Newsletter Employment Law IV/2015

 

December 2015

Having already reported in our last Newsletter of 2014 on the increased activities of the legislator in the field of employment law – in 2015 the Minimum Wages Act and the Collective Bargaining Unity Act entered into force - the last months of 2015 once again prompt us to report on two draft bills which are to take effect in 2016 and which will have considerable consequences for business practice, in particular as far as the assignment of temporary employees is concerned.

In our last Newsletter of 2015 we are reporting on these topics and on interesting decisions of recent employment law jurisprudence.

 

1. Current case law

 

1.1 Due and proper corporate integration management as a de facto prerequisite of the validity of dismissals on grounds of illness
1.2 Preceding work experience placement not included in the trial period of the vocational training
1.3 Conclusion of a cancellation agreement also constitutes a dismissal within the meaning of the Mass Dismissals Directive
1.4 Social selection in case of business closures and the transfer of jobs to another group company

 

2. Legal developments

 

2.1 Changes to temporary employment regulations
2.1.1 Maximum duration of assignments of temporary workers
2.1.2 Delimitation of contracts for work – prevention of concealed temporary employment
2.1.3 Threshold values
2.1.4 Equal Pay
2.1.5 Miscellaneous
2.2 Amendments of the Company Pensions Act

 

 

1. Current case law
1.1 Due and proper corporate integration management as a de facto prerequisite of the validity of dismissals on grounds of illness

 

The Federal Employment Court [Bundesarbeitsgericht, BAG] emphasised many times over the past few years that due and proper corporate integration management [Betriebliches Eingliederungsmanagement, BEM] within the meaning of Sec. 84 Subsec. 2 German Social Code Book IX [Sozialgesetzbuch IX, SGB IX] is not a legal prerequisite for the validity of an illness-based dismissal (most recently, for example, in BAG dated 20 November 2014, docket No.: 2 AZR 755/13). However, the BAG did also clearly state that Sec. 84 Subsec. 2 SGB IX is not just a proposal, for this norm concretises the principle of reasonableness and significantly increases the burden of representation and proof of the terminating employer in the proceedings. From purely the practical perspective, an omitted or improper BEM therefore results in such a considerable extension of the employer’s burden of representation and proof in unfair dismissal proceedings that a due and proper BEM certainly has to be appraised as a “de facto” prerequisite of the validity.

 

This was impressively made clear again in the decision of the Regional Employment Court [Landesarbeitsgericht, LAG] of Schleswig-Holstein dated 3 June 2015 (docket No.: 6 Sa 396/14; appeal on points of law filed with the BAG). On grounds of considerable periods of absenteeism the claimant in said proceedings had been dismissed on grounds of illness. In every single year between 2003 and 2013 the claimant had been incapacitated from working for far longer than the six-week period in which he continued to receive his remuneration, in some years he was even absent for more than 100 work days. The sued employer had informed the claimant of the aims of the BEM within the scope of an information talk regarding the BEM on 20 June 2013. On a pre-drafted form the claimant first consented to the BEM on 11 March 2014, after having received notice of termination of his employment relationship on grounds of illness on 5 March 2014. Between the talk in June 2013 and the declaration of the termination in March 2014 the claimant had failed to respond with respect to his willingness to conduct a BEM; accordingly, no BEM took place prior to the declaration of the termination.

 

The LAG Schleswig-Holstein deemed the dismissal on grounds of illness invalid, despite the negative prognosis for the future, on grounds of its unreasonableness. The sued employer had failed to conduct the BEM envisaged by law and was unable to represent that at the time of termination no further employment in another position appropriate to his condition had come into consideration as a milder option. The fact that the claimant had simply not responded to the offer of a BEM did not go in the sued employer’s favour, for the failure to respond could not be evaluated as a rejection. In particular, the claimant had not been set any deadline for rendering a declaration, after whose expiry the employer could have assumed a rejection. Moreover, the sued employer should have offered the employee a BEM again prior to declaring the termination in March 2014, since the claimant had been unable to work due to illness again for more than six weeks in the period from August 2013 to February 2014 and thus the prerequisites for a BEM pursuant to Sec. 84 Subsec. 2 SGB IX had been fulfilled (again). Accordingly, the sued employer was unable to represent in the unfair dismissal proceedings that the periods of absenteeism could definitely not have been avoided through the legally envisaged aids or services of the rehabilitation entity.

