Newsletter Employment Law II/2015

II/2015

 

The legislator has been active again and the German Tariff Uniformity Act [Tarifeinheitsgesetz] will be entering into force shortly. How long it will remain in force is uncertain, however, for several unions, including the doctors’ union Marburger Bund and the pilots’ union Cockpit, are already drafting statements of claim to have the Act examined by the German Federal Constitutional Court [Bundesverfassungsgericht]. Hence the dispute over the fundamentally relevant questions of tariff autonomy will not come to an end when the law is enacted, but will actually begin in a new quality. These are exciting times, not least also due to the case law of the labour courts, whose new decisions exert a constant influence over daily operations at businesses.

 

1. Current Case Law

 

1.1 Individually agreed termination notice periods versus the statutory notice period
1.2 Validity of clauses that waive the right of legal recourse in cancellation agreements in the event of the threat of termination
1.3 Change in case law: Holiday curtailment due to parental leave can no longer be made after employment relationship has ended
1.4 Termination on grounds of an excessive debit balance on the flexitime working hours account
1.5 BAG submits question to ECJ concerning the dynamics of a reference clause after a transfer of business
1.6 The ECJ and the term “temporary” within the meaning of the Temporary Employment Directive
 
2. Legal Developments

 

1. Current Case Law
1.1 Individually agreed termination notice periods versus the statutory notice

We are all familiar with the situation: the employer wants to terminate the employment relationship by ordinary termination and discovers upon reading the employment contract that, in application of the contractually agreed notice period, a different date for the end of the employment relationship was agreed to the termination date applicable in case of the statutory notice period pursuant to Sec. 622 German Civil Code [Bürgerliches Gesetzbuch, BGB]. This situation arises in particular in cases where the statutory notice period has increased by stages pursuant to Sec. 622 Subsec. 2 BGB due to the employee’s many years of service with the company. In such a situation it is not always evident at first glance which termination notice period is the more favourable – and hence the right one - for the employee, for as we know, the statutory notice periods can only be deviated from in favour of a longer notice period (Sec. 622 Subsec. 5 sentence 3 BGB).


The Federal Labour Court [Bundesarbeitsgericht, BAG] had to decide in a case in which a notice period of six months as per 30 June or 31 December of the year was contractually agreed but, because the employee had worked at the company for more than 20 years, the statutory provision stipulated a notice period of seven months to the end of a month. The employer dismissed the employee for operational reasons on 19 December 2012 with effect as per 30 June 2013. In the unfair dismissal proceedings the employee pleaded inter alia the non-observance of the statutory notice period of seven months to the end of the month – with which the employment relationship would only have terminated as per 31 July 2013 – as well as the resulting invalidity of the termination for this reason.


In its judgment dated 29 January 2015 (docket No.: 2 AZR 280/14) the BAG has now provided answers to the various questions arising in such a case.

Firstly, the BAG rejects the idea of combining the termination notice periods and termination dates of the various regulations to obtain the most favourable structure for the employee; a notice period of seven months to the end of the half-year therefore does not come into consideration. Rather, a so-called ensemble or group comparison needs to be made. In the BAG’s opinion, however, the contractual provision can only be more favourable and therefore have priority if it always - and thus irrespective of the specific termination date - leads to the employee remaining in the employment relationship for longer. It does not suffice that in 8 of 12 months of a year the contractual agreement – as in the case here – leads to longer and hence better protection.

The BAG does not officially answer the question of whether the individually agreed contractual notice period can at least be applied until it ultimately collides with an extended statutory period pursuant to the notice period stages regulated in Sec. 622 Subsec. 2 BGB due to the employee’s increasing years of service, as this issue was not of relevance to the decision in the present case. The BAG does, however, indicate that there are good reasons supporting such a view.
 
Finally, the BAG reconfirms that a termination that has been declared to a “false” date is not invalid in its entirety for this reason. Rather, such termination must be understood to mean a termination to the next possible date, hence in this case a termination as per 31 July 2013, assuming that the termination letter allows such an interpretation.
 
In practical terms this decision means that a favourability comparison must be made between the contractually agreed and the statutory termination provision, at least once the employee reaches the pertinent stage of Sec. 622 Subsec. 2 BGB, and that the contractual agreement to a conceivable termination declaration date within a year may not lead to a notice period that is shorter than the statutory period. This needs to be hypothetically examined for each month of the year. The contractual agreement can only be applied if this examination shows a consistently longer notice period in the employee’s favour. Even though the specification of a false termination date does not lead to the invalidity of the termination, it is still advisable to generally add the following in the termination letter “…alternatively to the next possible date…” in order to avoid further points of contention.

