Effects of the coronavirus - labor law update

(Last update: 24 March 2020)

Coronavirus is having a massive impact on many companies and businesses. Further questions are arising on almost a daily basis and the legislator is trying to support the economy. We would like to draw your attention to the following current developments:

1. Ordinance Facilitating Short-Time Work

Following the legislator’s establishment of a legal basis for adjusting short-time work compensation on 13 March 2020 through the Act on the Temporary Improvement of the Regulations for Short-Time Work Compensation [Gesetz zur befristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitergeld], the Federal Cabinet adopted the relevant Ordinance on 23 March 2020. Its most important cornerstones are:

• It suffices if 10 percent of a company’s workforce is affected by a loss of work for the company to be able to apply for short-time work.

• Social security contributions will be fully reimbursed by the Federal Employment Agency [Bundesagentur für Arbeit] in the event of short-time work.

• Businesses which use agreements on working time fluctuations will refrain from accumulating negative working time accounts.

• Short-time work compensation is also possible for employees in temporary employment.

• The Ordinance applies to the application period from 1 March 2020 onwards.

Publication of the Ordinance Facilitating Short-time Work in the Federal Law Gazette [Bundesgesetzblatt] will take place shortly.

2. Resolutions adopted by works councils - ministerial declaration by Hubertus Heil

In the current situation, the focus for companies is more than ever on achieving a quorum on committees in order to be able to implement issues of co-determination law (short-time work, annual company holidays, etc.). The current situation often prevents committees from coming together.

On 23 March 2020 the Federal Ministry of Labor and Social Affairs [Bundesministerium für Arbeit und Soziales, BMAS] published a ministerial declaration by Hubertus Heil dated 20 March 2020. According to this, in the current situation works council meetings are permissible in exceptional cases via video conference or telephone conference, including online supported applications such as WebEx meetings or Skype. The BMAS deems this permissible in order to guarantee the quorum of committees in the current situation.

In our view, minimum requirements (derived from § 41a European Works Councils Act [Europäische Betriebsrätegesetz, EBRG]) should apply to works council meetings, and employers should work towards meeting these requirements:

• The rules of procedure of the works council should allow telephone or video conferences for a limited period.

• Telephone or video conferences should be conducted on channels that are secured exclusively with state-of-the-art technology.

• Every works council member is to be obliged to do all in his power to uphold the principle of non-publicity: i.e. no telephone or video conferences in the presence of third parties; above all, at home in a closed room.

• The works council chairman should make reference to the telephone or video conferences in the invitation to the meeting.

The legal literature criticizes the ministerial declaration and urges a change in the law of the relevant § 33 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG]. In our view, however, such a change in the law cannot be expected at present, as the fundamental demand for a "digitalized works council" is not new.

3. Law on the facilitated access to social security and on the deployment and protection of social service providers due to the coronavirus SARS-CoV-2 (social protection package)

A draft of the social protection package has been available since 23 March 2020. Its primary purpose is to cushion and counteract losses in earnings. The measures are intended to support in particular low-income families and the self-employed with few or no employees, amongst other things by facilitating access to the basic social security schemes. The draft law thus provides for a variety of changes in the regulations relevant to social security law regarding basic social security for jobseekers (German Social Code, Book II [Sozialgesetzbuch II, SGB II]), assistance in securing one’s livelihood in accordance with SGB XII, and basic social security in old age and in the event of reduced earnings capacity in accordance with SGB XI.

From the labor law perspective, the draft has further core contents; these include:

Short-time work
If an employee takes up employment during short-time work, then to date this had to be fully credited against his so-called actual remuneration, with the result that the short-time work compensation was reduced for the employee.

The law provides for the partial waiver of such crediting of the short-time work compensation for a limited period in case of employment in key-sector branches and professions commenced whilst receiving short-time work compensation. This is to serve as an incentive for people to temporarily take up employment in key sectors such as agriculture on a voluntary basis.

Marginal employment
Employment is defined as short-term employment exempt from social security contributions if the time limits of three months or 70 working days are observed.

The time frame for these forms of employment are to be extended for a limited time, particularly for seasonal workers in agriculture, as such workers are available in far smaller numbers as a result of the corona pandemic. Accordingly, the time limits for marginal employment in the form of short-term employment are to be extended to a maximum duration of five months or 115 days.

Working Hours Act
An authorization to issue statutory ordinances is being included in the Working Hours Act [Arbeitszeitgesetz, ArbZG] to permit the issue of exceptions to the Working Hours Act by statutory ordinance in exceptional emergencies with nationwide implications, in particular in epidemic situations of national significance under § 5(1) German Act on the Prevention and Control of Infectious Diseases [Infektionsschutzgesetz, IfSG]). This regulation is intended to contribute to maintaining public safety and order, health care and nursing care, public services and the supply of the population with existential goods in an emergency.

The law implementing the social protection package will come into force on 29 March 2020.

4. Changes to the Act on the Prevention and Control of Infectious Diseases - continued payment of remuneration in case of day care / school care

Since 17 March 2020 at the latest, schools and day care centers have for the most part been closed and emergency care is only available in exceptional cases. Since such time, in the majority of cases parents have continued to receive their salaries for their absence from work in accordance with § 616 German Civil Code [Bürgerliches Gesetzbuch, BGB]. However, this can only be temporary, as it is generally accepted that these claims expire after 7 to 10 days at the latest. 

In connection with the social protection package, the BMAS has now publicly announced that the Act on the Prevention and Control of Infectious Diseases shall include a compensation claim for loss of earnings in the event of official closures of schools and day care centers in order to contain the current pandemic. According to the BMAS, compensation will depend on the fulfilment of several conditions (among others, only for children up to the age of 12). Compensation will then be granted at 67% of net income for up to six weeks and is limited to a maximum monthly amount of 2,016 euros. The compensation shall be disbursed by the employer, who can submit a refund application to the competent federal state authority.

With this move, the amendment to § 616 BGB, which was still being discussed last week, now seems obsolete. This change in the law is also already expected to come into force this week.

5. Court cases

According to our information, almost all of the labor courts have restricted their court proceedings to such an extent that only urgent matters - preliminary injunctions, extraordinary dismissals or appointment procedures for urgent conciliation boards - are currently being scheduled. In ongoing court proceedings, deadlines are being cancelled and time limits extended.

It is clear that this will lead to a backlog in the processing of cases by the courts, which means that we can expect very significant extensions of court cases. In the case of unfair dismissal proceedings, employers especially have to calculate the risk of the continued payment of salary during the period of litigation over the employment relationship.

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