Employment Law28.06.2019 Newsletter

Employment Law Newsletter II/2019

II/2019

In the second quarter of 2019, the ECJ’s decision of 14 May 2019 (docket No. C-55/18) obligating member states to have employers implement an effective and accessible working time recording system with which the working time actually worked by employees could be measured daily, objectively and reliably, caused considerable uproar in the media (we had already reported on this in our Newsflash of 14 May 2019). This judgement is justifiably seen as being the beginning of the end of “trust-based” working time. How the German legislator will implement these requirements and which changes it might make to the German Working Time Act [Arbeitszeitgesetz, ArbZG] are as yet unclear. Nor is anything to this effect to be expected from the German Federal Ministry of Employment and Social Affairs [Bundesministerium für Arbeit und Soziales] before the end of 2019. In all events, the ECJ has expressly granted member states the possibility of allowing for any peculiarities of a particular industry or enterprise as well as the size of an enterprise when structuring such an obligation. How and to what extent the legislator will make use of this possibility remains to be seen.

 

1. Current case law

1.1 Mass dismissals and a dismissal decision prior to notification

1.2 Requirements for the temporary need to limit an employment term on material grounds in case of project work

1.3 No restriction of the employer's freedom of organisation by § 164 ( 4) SGB IX

1.4 Application of the AGG to external managing directors of a GmbH

1.5 No right to injunctive relief in the event of an inadmissible exercise of rights by the works council

1.6 Informing the works council about industrial accidents that involve third parties

1.7 Appropriateness of the works council’s remuneration

1.8 Doctors and nursing staff on a fee basis are generally not freelancers

 

2. Legal developments

2.1 New EU Directive on Transparent and Predictable Working Conditions adopted

 

1. Current case law

1.1 Mass dismissals and a dismissal decision prior to notification

The Federal Employment Court [Bundesarbeitsgericht, BAG] recently ruled in a decision of 13 June 2019 (docket No. 6 AZR 459/18), as yet only available as a press release, that notification of a mass dismissal pursuant to § 17 (1) German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG] can also be validly given if the employer has already reached the decision to terminate the employment relationships at the time of receipt of the notification by the German Employment Agency [Agentur für Arbeit]. Decisive is the receipt of the notification prior to the employee’s receipt of the letter of termination.

In the case underlying the decision, the insolvency administrator filed a notice of mass dismissal which was received by the German Employment Agency on 26 June 2017. In a letter dated the same day, the insolvency administrator then dismissed 45 employees, including the claimant, whereby the termination letter arrived at the claimant on the following day. The claimant subsequently contested the validity of the termination on the grounds that the signature under the letter of termination was a manifestation of the dismissal decision through which the declaration of termination was therefore constitutively created. The letter should therefore only have been signed after receipt of the mass dismissal notification.

The BAG clarified that the employer's obligation to notify mass dismissals serves purely employment policy purposes. It was to put the German Employment Agency into a position in which it could prepare itself for the mass dismissal and the resulting agency services that would arise. It neither can, should nor intends to influence the employer's dismissal decision, however. In contrast, it already needs to be clear at the time of notification how many and which specific employees are going to be dismissed, since this is all that is relevant for the German Employment Agency.

With this, the BAG has resolved a dispute in the jurisdiction of the instance courts regarding § 17 KSchG and has positioned itself on the employer side. The Regional Employment Court [Landesarbeitsgericht, LAG] of Berlin-Brandenburg, for example, has recently already decided twice in the same way (judgements of 25 April 2019, docket No. 21 Sa 1534/18, and 9 May 2019, docket No. 18 Sa 1449/18), granting the employer the right to have already reached the decision to terminate employment relationships before the receipt of the mass dismissal notification. The decision can be welcomed against the background of the judgement of the lower instance (LAG Baden-Württemberg, judgement of 21 August 2018, docket No. 12 Sa 17/18), which gave cause for great confusion in its practical implementation last year. With this ruling, the BAG has now provided employers with certainty.