 

That this is practically impossible for a sued employer is quite evident. Even if the above decision of the LAG Schleswig-Holstein is not yet legally binding and the BAG has to legally appraise this case anew in an appeal on points of law, we cannot assume that the BAG will take a “milder view” of the employer’s obligations in connection with the BEM.

 

In practical terms this decision means that the employer, which bears the burden of initiating the execution of a BEM, should always set the employee a reasonable deadline for reacting to the offer of a BEM. At the same time, he should be notified that the employer will otherwise assume a rejection of the offer. Moreover, it is clear that, in each case, a new attempt at a BEM should be made when the employee becomes unable to work due to illness again between the first attempt and the declaration of the termination on grounds of illness for a period of six weeks or more.

 

Kathrin Vossen

 

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1.2 Preceding work experience placement not included in the trial period of the vocational training

 

A work experience placement preceding a vocational training placement is not counted towards the trial period of such vocational training relationship (BAG dated 19 November 2015, docket No.: 6 AZR 844/14; presently only available as a press release). The same also applies if this concerns an employment relationship as opposed to a work experience placement (BAG dated 16 December 2004, docket No.: 6 AZR 127/04).

 

In the case underlying the decision, the claimant applied to the defendant in the spring of 2013 for a vocational training placement as a retail merchant. The vocational training began on 1 August 2013 with a trial period of three months. To bridge the period until the start of the vocational training, the parties agreed on a fixed-term work experience contract, which ended on 31 July 2013.

By letter of 29 October 2013 the defendant terminated the vocational training contract with the claimant. The termination letter was received by the claimant on the same day. The claimant opposed this termination with the argument that that the termination had not been declared until after the expiry of the trial period, since the work experience placement preceding the vocational training had to be counted towards the trial period.

 

The appeal on points of law was unsuccessful. The BAG established the validity of the dismissal without termination notice period pursuant to Sec. 22 Subsec. 1 German Vocational Training Act [Berufsbildungsgesetz, BBiG], since the preceding work experience placement is not counted towards the trial period. This is because all vocational training placements must commence with a trial period. The purpose of the trial period is to give both contractual partners to the training relationship sufficient opportunity to check the circumstances required for the training. In the opinion of the BAG, it is only possible to check these circumstances during the actual vocational training placement involving the specific pertinent duties. For this reason, periods of a preceding work experience placement cannot be counted towards the trial period. Accordingly, for purposes of calculating the trial period, the clock is wound back to null with the beginning of a training relationship.

 

For the employer, this therefore means that it will still be able to familiarise the future trainee with the circumstances existing at the business within the scope of advance work experience placements, and for the trainee to gain a first impression thereof.

 

Nils-Frederik Wiehmann

 

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1.3 Conclusion of a cancellation agreement also constitutes a dismissal within the meaning of the Mass Dismissals Directive

 

In its decision dated 11 November 2015 (docket No.: C 422/14) the European Court of Justice (ECJ) has a further opportunity to comment on the interpretation of the Mass Dismissals Directive 98/59/EC. The decision concerned the question of the extent to which contract cancellations other than terminations constitute a dismissal and are thus of relevance to the calculation of the threshold values.

 

The background of the decision was a preliminary ruling sought after by a Spanish court. The ECJ was to establish whether the term “dismissal” also covered considerable changes to substantial elements of the contract that were unilaterally made to the employee’s detriment. In the national proceedings an employee brought legal action against his employer and asserted the invalidity of his dismissal. The employer had failed to conduct the mass dismissal proceedings although the threshold value had been met. In his opinion, the calculation of the threshold value should also have included a female employee whose employment relationship had been ended by cancellation agreement after she had refused to consent to a 25% reduction of her fixed salary.

 

The ECJ initially emphasised that employees with a contract concluded for a specific term or activity were classed as employees who, within the meaning of the Directive, are employed at the business “as a rule”. Employees whose contracts end through the regular lapse of time are not to be considered in the calculation of the threshold values within the scope of mass dismissals.

 

The court went on to state that the term “dismissal” is a term of trade union law which cannot be defined on the basis of the legal provisions of the Member States. Through the harmonisation of the legal provisions on mass dismissals the legislator wanted to ensure the uniform protection of the rights of the employees. Dismissals differ from other terminations of the employment contract in that the former lacks the employee’s consent. Against this background, therefore, the term “dismissal” must be interpreted to the effect that it includes every ending of an employment contract that is not wanted by the employee, that is to say that is undertaken without his consent. In the present case, the end of the employment relationship of the female employee was based on a cancellation agreement, i.e. the employee had given her consent to a cancellation of her contract. However, the cancellation agreement had been based on the fact that the employer had wanted to cut her fixed wages by 25% for grounds not lying in the person of the employee.