 

Kathrin Vossen

 

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1.2 Validity of clauses that waive the right of legal recourse in cancellation agreements in the event of the threat of termination

In order to avoid possible lawsuits before the labour courts, employers frequently conclude cancellation agreements with employees in which the employees formally waive their right to seek legal recourse. Caution is required, however, if the employer has threatened to (extraordinarily) terminate the employment relationship prior to the conclusion of the cancellation agreement. In its judgement dated 12 March 2015 (docket No.: 6 AZR 82/14) the BAG decided that cancellation agreements may be judicially contested despite a clause waiving legal recourse if the threat of termination was unlawful. 

The BAG dealt with the question of when such knowledge within this meaning is gained in its decision dated 25 September 2014 (docket No.: 2 AZR 567/13) and in doing so confirmed its previous jurisprudence. In the underlying case a personnel manager, who simultaneously had joint general commercial power of representation [Gesamtprokura], had used the addition “ppa” customarily used by officers vested with general commercial power of representation [Prokurist]. An original power of attorney was not attached to the termination. The person signing the termination had been appointed to the position of personnel manager, which had also been notified to the claimant. Firstly, the BAG corroborated that an employee cannot plead a lack of knowledge of the authorisation if the declaring party is registered as Prokurist in the Commercial Register [Handelsregister, HR]. Secondly, in the case at hand the BAG held that the recipient of the declaration also had knowledge excluding the right of rejection if the personnel manager was known to have authorisation to establish and terminate employment relationships. This applied irrespectively of whether or not the person signing the termination declaration validly represented the employer in his position as Prokurist.

 

In the case underlying the decision the defendant accused the claimant in a personnel interview of the theft of two tins of soup from its warehouse stock. It threatened the employee with immediate dismissal and criminal action if the claimant did not immediately sign a cancellation agreement. The parties subsequently concluded a cancellation agreement, pursuant to which the employment relationship was to end with immediate effect without the payment of any compensation. The contract also envisaged a formal waiver of the employee’s right of opposition and legal recourse. On that very same day, however, the claimant contested the cancellation agreement on grounds of an unlawful threat. He then filed legal action with the labour court and sought a declaratory judgement to the effect that the employment relationship continued to exist.

 

In the opinion of the BAG, a formal waiver of legal recourse contained in a cancellation agreement is invalid if the employee has signed the cancellation agreement in order to avoid a termination which was unlawfully threatened by the employer. In this case the employee can contest his declaration of intent to conclude the cancellation agreement pursuant to Sec. 123 BGB. However, the formal waiver of the right to seek legal recourse deprives the employee of his chance to also have the contestation judicially examined, with the result that the cancellation agreement ultimately cannot be contested in a legally enforceable manner. A clause waiving the employee’s right to seek legal recourse therefore puts the employee at an unreasonable disadvantage within the meaning of Sec. 307 Subsecs. 1 and 2 No. 1 BGB if an informed employer would not seriously be able to consider terminating the employment relationship and the threat is therefore unlawful. Ultimately, the waiver of the right of legal recourse therefore shares the legal fate of the cancellation agreement.

 

In terms of labour law practice it is established that, when using clauses that waive the employee’s right to seek legal recourse, employers must precisely consider the circumstances in the individual case in order to avoid risking the clause’s invalidity. This applies in particular in case of circumstances which could entitle the employee to contest the cancellation agreement. Pursuant to the BAG’s decision of 12 March 2015, namely, it is established that employers cannot prevent a judicial examination of the employee’s declared contestation.

 

Dr. Sven Schulze

 

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1.3 Change in case law: Holiday curtailment due to parental leave can no longer be made after employment relationship has ended

Once an employment relationship has ended, employers can no longer reduce an employee’s recreational leave on grounds of parental leave pursuant to Sec. 17 Subsec. 1 sentence 1 of the German Federal Act on Parental Benefit and Parental Leave [Gesetz zum Elterngeld und zur Elternzeit, BEEG]. By decision dated 19 May 2015 (docket No.: 9 AZR 725/13), the BAG amended its previous case law and now requires for the employer’s authority to reduce the holiday that the claim to recreational leave still exists. This is not the case if the employment relationship has ended and the employee is entitled to remuneration in lieu of holiday. The former, contrary case law of the BAG still applied the surrogate theory, which has since been completely abandoned by the Senate.