Cornelia-Cristina Scupra

 

1.2 Requirements for the temporary need to limit an employment term on material grounds in case of project work

By judgement dated 21 November 2018 (docket No. 7 AZR 234/17), the BAG ruled that a material reason to limit the term of an employment contract in accordance with § 14 (1) sentence 2 No. 1 German Part-Time and Fixed-Term Employment Act [Teilzeit- und Befristungsgesetz, TzBfG] exists if the project activities in question are not permanent, essentially unchanged tasks that entail a staffing level that can be planned on a long-term basis.

The parties contested the validity of the limitation of the claimant’s contractual employment term for material reasons. She had worked for the defendant, first as a clerk, and later as a project manager on the basis of several fixed-term, successively running employment contracts. The claimant’s employment activity as agreed in her last employment contract was the handling of a temporary project of the defendant. The claimant's activities also ended with the completion of the project. The claimant challenged this by means of an action for an examination of the limitation of her contractual term.

The BAG, like the previous instances, dismissed the action on grounds that, for the limitation of the employment term on material grounds pursuant to § 14 (1) sentence 2 No. 1 TzBfG, the only decisive factor for the operational need for work performance on just a temporary basis is whether the activity arises in an essentially unchanged and continuous manner within the scope of the business purpose. Should this be the case, then this is a permanent task. To be distinguished from this are additional tasks that only need to be performed for a limited period of time and therefore do not entail any foreseeable staffing requirements. The mere fact that an employer regularly carries out a considerable number of projects does not necessarily mean that these are permanent tasks. Certainly as far as the defendant was concerned, the staffing requirements triggered by the individual projects could not be planned in the long term, which meant that the limitation of the term was materially justified.

With its decision, the BAG has given valuable indications as to the prerequisites for project-based limitations of contractual terms. Employers should refrain from declaring individual activities which arise on a permanent basis as projects in order to be able to limit the contractual terms for material reasons. A project-based limitation of the contractual term therefore also requires careful examination.


Alexandra Groth

 

1.3 No restriction of the employer's freedom of organisation by § 164 ( 4) SGB IX

The claim of a severely disabled employee to have his employment relationship implemented in a manner that suits his health situation under § 164 (4) German Social Code Book IX [Sozialgesetzbuch IX, SGB IX] is very far-reaching and includes a disability-friendly work organisation in addition to a general disability-friendly employment activity, special vocational training and structuring of the workplace, the working time and the working environment.

In its judgement of 16 May 2019, however, the BAG has now made it clear that this claim does not imply a restriction of the company’s freedom of organisation (docket No. 6 AZR 329 18). In the context of staff cutbacks that were made during the company’s insolvency and after having obtained approval from the Integration Office, the sued employer had also terminated the employment of the severely handicapped claimant. In the unfair dismissal proceedings, the claimant had pleaded that, in view of his comprehensive employment claim, the defendant had to reverse its organisational decision which had led to the loss of his job or, alternatively, create a new, suitable job for him. This was rejected by the BAG. The special protective norm of § 164 (4) SGB IX does not guarantee the severely disabled person employment. There is no obligation on the part of the employer to create or maintain a job that the employer does not or no longer needs. The special claim to employment must only be considered in the examination of whether any possibilities of continued employment exist in an existing, vacant job. 

The decision, as yet only available as a press release, regulates the relationship between the severely disabled employee’s claim to employment and the employer's freedom of organisation. The BAG’s confirmation that the employer does not have to create or retain a job in contradiction to its workplace concept, even in consideration of § 164 (4) SGB IX, is certainly to be welcomed. However, this should not detract from the fact that the employer's obligations in connection with the employment of severely disabled persons are very far-reaching and that the efforts made to maintain the employment relationship by reorganising the work processes, among other things, must be considerable. Only unreasonableness, disproportionate outlay or opposing regulations set the limits of the employer's employment obligation in accordance with § 164 (4) sentence 3 SGB IX.


Kathrin Vossen

 

1.4 Application of the AGG to external managing directors of a GmbH

The BAG recently ruled in a decision dated 26 March 2019 (docket No. II ZR 244/17) that, in conformity with the interpretation pursuant to European law, external managing directors of a German limited liability company [Gesellschaft mit beschränkter Haftung, GmbH] are employees within the meaning of the German General Non-Discrimination Act [Allgemeines Gleichbehandlungsgesetz, AGG], insofar as the AGG is applicable on grounds of the termination of his employment contract.

