ holiday for the calendar year 2010 as opposed to just 24 because he had worked full-time until 15 July 2010, i.e. 15 days from the first half of the year (full-time employment) and 12 days from the second half of the year (part-time employment).

 

The BAG agreed with the claimant and supported its decision in reference to the case law of the European Court of Justice (ECJ dated 13 June 2013 – docket No.: C-451/12) on the fact that, with an employee’s transfer from full-time to part-time employment, a proportionate reduction of the claim to holiday which had been acquired by the employee during the period of his full-time employment but which he had been unable to take during such period, breached European Union law (in particular Art. 7 (1) of Directive 2003/88/EC and Sec. 4 No. 2 of the Framework Agreement on Part-Time Employment in the Appendix to Directive 97/81/EC). Accordingly, the collectively agreed norm of Sec. 26 Subsec. 1 sentence 3 TVöD also had to be deemed invalid on grounds of its violating European law to the extent it reduced the number of holiday days acquired during the full-time employment.

 

In terms of employment law practice, this means that if an employee changes from full-time to part-time employment, a recalculation of those days of holiday which were already acquired by the employee during his full-time employment is impermissible. Although there has not yet been any decision on cases where the holiday claim arises from the German Federal Holiday Entitlement Act [Bundesurlaubsgesetz, BUrlG], because of the required interpretation in conformity with the Directive and the precedential application of European Union law, we should be able to assume corresponding future case law of the BAG.

 

Dr. Sven Schulze

 

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3. Holiday cannot be granted “as a precautionary measure”

 

The precautionary granting of holiday by releasing an employee from his employment duties in connection with a dismissal has been a common approach taken by many employers in order to avert a double financial burden. If the declared dismissal turned out to be invalid, then employers had to pay the employee his salary for the period of the unjustified release from duties, but the holiday claim was fulfilled in natura through the precautionary granting of holiday, thus avoiding claims to the payment in lieu of holiday.

 

By judgement of 10 February 2015 the BAG has restricted this practice to a specific case configuration. If the employer declares an immediate termination and simultaneously declares the ordinary termination as an alternative measure, the employee keeps his holiday claim even if the employer has declared in the dismissal letter that - in the event of the invalidity of the extraordinary termination - the employee is irrevocably released from his obligation to fulfil his employment duties, such garden leave including all claims to holiday and overtime, until the expiry of the ordinary termination notice period (docket No.: 9 AZR 455/13). A prerequisite for the fulfilment of the claim to recreational holiday is, in addition to being released from duties, also payment of the holiday remuneration. Holiday is therefore only validly granted through the declaration of a release from duties if the employer pays or promises unreservedly to pay the employee the holiday remuneration before the holiday is taken.

 

In the said case the employee was dismissed without notice and, as an alternative measure, dismissed with ordinary notice. Furthermore, in the event that the immediate termination was invalid, the employer irrevocably released the employee until the expiry of the ordinary termination notice period from his duties, such garden leave including all holiday claims. In the unfair dismissal action, the parties concluded a settlement which terminated the employment relationship with a comprehensive holiday remuneration clause. In a subsequent legal action the employee claimed inter alia payment in lieu of holiday. The sued employer countered that the claimant had been granted the holiday in natura through the precautionary irrevocable release from his duties in the dismissal letter.

 

Although the BAG decided against the employee on grounds of the court settlement, had there been no such settlement, the BAG would have granted the employee the payment in lieu of holiday. The BAG based its decision on Sec. 1 BUrlG, which presupposes the payment of the remuneration for the period of the holiday in addition to the release from duties for the fulfilment of the claim to recreational holiday.

 

The case law of the BAG is now in line with the European Directive 2003/88/EC, respectively 96/104/EC, as well as the European Court of Justice’s case law on this issue (ECJ 26 March 2006, docket No.:  C-131/04 - Robinson Steel).

 

In practical terms it is still advisable to declare a precautionary ordinary termination along with an immediate dismissal even if a precautionary remuneration of holiday cannot be combined with this, for an unreserved promise to remunerate holiday or its actual payment to the employee dismissed without notice will doubtlessly not generally come into consideration.

 

Jamilia Becker

 

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4. Exclusion from dismissal in the social plan must also apply to employees opposing a transfer of business

 

A social plan which envisages the exclusion of terminations for operational reasons may not exclude employees who oppose a transfer of business from this exclusion. In the opinion of the LAG Berlin-Brandenburg in its decision dated 10 February 2015 (docket No.: 7 Sa 1619/14), which is thus far only available as a press release, it violates the principle of equal treatment of shop constitution law to only grant the extended protection against dismissal to a part of the workforce affected by a change of business. This violation leads to the invalidity of the said limitation.

 

In the case up for decision the defendant – a bank – transferred a business division to another credit institute. It also agreed with the works council on a social plan which excluded terminations for operational reasons. Expressly excluded from this exclusion, however, were those employees who opposed the transfer of their employment relationships to the acquirer of the business division. The claimant was amongst these employees, and was then terminated for operational reasons by the defendant. She filed an unfair dismissal action.

