Employment Law Newsletter III/2019

III/2019

On 20 September 2019, Federal Employment Minister Hubertus Heil presented a report on the results of his Dialogue for the Future "New Work. New Security." in Berlin. The report contains a multitude of proposals and declarations of intent for shaping tomorrow's work environment. These include the expansion of personal time accounts and state aid for time-outs for specific purposes, as well as the examination of an individual's legal entitlement to a personal long-term account. The introduction of an individual entitlement to mobile work is also going to be considered in cases not opposed by operational reasons. Whether, when and how such ideas will find their way into business reality cannot yet be foreseen. What is certain, however, is that they will substantially change work in future and that they will present employers with considerable organisational challenges. In this Newsletter, we report as always on current innovations in jurisprudence and legislation.

1. Current case law

1.1 Managers in matrix structures - extension of works council’s participation rights

1.2 Works council’s inspection of non-anonymous gross remuneration lists

1.3 Exclusion of employees close to retirement from social plan benefits

1.4 Norms transformed according to § 613a (1) sentence 2 BGB retain their collective-law character

1.5 No holiday entitlement during the release phase of partial retirement 

1.6 Proper clarification within the framework of business integration management

1.7 No obligation on the part of the employer to instruct employees with long-term illnesses about the expiration of holiday

1.8 The employer’s obligation to inform and request the taking of statutory additional holiday for severely disabled employees 

2. Legal developments

2.1 Employment law aspects of the Third German Cutting Bureaucracy Act

3. 11. Employment law day at Oppenhoff & Partner on 14 November 2019

1. Current case law

1.1 Managers in matrix structures - extension of works council’s participation rights

In cross-business or cross-company matrix structures, managers often manage employees in different businesses of their own company or other group companies. The Federal Employment Court [Bundesarbeitsgericht, BAG] recently ruled in a decision of 12 June 2019 (docket No. 1 ABR 5/18) that the management of employees in the respective businesses leads to the manager’s appointment in each respective case within the meaning of § 99 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG], and correspondingly triggers the right of participation of the works council there.

In the proceedings underlying the decision, the works council’s involvement in the appointment of a manager was controversial. The company had promoted an employee at the site of the head office to division manager with the approval of the works council there. A department manager directly assigned to the division manager and his employees predominantly worked at another business as opposed to at the head office. The works council at the head office had previously dispensed with announcing the vacancy. The works council at the business was asked to approve the "transfer" of the division manager. The works council refused to give its approval due to the lack of vacancy notice, among other reasons.

The BAG proceeded on the basis of an appointment of the division manager according to shop constitution law at the business of the employees assigned to him and granted the works council there a right of participation in accordance with § 99 BetrVG. By assuming the management function, the division manager is also fulfilling the work purpose at this additional business, which means that he is integrated into the business there in a manner of relevance for the definition of “appointment” in § 99 BetrVG. It does not matter whether the manager has his assigned place of work at this business or whether he regularly works there. The BAG rejects an original responsibility of the central works council in the present constellation. It additionally concludes, however, that no right to withhold consent exists, since the decision on the spatial location of an employment position is a matter of entrepreneurial freedom and this position is only assigned to one business. Only the works council at such business can object to the lack of vacancy notice.

The BAG's decision is of great relevance for the companies concerned, as it triggers a number of consequential questions, such as the applicability of shop agreements to a superior officer who might be based abroad. Participation processes will also have to be redefined.

Jörn Kuhn

1.2 Works council’s inspection of non-anonymous gross remuneration lists

By judgement dated 7 May 2019 (docket No. 1 ABR 53/17), the BAG decided that the right of inspection of the works committee or other formed committees of the works council is not limited to anonymous employee lists.

The decision was based on a legal dispute in which the works committee formed at the business requested access to the company’s non-anonymous gross remuneration lists. The employer, at which a terminated collective agreement applied, kept gross remuneration lists in electronic form for its employees. The lists contained, among other things, the names of the employees, the nature of their work and information on the various remuneration components. Upon request, it gave individual works council members access to an anonymised version of this list. The works council opposed this, demanding access to the complete gross remuneration list including the employees’ real names.