The claimant, who was born in 1955, had been working for the defendant as an external managing director since 2005. The service agreement stipulated the possibility that both parties could terminate the fixed-term service agreement as soon as the managing director reached the age of 61. The managing director would subsequently be entitled to a pension. In 2016, the service agreement was terminated by the company, and the managing director took court action to oppose such termination.

The BGH has now ruled that the agreed dismissal condition falls within the scope of the AGG. The Act was materially applicable since the dismissal was based on a dismissal condition pursuant to § 2 (1) No. 2 AGG and the dismissal was also not excluded by § 2 (4) AGG. § 2 (4) AGG does not apply to dismissals that do not fall under the KSchG. The Act was personally applicable since, according to an interpretation in conformity with European law, external managing directors must be regarded as employees within the meaning of § 6 (1) sentence 1 No. 1 AGG. In order to best achieve the objectives of the anti-discrimination directive, the application of the AGG to the management bodies of a corporation is necessary if they fulfil the requirement of the concept of employees under Union law. This is the case with external managing directors of a GmbH, as they are in a relationship of subordination to the company on grounds of the company’s right to issue instructions and the fact that they can be dismissed from office at any time. The possibility of dismissal on grounds of age constitutes a direct discrimination of the claimant. A general reference to business and company interests is not enough to justify the discrimination under § 10 AGG. The bridging of the gap until retirement through a company pension scheme also does not justify the discrimination.

In practice, this means that service agreements whose termination is attached to a specific age lying under the statutory retirement age will need to be amended. Furthermore, caution is required in future when dealing with external managing directors. According to the BGH's reasoning, external managing directors can always be regarded as employees if they are governed by national provisions serving the implementation of Union law requirements, with the result that all employee protection regulations of Union law apply.


Anja Dombrowsky

 

1.5 No right to injunctive relief in the event of an inadmissible exercise of rights by the works council

In its decision of 12 March 2019, the BAG ruled that a works council can be exceptionally denied the right to claim injunctive relief to which it is generally entitled if this constitutes an unlawful exercise of a right within the meaning of § 2 (1) German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG] (docket No.: 1 ABR 42 17).

The parties in question, a clinic operator and its works council, disputed the existence of claims of the works council to injunctive relief. The employer had repeatedly drawn up duty rosters, put them into effect and subsequently amended them without the works council's consent. In the course of the previous negotiations over the drafting of such rosters, the works council had refused any participation, both in consensual and court-appointed conciliation bodies, as it did not consider them the suitable bodies for regulating the matter. The works council sought the employer’s forbearance from the unilateral drafting of the duty rosters as well as the prohibition of such conduct for the future.

Although the BAG established a fundamental infringement of the right of co-determination pursuant to § 87 (1) sentence 1 No. 2 BetrVG, it simultaneously emphasised that the prohibition of the inadmissible exercise of the right also applies in the relationship between the works council and the employer and, in extremely exceptional cases, that it could be opposed by a forbearance claim of the work council. It pointed out that co-determination rights in conjunction with the principle of a trust-based cooperation can also give rise to cooperation obligations on the part of the works council. If the works council invokes a legal position which it has acquired through having conducted itself in contradiction to the shop constitution to an increased degree, then this can be legally abusive and thus inadmissible.

The decision is particularly welcome for employers who, due to their legal obligations, depend on the uninterrupted deployment of their personnel and the prompt drafting of duty rosters. In such cases, it will be considerably more difficult in future for the works council to excessively use its consent as a means of exerting pressure to achieve other objectives. It should be noted, however, that this is limited to extreme exceptional cases. It remains the employer's responsibility to take the necessary steps to safeguard the works council's rights of co-determination.


Jörn Kuhn

 

1.6 Informing the works council about industrial accidents that involve third parties

Recently, the BAG ruled that the works council can require the employer to inform it of accidents at work suffered by employees of external companies (decision dated 12 March 2019, docket No. 1 ABR 48 17).
The employer, a large logistics enterprise, employed approximately 2,500 employees of subcontractors. In 2016, two employees of the external companies injured themselves while loading freight, whereupon the works council demanded the submission of copies of the accident reports. The works council also wanted to be informed in future about accidents at work involving external personnel. The employer refused on the grounds that only the subcontractor had to report the accident.