 

Following the opinion of the employment court, the LAG Berlin-Brandenburg deemed the dismissal to be invalid, for the claimant could still plead the exclusion of terminations in the social plan despite having opposed the transfer of business. In the opinion of the LAG, the agreed protection against dismissal had to benefit all employees covered by the social plan. According to established case law, the unequal treatment of employees within a social plan can only be justified through its purpose of mitigating the economic disadvantages of a change of business. The LAG states in this connection, however, that it is specifically that part of the workforce which opposes the transfer of the employment relationship that is particularly dependent on being protected against a termination for operational reasons. The exercise of the constitutionally guaranteed right of opposition pursuant to Sec. 613a Subsec. 6 German Civil Code [Bürgerliches Gesetzbuch, BGB] should also not lead to negative consequences. The said differentiation therefore violated the principle of equal treatment of shop constitution law pursuant to Sec. 75 Subsec. 1 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG] and was invalid.

 

The decision is not yet legally binding, the LAG Berlin-Brandenburg has admitted the appeal to the BAG. Whether the BAG will adopt this jurisprudence therefore remains to be seen. A confirmation of the decision by the BAG could, however, have far-reaching practical consequences, for in this case the exclusion of employees who oppose the transfer of business from social plan severance payments might also be legally invalid.

 

Isabel Hexel

 

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5. Limitation of an employment term by court settlement

 

Despite the supposedly clear wording of the law, not all court settlements represent a valid reason for stipulating a limited term within the meaning of Sec. 14 Subsec. 1 sentence 2 No. 8 TzBfG. In its latest judgement dated 12 November 2014 (docket No.: 7 AZR 891/12) the BAG has confirmed its case law on the restrictive interpretation of said reasons for limiting the employment term. Rather, one must ensure that the settlement is concluded in the context of a litigation over the (continued) existence of an employment relationship. The court must also – as already highlighted by the BAG in a preceding decision, BAG 15 February 2012, docket No.: 7 AZR 734/10) – have been involved in the procurement of the settlement. This is not the case if the parties propose a settlement to the court pursuant to Sec. 278 Subsec. 6 sentence 1 alternative 1 German Code of Civil Procedure [Zivilprozessordnung, ZPO], since in this case the court only records the settlement and specifically does not bear any responsibility for its content.

 

In the underlying case, the claimant was initially employed at the defendant as a security guard and dog handler in 6 consecutive fixed-term employment contracts. In case of the last 4 employment contracts, the limitation of the employment term was agreed by court settlement. After the claimant had been turned down for a job that had been advertised at the defendant during the term of his last employment contract, he applied for an interim injunction with a view to being offered an employment contract in accordance with the job advertisement. At the oral hearing of the proceedings, the parties ultimately agreed in a procedural settlement that the fixed-term employment relationship that still existed between them was to be continued at unaltered conditions for a further fixed term of a few months. Following another legal action by the employee, the BAG ultimately had to decide on the validity of the limitation of the employment term that had been agreed by way of the court settlement.

 

After the dismissal of the case by the Labour Court and the Appeal Court, the BAG referred the litigation back to the Regional Labour Court with regard to a possible legally abusive practice of a repeat chain of limited-term contracts, but recognised the last limitation of the employment agreement that had been agreed within the scope of the procedural settlement as a material reason pursuant to Sec. 14 Subsec. 1 sentence 2 No. 8 TzBfG. In this connection, the peculiarity of the case was that the corresponding settlement had not been procured in a judicial dispute over the existence of the employment relationship at that time, but in the dispute over the continued existence of the employment relationship through the conclusion of a subsequent contract. Contrary to the wording of Sec. 14 Subsec. 1 sentence 2 No. 8 TzBfG, in the opinion of the BAG not all court settlements justify a limitation of the employment relationship agreed therein. Rather, the decisive factor is that due consideration is given to the employee’s interest in the preservation of his employment relationship. For this, the court must be familiar with the reciprocal legal positions of the parties concerning the continued existence of the employment relationship in order to be able to fulfil its duty to protect the employee within the scope of its settlement proposal. This is not only the case with unfair dismissal actions and actions to cancel limitations of employment terms, but also with litigations concerning the conclusion of subsequent contracts, since here as well the court involved in the settlement must be sufficiently informed of the contractual history and the legal risks. In contrast, this is not the case with litigations concerning warning notices, for example.

 

Isabel Hexel

 

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6. Transfer of business – right of opposition only vis-à-vis the former employer or new owner

 

In a decision dated 11 December 2014 (docket No: 8 AZR 967/13) the BAG had to deal with an interesting configuration: on grounds of two transfers of business in the years 2007 and 2008, the business employing the claimant was initially transferred on 1 September 2007 from the defendant to V-GmbH and then on 1 December 2008 from V-GmbH to T-GmbH. On 12 December 2009 the claimant had also signed a new employment contract – at worst conditions – with T-GmbH. On 26 May 2011 the incorrectness of an identically worded notification letter concerning the first transfer of business (from the defendant to V-GmbH) was established by legally binding decision, albeit concerning a different employment relationship. This caused the claimant to file the disputed opposition to the first transfer of business vis-à-vis the defendant on 7 October 2011. By further letter of the same date, he also opposed the transfer of his employment relationship from V-GmbH to T-GmbH.