 

The decision confirms the consideration of cancellation agreements in the calculation of the threshold value pursuant to Sec. 17 Subsec. 1 German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG] already assumed by the BAG (BAG dated 11 March 1999, docket No.: 2 AZR 461/98). According to this, as is a well known fact, the conclusion of cancellation agreements within the scope of voluntary programmes prior to changes of business must be examined as to the fulfilment of a notifiable criterion for a mass dismissal.

 

Jamilia Becker

 

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1.4 Social selection in case of business closures and the transfer of jobs to another group company

 

The BAG recently ruled that an employer must also conduct a social selection when dismissing all of his employees if it transfers a part of the workforce to an affiliate (judgement dated 21 May 2015 – 8 AZR 409/13).

 

In the underlying situation the sued employer shut down its entire business operations. For this reason it terminated the employment relationships of its entire workforce, including the claimant, for operational reasons. Parallel thereto, the defendant concluded with its affiliate an assumption agreement pursuant to which a part of the business divisions were to be continued by it. Since no works council existed at the defendant, no separation of the business was negotiated; rather, the employees who were to be affected by the partial transfer of business received a letter with which they were informed of their new allocation to the business divisions being transferred. Besides their terminations, these employees also received a notification letter in which the affiliate irrevocably declared its intention not to derive any rights from the termination declared by the defendant after the transfer of business and to continue the employment relationship at the previously existing conditions. Said employees were then asked to sign a separate declaration on the continuation of their employment relationships. The claimant did not belong to that group of employees whose employment relationship was to transfer to the affiliate. She therefore filed an unfair dismissal action and as an alternative measure applied for a declaratory judgement to the effect that her employment relationship with the defendant had transferred to the affiliate.

 

The BAG negated a transfer of business since no existing economic unit had been continued by the affiliate with the simultaneous preservation of its identity. Too few members of the workforce (less than half) and only inadequate operating resources had been assumed. This also did not represent a transfer of a business unit since the assumed business division did not represent a transferrable business unit as it lacked sufficient management and organisational structures. The identity of an economic unit is not based solely on its activities, but on several related features such as its staff, its management, its work organisation, its operating methods and any operating resources available to it. Even if organisational charts suggest the existence of such structures, they do not prove whether and to what extent the alleged organisational structures actually also exist. The termination was therefore not already invalid pursuant to Sec. 613a Subsec. 4 BGB – possibly on grounds of a lack of allocation to the business divisions to be continued.

 

However, according to the BAG a social selection pursuant to Sec. 1 Subsec. 3 KSchG should have been conducted, but was not conducted, by the defendant. Although it is correct that the employer is fundamentally not obliged to conduct a social selection if it terminates all of the employees of its business, in the case at hand, on grounds of the assumption agreement concluded by the parties, both the defendant and its affiliate specifically did not proceed on the basis that all of the employment relationships were to end. After all, the affiliate had declared with binding effect and irrevocably vis-à-vis several employees that it did not intend to derive any rights from the termination by the defendant and intended to continue the employment relationship, which is equivalent to an arbitrary entry of the affiliate into the employment relationships. This, however, gives rise to the requirement to make a social selection. Since, however, in the opinion of the BAG only “employees who distinctly merit greater protection” would be able to successfully object to the faultiness of the social selection, the matter was referred back to the LAG for examination of the social selection.

 

With this, the BAG is continuing its strict jurisprudence on the social selection. In its decision dated 28 October 2004 (docket No. 8 AZR 391/03) the BAG had already ruled in the case of an intended closure of a business unit and transfer of a business unit, that a social selection concerning the entire business, including the business unit subsequently transferring, was to be conducted. Decisive insofar would appear to be not only the timing, but also the influence of the “seller of the business unit”. For if it had no determining influence whatsoever within the scope of the closure of its business upon the assumption and selection of employees at the affiliate and if the affiliate – without triggering a transfer of a business unit pursuant to Sec. 613a BGB – were to offer employment contracts to several employees of the closing business at its own responsibility, then, in our opinion, no social selection needs to be made at the employer of the closing business. In this case as well – at least according to the former case law of the BAG – this would not constitute a case of a group-wide claim for further employment and to the conducting of any “extended social selection” in such case. However, this decision shows that the BAG is increasingly trying to set the boundaries for a circumvention of protection against dismissal through group-internal restructurings. In comparable transactions extreme caution is therefore required and it remains to be seen whether the BAG will also reject the aforesaid theoretical configuration in future.