The BAG ruled that the employer had to inform the works council about every industrial accident of employees of external companies that occurred on the company premises, stating the date, time of the accident, accident site, cause of the accident and injuries suffered. The works council had to be able to verify whether this information was required in order to be able to exercise co-determination rights pursuant to the Shop Constitution Act with regard to the company employees represented by it. This was required by the information claim in respect of external personnel pursuant to § 80 (2) sentence 1 half-sentence 2 BetrVG. In contrast to temporary employees pursuant to § 11 (6) German Temporary Employment Act [Arbeitnehmerüberlassungsgesetz, AÜG], the employer's responsibility for the occupational health and safety of external company employees is not explicitly regulated. However, pursuant to § 80 (1) No. 9 BetrVG the works council has a duty to promote, and pursuant to § 89 (1) BetrVG a duty to ensure compliance with, occupational health and safety as well as accident prevention at the business. The information on the accident could also be used to obtain findings with regard to accident prevention for the employees who belong to the company, since all employees use the same business infrastructure. However, the obligation to submit accident reports for countersignature by the works council pursuant to § 89 (6) BetrVG only concerns reports which have actually been filed and does not also cover the enforcement of the obligation to report accidents.

With its decision, the BAG is extending the works council's participation rights beyond those for temporary employees, but these rights exclusively serve the purpose of protecting the health and safety of internal employees. Accordingly, in future employers must keep a check on all accidents that occur their company and provide information to the works council. However, this does not apply to data relating to the employment relationship of the person in question, such as the name of the employee or external company.


Annabelle Mertes

 

1.7 Appropriateness of the works council’s remuneration

Especially in the case of long-term works council members, there is often uncertainty as to whether their remuneration is appropriate. In a decision of 17 April 2019 (docket No. 7 Sa 1065/18), the LAG Düsseldorf recently had the opportunity to clarify whether downgrades in the salary group on grounds of previous transgressions were to be taken into account in the question of the appropriateness of remuneration.

The claimant had initially been a simple member of the works council since 2006 and had later become its chairman. Progressing through several career development stages, he reached remuneration group (EG) 11 in 2012. At the beginning of 2013, after waiving his release from duties and being assigned a new field of activity, he was upgraded to EG 13 with the perspective of being upgraded to EG 14. On grounds of a proven transgression, the claimant was issued a warning and was assigned a new field of activity by mutual agreement in November 2013. In this connection he was downgraded to EG 11. In the course of the works council election in 2014, the claimant was re-elected to the works council, assumed the chair and was released completely from his duties. As of April 2015, he was upgraded to EG 14 in reference to the purported development according to business practice. In the course of a merger, the defendant reviewed the claimant’s classification at the beginning of 2018 and downgraded him to EG 11 with reference to an undue advantage pursuant to § 78 sentence 2 BetrVG. The claimant brought an action for payment of the difference as of April 2018, whilst the defendant demanded the reimbursement of the overpaid remuneration.

The LAG Düsseldorf dismissed both the employee's complaint and the employer's counterclaim. The court took the view that a classification of the claimant in EG 14 constituted an undue advantage on grounds of his activity on the works council. Especially in view of his downgrading to EG 11 in 2013, it was not justifiable to class the claimant as a "regular" employee in EG 14 according to customary business and personal development practice. It was not standard practice at the employer for an employee to climb three pay groups in one and a half years. However, the unreasonableness of the remuneration pursuant to § 78 sentence 2 BetrVG did not lead to a claim for repayment on the part of the defendant, because the defendant had infringed the prohibition of preferential treatment and a repayment claim could therefore be excluded pursuant to § 817 sentence 2 German Civil Code [Bürgerliches Gesetzbuch, BGB]. The judgement is not yet final; the appeal on points of law before the BAG has been expressly permitted.

That the excessive remuneration of works council members who are released from their employment duties can be an explosive issue and even a punishable offence is not a matter that first arose with the proceedings against the VW works councils (see BGH, judgement dated 17  September  2009, docket No.  5 StR 521/08). The present decision makes it clear once again that only the usual business and personal development of comparable employees is relevant for the assessment of remuneration - this includes "setbacks" on the career ladder. Although the employer and works council are, in principle, able to make their own regulations for determining the comparison groups "with the normal development practice at the business", these must in turn satisfy the requirements of §§ 37 (4), 78 sentence 2 BetrVG (cf. BAG, judgement dated 18 January 2017, docket No.  7 AZR 205 15).