 

Of the following two complaints, the first – concerning the opposition to the transfer of the employment relationship from V-GmbH to T-GmbH – ended by legally binding dismissal of the case in the first instance. In the second proceedings the Regional Labour Court of Thüringia ruled that the claimant’s opposition to the transfer of his employment relationship from the Defendant to V-GmbH was forfeited. Firstly, the element of time had been fulfilled, because more than four years had lapsed since the transfer of business. Secondly, the element of circumstance had also been fulfilled, because the claimant had concluded a new employment contract in 2009 and thus acknowledged T-GmbH as his new employer.

 

The BAG ultimately deemed this decision to be correct, yet false in its reasoning. The question of forfeiture was irrelevant, because at the time of the opposition in 2011 the defendant had neither been the “previous employer” nor “new owner” within the meaning of Sec. 613a Subsec. 6 sentence 2 BGB; these had been V-GmbH and T-GmbH. For the transfer of business, the “previous employer” was always the party which owned the business prior to the current employer. On grounds of the second transfer of business on 1 December 2008, this had been V-GmbH and not the defendant at the time of the opposition.

 

The decision is correct. The BAG consistently oriented itself on the wording of Sec. 613a Subsec. 6 sentence 2 BGB. However, this decision still does not remove the risk of the so-called “domino effect”, i.e. that in each case of an invalid notification the employee can jump back step for step to the beginning of a multi-linked chain of sales. This was only excluded in the present case because the chain had been interrupted and the opposition to the transfer of the employment relationship from V-GmbH to T-GmbH had been rejected with legally binding effect. However, from the employer’s point of view it is advisable to carefully check in future, in case of an opposition to a transfer of business, whether the correct addressee has also been chosen by the employee.

 

Dr. Alexander Willemsen

 

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7. Employee’s claim to the implementation of company reintegration management – but without legal counsel

 

Two recently published judgements of the labour courts have further defined the legal framework for company reintegration management [Betriebliches Eingliederungsmanagement, BEM] within the meaning of Sec. 84 Subsec. 2 German Social Code Book IX [Sozialgesetzbuch, SGB IX], which had only been very vaguely worded by the legislator. Pursuant to Sec. 84 Subsec. 2 SGB IX employers must implement BEM measures for all (not just severely disabled) employees who are incapacitated for work without interruption or repeatedly for more than 6 weeks in a year in order to avoid endangering the employment relationship on health-related grounds. This applies irrespective of the size of the enterprise and also independently of the existence of a works council. The legislator has not concretely specified the content and process of BEM measures, simply naming the parties who are to be involved besides the employee in question, such as works/staff council, representatives of the severely disabled, integration office.

 

Over the past few years the case law of the BAG and of the various instances has developed further minimum requirements of practical business relevance for the implementation of BEM. The LAG Hamm and the LAG Rhineland-Palatinate have now contributed two further important aspects.

 

The Regional Labour Court of Hamm had to decide whether an employee can assert his own claim to the implementation of BEM against his employer and affirmed this claim by judgement dated 13 November 2014 (docket No: 15 Sa 979/14; appeal on points of law admitted). The implementation of BEM is initially a public-law duty of the employer. However, as a concretisation of the general (contractual) duty to ensure employee welfare, the consequence hereof is a claim of the employee against the employer to the implementation of BEM. In consequence this can mean that, if no BEM is implemented, the employee can assert damage claims or rights to refuse performance. Moreover, the implementation of BEM is also strongly advisable before declaring a termination on grounds of illness in order to avoid facing increased duties of representation and proof in unfair dismissal proceedings.

 

Both the LAG Hamm and the LAG Rhineland-Palatinate also had to decide in a judgement of 18 December 2014 (docket No.: 5 Sa 518/14) on the question of whether an employee is entitled to call in a lawyer to the meetings held within the scope of the BEM. Both courts reject such a right of the employee. In justification hereof, they pointed out that the wording of Sec. 84 Subsec. 2 SGB IX does not envisage this. Moreover, the employer can neither enforce a BEM meeting nor take unilateral measures during the course of such meeting, which means that the employee requires no legal assistance. Both courts expressly reject any parallel to hearings in case of terminations on grounds of a suspicion, for the BEM’s very purpose is to preserve the employment and not to fight out opposing interests of the parties to the employment contract. The argument of an “equality of arms” therefore does not apply. However, this might be assessed differently if the employer itself brings a legal representative in to attend the BEM meeting.

 

In practical terms the decisions have two-fold relevance: firstly, it has become repeatedly clear that the employer should implement corresponding arrangements for company reintegration management (shop agreements, recommended actions and the like) in its own interests, to the extent not already implemented. Secondly, the contractual parties should initially sound out the possibilities of preserving the employment relationship at the BEM meeting. Comprehensive legal counselling in preparation hereof would be advantageous.

 

Kathrin Vossen

 

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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