 

Isabel Hexel

 

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2. Legal Developments

 

The grand coalition has already initiated several acts – inter alia the Minimum Wages Act [Mindestlohngesetz, MiLoG] and the Act on Collective Bargaining Unity [Tarifeinheitsgesetz, TEG] – and is continuing its efforts to fulfil the obligations agreed in the Coalition Agreement. Particular attention should be given to the current legislative activities to amend both the Temporary Employment Act [Arbeitnehmerüberlassungsgesetz, AÜG] and the Company Pensions Act [Betriebsrentengesetz, BetrAVG] over the coming year.

 

2.1 Changes to temporary employment regulations

 

The German Federal Ministry of Employment and Social Affairs [Bundesministerium für Arbeit und Soziales, BMAS] published on 16 November 2015 the long-awaited draft of a bill amending the Temporary Employment Act as well as other laws. The CDU/CSU and SPD had already agreed in the Coalition Agreement to take measures to prevent the abusive use of contracts for works and to further develop temporary employment regulations (p. 49 et seq. of the Coalition Agreement). With the envisaged draft, the government coalition now wishes to implement this Agreement.

 

The essential points of the draft bill are:

 

2.1.1 Maximum duration of assignments of temporary workers 

 

  • the maximum duration of an assignment of a temporary worker is 18 months – deviations are only possible by branch-wide collective agreement or by shop agreements on grounds of such collective agreements; 
  • the maximum duration of an assignment of a temporary worker is the maximum period in which a temporary worker may work at a single hiring company; hence, the assessment basis is the individual worker; 
  • assignments of a temporary worker at a single hiring company are always accumulated if less than 6 months lie between the assignments; in cases of breaks between assignments of more than 6 months, they are not accumulated; 
  • the deadline for the maximum assignment term of 18 months begins as of 1 January 2017; the legislator is therefore granting enterprises a period to adapt to the changed legal situation;  
  • if the maximum assignment term is surpassed, an employment relationship with the hiring company is established insofar as the temporary worker does not oppose such an employment relationship with the hiring company;
  • if the maximum assignment term is surpassed, the manpower supplier risks the loss of its licence to supply temporary workers;

 

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2.1.2 Delimitation of contracts for work – prevention of concealed temporary employment

 

  • through a new regulation of Sec. 611a German Civil Code [Bürgerliches Gesetzbuch, BGB], contracts for work and employment agreements are to be clearly delineated;
  • the provision contains eight criteria which indicate an employment agreement; however, jurisprudence presently already deems some of these criteria to not be decisive; 
  • the provision - arguably – has to be understood broadly and affects not only solo self-employed persons but also the external personnel assigned to the customer by the third-party enterprise; 
  • a “precautionary” manpower supply licence is not valid; the contract must clearly be identified as a temporary employment contract; a notification obligation vis-à-vis the temporary worker is determined;
  • a disclosure obligation exists pursuant to which, firstly, in the agreement reached between the manpower supplier and the hiring company, the provision of employees expressly has to be identified as the “provision of temporary workers”; the temporary employment agreement between the manpower supplier and the temporary worker must also make reference to the manpower supply agreement and the manpower supply agreement has to be disclosed to the temporary worker; in future, in case of a violation of the disclosure obligation, an employment relationship between the hiring company and the temporary worker will be simulated by law;
  • also in case of contracts for work, the works council has a right to full information; it is to be aware of the scope of the work, the place of work and the work tasks; all contracts are to be presented to it; the works council therewith becomes the “works police”;

 

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2.1.3 Threshold values  

 

  • As of their first day of assignment, temporary workers are included in the calculation of all threshold values of the Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG] (except for Sec. 112a BetrVG);  
  • Temporary workers must also be taken into consideration in the calculation of all threshold values of company codetermination pursuant to the One-Third Employee Participation Act [Drittelbeteiligungsgesetz, DrittelbG] or the Co-determination Act [Mitbestimmungsgesetz, MitbestG];
  • with this, the legislator is applying as a whole the more recent jurisprudence of the Federal Employment Court [Bundesarbeitsgericht, BAG] (most recently dated 4 November 2015, docket No.: 7 ABR 42/13);

 

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2.1.4 Equal Pay

 

  • the principle of equal pay has been regulated by law for the first time; 
  • after 9 months the same remuneration must be paid unless a deviation is agreed by branch-wide collective agreement; 
  • to the extent the employment relationship is governed by a (branch-wide) collective agreement on increased rates of pay which envisages a gradual alignment of the employment remuneration with equal pay after an initial employment induction period of six weeks, a deviation from equal pay for as much as 12 months is possible.