In the case underlying the decision, the claimant was employed as of April 2007 as an occupational therapist at the defendant’s retirement home. After the birth of her son in December 2010 the claimant went on parental leave from mid February 2011 until the end of her employment relationship. The employment relationship ended on 15 May 2012. The claimant subsequently demanded the calculation and settlement of her holiday claims from the years 2010 to 2012. In September 2012 the Defendant declared the reduction of the claimant’s recreational leave on grounds of her parental leave.

In the BAG’s opinion, the defendant was no longer able to reduce the claimant’s holiday claim at that time. The provision in Sec. 17 Subsec. 1 sentence 1 BEEG, pursuant to which the employer can reduce an employee’s recreational leave by one twelfth for each full month of parental leave presupposes the existence of a claim to recreational leave as opposed to a claim to remuneration in lieu thereof. According to the new case law of the BAG, the claim to remuneration in lieu of holiday is no longer a surrogate for the holiday claim, but a purely monetary claim. Although the remuneration claim originated from legal provisions regulating holiday entitlement, once the claim initially accrues it then becomes a part of the employee’s assets. Through this, it does not differ in the legal respect from any other payment claims of the employee against the employer.

An outstanding question in said case was whether the employer’s authority to reduce the holiday claim pursuant to Sec. 17 Subsec. 1 sentence 1 BEEG is reconcilable with union law. This is controversial in the case law of the instances and has not yet been clarified by the European Court of Justice [ECJ]. Whilst the Labour Court [Arbeitsgericht, ArbG] of Karlsruhe wants to remove the first three months of parental leave from the reduction pursuant to Sec. 17 Subsec. 1 sentence 1 BEEG, the Regional Labour Courts [Landesarbeitsgericht, LAG] of Hamm, Hesse and Rhineland-Palatinate deem the provision to conform with union law. Irrespective of this question, employers are therefore well-advised to declare any intended reduction of the holiday claim due to parental leave as early as possible, but in all events prior to ending the employment agreement.

 

Isabel Hexel

 

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1.4 Termination on grounds of an excessive debit balance on the flexitime working hours account

The ordinary, conduct-based dismissal of an employee can be permissible on grounds of his repeated considerable exceedance of the permissible amount of minus hours on his flexitime account. The Regional Labour Court of Mecklenburg-West Pomerania rejected an unfair dismissal action in this connection with unusually clear wording (judgement dated 15 January 2015, docket No.: 5 Sa 219/14).

In the underlying factual situation, the sued city had ordered the claimant over a period of many years, without success and with intensified threats of sanctions, to observe the applicable service agreement on flexitime. According to the agreement, a debit balance of a maximum of ten working hours which could be carried forward per month was permissible. The claimant’s account actually often had more than 20 or more minus hours, and hence the parties repeatedly mutually agreed to offset the debit balance with days of holiday or a reduction of remuneration. By the end of the month prior to a second warning notice, the claimant’s balance had actually even reached 40 minus hours. Since the claimant had only marginally reduced the deficit three months later and still exceeded the permissible negative deviation by more than double, the defendant declared the ordinary conduct-based dismissal.

The LAG appraised the claimant’s conduct as a significant breach of principal duties under the employment contract. He had breached his duties by not positively changing the contract-breaching situation of more than 10 minus hours by reasonably reducing this deficit. The mutually agreed intermittent set-offs also did not “undo” the respective preceding breaches of duty. Through these set-offs, the employer had only balanced out the damages incurred by it. Ultimately, because of the persistence of the breaches of duty and despite repeated cautions leading to as much as two warning notices, the employer had to ultimately assume that the claimant would not change his conduct.

In its judgement, the LAG makes its clear that an impermissibly high deficit of hours pursuant to the provisions governing the working hours account and the employee’s unwillingness to reduce them constitutes a significant breach of duties. Before declaring an ordinary termination, such conduct must be cautioned at least once to ensure that reasonableness has been observed, however; as a first reaction to the misconduct it is also advisable to demand that this deficit be balanced out with the threat of labour law measures. If the employee does not swiftly reduce the minus hours within an adequately long period after the warning, however, an ordinary conduct-based termination should come into consideration.