Dr. Alexander Willemsen

 

1.8 Doctors and nursing staff on a fee basis are generally not freelancers

The Federal Social Court [Bundessozialgericht, BSG] in Kassel affirmed the long-debated question of the social security obligation of medical specialists working on a fee basis in twelve proceedings on 4 June 2019 (docket No. B 12 R 11/18 R) and in four further proceedings on 7 June 2019 (docket No. B 12 R 6/18 R).

The judgements in the proceedings, as so-called lead cases, have a general significance that goes beyond the proceedings decided in the specific case, because they fundamentally concern the deployment of employees on a fee basis.

The BSG found that fee-based nursing staff in old people's and nursing homes and fee-based doctors in hospitals are not to be regarded as self-employed within the meaning of § 7 German Social Code Book IV [Sozialgesetzbuch IV, SGB IV]. Although it is true that nurses and doctors carry out their work on their own responsibility, this does not mean that this is an activity which is exempt from social security contributions. External influences such as the shortage of skilled workers in the medical sector also does nothing to change this fact. The obligation to follow instructions or the integration into the work organisation must always be assessed on the basis of the actual structure of the activity in the individual case. The BSG acknowledged the fact that nursing staff and doctors in particular had to be integrated into the company organisation in order to complete their tasks.

Although we must await the publication of the grounds for the judgement, there are already indications that the decisions will have implications for other self-employed people working on a fee basis beyond those in the medical sector: The freedom of choice as to which patient is cared for with which procedure is no different under social insurance law to the order in which packages are delivered, floors are cleaned or shelves refilled. Here, too, the degree of entrepreneurial freedom should not be sufficient to exclude a social security obligation for the activity.

The relevant criteria for distinguishing between a self-employed and employed activity, namely the integration into the business organisation and the exercise of the right of direction, must be observed by the companies when hiring third parties. The decisions of the BSG show that both criteria have to be considered equally, because even a clear predominance of one criterion results in a negative assessment under social security law of an exclusively self-employed activity.


Jan Philipp Baale

 

2. Legal developments

2.1 New EU Directive on Transparent and Predictable Working Conditions adopted

The European Parliament has decided to replace the previous directive on the employer’s obligation to inform employees of their employment conditions (Directive 91/533/EEC of 14 October 1991) with the "Directive on Transparent and Predictable Working Conditions in the EU". The package of measures especially aims at creating minimum standards in the "gig economy", i.e. the part of the labour market where small orders are awarded at short notice to independent self-employed persons, freelancers or micro-job employees ("crowdworking” or “clickworking").

In Germany, the new directive, which has to be transposed into national law by 2022, will primarily lead to an adjustment of the German Act on the Notification of Employment Conditions [Nachweisgesetz, NachwG], as the catalogue of working conditions to be documented is to be supplemented by information on the trial period and training opportunities, among other things. In addition, the employer must fulfil the notification obligation within one week; the previous period of one month will only be an exception for certain information. The directive on on-call work contains extensive regulations, but the new minimum standards for this form of employment are already (excessively) fulfilled by § 12 TzBfG. There are also new requirements for multiple employment - sideline employment activities may not simply be banned in general under the new directive - and the trial period, which in future (as is customary in Germany) may not exceed six months. Also new is the provision according to which the trial period for fixed-term employment relationships must be proportionate to the contract term and type of activity. This restriction does not yet exist under German law.

Although the new directive only requires action on a limited number of points, these actions will nevertheless have a practical impact.


Dr. Alexander Willemsen

 

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Dr. Gilbert Wurth

Dr. Gilbert Wurth

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Dr. Alexander Willemsen

Dr. Alexander Willemsen

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Kathrin Vossen

Kathrin Vossen

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Cornelia-Cristina Scupra

Cornelia-Cristina Scupra

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Annabelle Marceau

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Jörn Kuhn

Jörn Kuhn

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Isabel Hexel

Isabel Hexel

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Alexandra Groth

Alexandra Groth

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Anja Dombrowsky

Anja Dombrowsky

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