 

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2.1.5 Miscellaneous 

 

  • hiring companies may not hire temporary workers insofar as their businesses are directly affected by industrial action; such provision actively interferes with the industrial action;
  • in keeping with the previous administrative practice, the chain supply of temporary workers (respectively further or interim supply) is prohibited;  
  • the Temporary Employment Act expressly no longer applies to personnel provision models of the public sector (Sec. 4 Subsec. 3 Collective Agreement for Civil Service Employees [Tarifvertrag für den öffentlichen Dienst – TVöD]), where tasks are outsourced to private enterprises; 
  • as a whole, the catalogue of administrative offences and criminal offences has been extended.

 

Because the draft is essentially in line with the Coalition Agreement and also applies the more recent jurisprudence of the Federal Employment Court, there may not be many changes during the legislative process.

 

For this reason, one should already review guidelines and processes for employing external personnel now with a view to any required adjustments. Purchasing processes, in particular, should be checked. Contracts for work and services – a material element of every branch – are still permissible; however, they require far clearer delineation than before in order to avoid falling under the general suspicion provoked by the legislator.

 

Jörn Kuhn, Nils-Frederik Wiehmann

 

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2.2 Amendments of the Company Pensions Act

 

Many amendments of the Company Pensions Act (BetrAVG) are necessary: on the one hand the EU Mobility Directive needs to be implemented, and on the other the Federal Ministry of Employment and Social Affairs wants to promote company pensions with a new form of pension promise (so-called “Nahles Pension”).

 

The implementation of the EU Mobility Directive is now taking a concrete form, as the German Bundestag accepted the submitted draft bill of the Federal Government of 12 November 2015 in its final reading. The EU Mobility Directive aims to remove the company pension disadvantages incurred by employees who transfer to a different employer abroad.

 

The key points of the draft bill can be summarised as follows: 

 

  • New pension promises granted as of 1 January 2018 already become non-forfeitable after three years instead of previously five years. The minimum age for obtaining a pension expectancy in case of a premature withdrawal from the company is also being lowered from 25 to 21.  
  • The non-forfeitable expectancies of employees who have left the company will be dynamic in future. This means that changes in the pension regulations and calculation bases will no longer be disregarded for this group. The so-called “fixed-rate principle” of Sec. 2 Subsec. 5 Company Pensions Act will therefore be dropped and an extensive new regulation of the partial claims will be contained in Sec. 2a BetrAVG-E.  
  • The settlement of minimal expectancies, which was previously also unilaterally permissible, will now only be possible with the consent of the employee in cases where employees move to another EU country within one year of ending their employment relationship. 
  • Section 4a BetrAVG is being reviewed and will extend the notification obligations of the employer, respectively the pension company, concerning the expectancies. 
  • Additionally, adjustments are being made in the German Income Tax Act [Einkommenssteuergesetz, EStG] which primarily apply to provident funds.

 

A consequence of the intended amendments will certainly not be that enterprises will consider own pension systems to be advantageous. Above all, administrative costs and increasing complexity are inhibiting. The increased notification obligations entail a high risk potential for possible claims by employees, for the employer also bears the liability for faulty information by service providers or pension companies.

 

In order to make company pensions more attractive, especially for small and medium-sized enterprises, and to simultaneously cover possible financial deficits during retirement, the BMAS is making further considerations which are expressed in the so-called draft section “17b BetrAVG” (“Nahles Pension”).

 

The draft contains a “social partners’ model”. The underlying consideration is that the company pension is established in the form of a “social partners’ model” where the collective bargaining parties set up pension funds in simultaneous deviation from several provisions of the Company Pensions Acts. In this case the employers’ obligation could then be confined to the mere payment of a contribution if a common scheme exists between the collective bargaining partners (Sec. 4 TVG). Employers and employees not bound by collective bargaining agreements will also be able to join this model.

 

The proposal is being intensely scrutinised by both employers and unions. Viewing this proposal in connection with the simplified declaration of universal applicability of collective agreements which was first introduced this year, this could give the impression that a comprehensive company pension scheme is to be achieved with a collectively bargained structure.

 

Jörn Kuhn

 

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Dr. Gilbert Wurth, Kathrin Vossen, Jörn Kuhn, Isabel Hexel,  Dr. Alexander Willemsen, Jamilia Becker, Nils-Frederik Wiehmann, Mareike Götte

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