Jörn Kuhn

 

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1.5 BAG submits question to ECJ concerning the dynamics of a reference clause after a transfer of business

The BAG requested a preliminary decision from the ECJ on the question of whether its interpretation of Sec. 613a Subsec. 1 BGB on so-called dynamic reference clauses is reconcilable with the provisions of union law (BAG dated 18 June 2015, docket No.: 4 AZR 61/14 – thus far only available as a press release).

In the underlying factual situation the claimant had concluded an employment contract in 1978 with a district [Landkreis] which was a member of the municipal employers’ association [Kommunaler Arbeitgeberverband, KAV], which contained a reference to the Federal Collective Framework Agreement for Employees of Local authorities and Businesses dated 31 January 1962 (“BMT-G II”) as well as the collective agreements supplementing, amending or replacing it. Upon its spin-off to a private entity in 1997 – which was likewise a member of the KAV, however – a collective agreement on the transfer of personnel was concluded pursuant to which the BMT-G II, as amended from time to time, including the collective agreements supplementing, amending or replacing it, were to continue to apply. Following a further transfer of business to a private company which was not a member of the KAV, collectively bargained wage increases were not passed on to the claimant and ultimately the provisions of the Collective Agreement for the Public Services Sector (which had replaced the BMT-G II) were not applied.

The BAG already indicated in its order for reference that the defendant should actually apply the Collective Agreement for the Public Services Sector “TVöD” as the new collective agreement replacing the BMT-G II and that the claimant should consequently pay in accordance with this agreement. Ultimately, the acquirer of a business unit pursuant to Sec. 613a Subsec. 1 sentence 1 BGB is contractually bound to an employment agreement which refers to collective agreements, as amended from time to time, and whose provisions are made the content of the employment contract on grounds of private autonomous declarations of intent (so-called dynamic reference clause) as if the acquirer itself had reached this contractual agreement with the employee.

However, in the summer of 2013 the ECJ established in the much-noticed “Alemo-Herron” decision that dynamic reference clauses are not enforceable after transfers of business if the acquirer of said business has no chance of participating in the negotiations on the collective agreements concluded after the transfer and to which reference has been made (ECJ dated 18 July 2013, docket No.: C-426/11). In effect, one therefore has to proceed on the basis of the “elimination of the dynamic nature” of the reference clause in the employment contract after the transfer of business if - as in the present case - the business acquirer is not able to join the KAV and thus participate in the negotiations on the referenced collective agreements.

The BAG has now taken the first opportunity to request clarity from the ECJ as to how its case law on the “Alemo-Herron” decision – the subject matter of which situated in Great Britain – should be understood in the context of German labour law. We hope the ECJ will soon dispel the uncertainty that has existed now on this point for two years by giving a clear opinion.

Dr. Alexander Willemsen

 

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1.6 The ECJ and the term “temporary” within the meaning of the Temporary Employment Directive

The ECJ’s decision of 17 March 2015 has been awaited with great anticipation (docket No.: C-533/13). For the first time, the ECJ had the opportunity to comment within the scope of Finnish preliminary proceedings on the interpretation of the term “temporary” within the meaning of the Temporary Employment Directive 2008/104/EC.

The Finnish court conducted the preliminary proceedings in connection with a lawsuit in which the workers’ union AKT inter alia had sued a supply enterprise. AKT asserted that the enterprise had been employing temporary employees on a long-term and uninterrupted basis since the year 2008 to handle tasks that were completely identical to those of the enterprise’s own employees. The temporary employees were employed within the scope of the enterprise’s normal activities alongside its regular workers under the same management, although they did not have special occupational skills.

Despite a corresponding preliminary question on whether the long-term deployment of temporary workers alongside an enterprise’s own employees can be classed as a prohibited deployment of temporary labour, the ECJ failed to comment on the maximum applicable leasing term for the supply of temporary employees. For enterprises, it therefore remains open which period of deployment can still be classed as permissible, and the use of temporary workers continues to entail certain risks.

For temporary employees working in Germany who fall under the provisions of the German Temporary Employment Act [Arbeitnehmerüberlassungsgesetz, AÜG] - even though no corresponding draft bill is yet available – they are advised to orient themselves on the legislative amendment striven in the Coalition Agreement of 27 November 2013 (see the Coalition Agreement between the CDU, CSU and SPD dated 27 November 2013, 18th legislative period, p. 69). Pursuant to the Coalition Agreement, an amendment is announced to set the maximum statutory leasing period in the temporary employment branch at 18 months. However, the agreement of deviating solutions is to be possible through collective agreements in the branch in which the worker is deployed or in shop or service agreements on grounds of such collective agreements.

Jamilia Becker

 

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2. Legal Developements

The Tariff Uniformity Act

Since 12 June 2015 it is a certainty: The German Tariff Uniformity Act is on its way. At the Bundesrat session the Governmental Draft [Regierungsentwurf, RegE] of the Tariff Uniformity Act was approved. The aim of the Act, according to the Federal Government, is to secure the functional capability of tariff autonomy.

A significant factor that triggered the creation of the Tariff Uniformity Act was the BAG’s formal abandonment of the principle of tariff uniformity in its judgement of 7 July 2010 (BAG dated 7 July 2010, docket No.:  4 AZR 537/08). Through this, different collective agreements of competing unions can simultaneously be applied to the same group of employees (tariff conflict). The Tariff Uniformity Act now aims to prevent such tariff conflicts. To achieve this goal, Sec.  4a Subsec. 2 sentence 2 of the Governmental Draft of the German Collective Bargaining Agreements Act [RegE-TVG] stipulates:

“To the extent the areas of applicability of collective agreements of different unions with different content should overlap (conflicting collective agreements), the only legal norms which will be applicable at the business are those of the collective agreement which has the most members in an employment relationship at the time of conclusion of the last conflicting collective agreement concluded.”

According to the Federal Government’s understanding, the said principle of tariff uniformity should only apply subsidiarily. Primarily, it is the task of the collective bargaining parties to avoid tariff conflicts through autonomous decisions. To this end, the unions are given various regulatory options. One example is the possibility of so-called arbitrary tariff plurality; according to this, the unions can coordinate with each other on their respective competences, with the result that their collective agreements apply to various employee groups. The possibility of tariff plurality is also stipulated by law in Sec. 4a Subsec. 2 sentence 1 RegE-TVG. According to this, to the extent there is no conflict of collective agreements, it should also be possible for the employer to be bound by several collective agreements of different unions. Insofar, collective agreements of branch unions such as Cockpit, GdL and EVG will retain their validity.

The introduction of the Tariff Uniformity Act gives rise to two questions in particular. Firstly, how will the Tariff Uniformity Act affect industrial dispute law and, secondly, is the Tariff Uniformity Act constitutional.

As regards industrial dispute law, the answer to this question depends on whether strikes of minority unions such as GdL and Cockpit will still be deemed lawful in the future.

The legislative text of the RegE does not answer this question and also does not address the issue of strike law insofar. However, it conforms to the principle of BAG case law that industrial disputes are only considered legitimate if the aim of such dispute is to procure a valid tariff regulation (e.g. BAG dated 5 March 1985, docket No.: 1 AZR 468/83; BAG dated 21 April 1971, docket No.: GS 1/68). An industrial dispute by a minority union will ultimately only be lawful in the few cases in which only a narrow majority exists at a business, since there will then be a realistic possibility of a fully valid tariff regulation. The entry into force of the Tariff Uniformity Act will in all probability lead to considerable restrictions of the strike law of minority unions.

The introduction of the Tariff Uniformity Act thus also raises constitutional concerns, for the Tariff Uniformity Act will lead to a suppression of collective agreements with minority unions which will result in a curtailment of the coalition activity of branch unions. Whether or not this curtailment represents an infringement of Art. 9 Sec. 3 German Constitution [Grundgesetz, GG] that is justified by the goals of the Tariff Uniformity Act remains to be clarified by the Federal Constitutional Court [Bundesverfassungsgericht, BVerfG]. The minority union Cockpit has already announced its attention to lodge an appeal with the Federal Constitutional Court.

In summary it can be said that the Tariff Uniformity Act will create more problems than it solves. In industrial dispute law in particular, the precursors of the Tariff Uniformity Act are already evident. The strike by the GdL, for example, was also a strike regarding areas of competence and membership recruitment. These unions will be forced to fight far more aggressively for their survival in future. This conflict will be fought out on the streets as well as in businesses and before the courts.

 

Nils-Frederik Wiehmann

 

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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