The works council's demand was also successful before the BAG. In the opinion of the Erfurt judges, the right of inspection of the works council or a committee formed by it is not limited to anonymous remuneration lists pursuant to § 80 (2) sentence 2 BetrVG. Nor can anything to the contrary be derived from the legal appraisals of the German Remuneration Transparency Act [Entgelttransparenzgesetz, EntgTranspG]. Rather, the works council is entitled to inspect the remuneration lists actually kept by the employer to the extent necessary for performing its tasks. Data protection considerations would also not necessitate their anonymisation. The processing of personal data associated with the right of inspection was covered by § 26 (1) sentence 1 German Federal Data Protection Act [Bundesdatenschutzgesetz, BDSG].

The decision comes as no surprise and clarifies the data protection provisions. The employer cannot derive an obligation to anonymise from the Remuneration Transparency Act, since the right of inspection regulated therein is a right of inspection which is independent of the right to information under the German Shop Constitution Act. Nor, however, can a general obligation to provide information on non-anonymous remuneration lists be derived from the decision. The lists must always be inspected in the same form as they are actually kept at the company and to the extent required by the works council to carry out its work.

Alexandra Groth

1.3 Exclusion of employees close to retirement from social plan benefits

The BAG ruled by decision of 7 May 2019 (docket No. 1 ABR 54/17) that, although the exclusion of employees close to retirement from the benefits provided for in the social plan constitutes a discrimination on grounds of age, this is justified in individual cases where the exclusion is appropriate and necessary.

The parties disputed the validity of a social plan adopted by the conciliation board. This provided that employees who were entitled to a reduced or unabridged old-age pension directly or after receiving employment benefit “ALG I” were excluded from the benefits of the social plan. Possible earlier retirement for severely disabled persons and women was not taken into account. The works council's appeal against the decision of the conciliation board was unsuccessful in the final instance.

To begin with, the BAG clarified that the decision of the conciliation board did not exceed the scope of discretion granted to it. Whether and which disadvantages are to be fully or partially compensated or merely mitigated in the social plan is at the discretion of the conciliation board, which has a margin of decision-making freedom in this respect. The situation in the individual case is always decisive. The severance payments at the lower limit with the age-graded factors 0.15 - 0.32 still constitutes a sufficient substantial alleviation of the economic disadvantages in relation to the expected duration of unemployment. The employer’s economic strength is irrelevant in this respect. The need for compensation and mitigation is calculated only on the basis of the disadvantages on the employee’s side.

If employees who are entitled to a reduced or unabridged old-age pension directly or after receiving unemployment benefit “ALG I” are excluded from benefits under the social plan, then this constitutes age discrimination under the German General Equal Treatment Act [Allgemeines Gleichbehandlungsgesetz, AGG]. However, pursuant to § 10 sentence 3 No. 6 in conjunction with § 10 sentence 2 AGG, this may be justified. According to the BAG, this is the case if the conciliation board can assume sufficient economic security through entitlement to a possibly reduced old-age pension. The BAG did not deem a referral to the ECJ to be necessary since, in its opinion, the legal situation had been clarified by the ECJ's case law insofar.

In practice, this means that when determining severance amounts in the social plan, account should be taken of the expected unemployment in the various age groups and the associated economic disadvantages. Furthermore, employees can also be excluded from severance payments even if they are only able to draw a reduced old-age pension.

Anja Dombrowsky

1.4 Norms transformed according to § 613a (1) sentence 2 BGB retain their collective-law character

On 12 June 2019, the BAG ruled (docket No. 1 AZR 154/17) on the validity of a pension scheme after several transfers of businesses.

The claimant had been employed by V GmbH since 1987, at which time there was a group-wide shop agreement [Gesamtbetriebsvereinbarung, GBV)] on the company pension plan, the amount of which was based, among other things, on the employees’ creditable years of service with the company. In 1999 the claimant's department was transferred to V SEA GmbH by way of a transfer of business and in 2013 it was again merged with the defendant by way of absorption, with the business being fully integrated into the defendant's business. A GBV on the company pension plan also existed at the defendant, the amount of which was determined by the periods of contribution. The claimant asserted that the original regulation of V GmbH still applied to him even after the transfers of businesses.

The claimant’s appeal on points of law was unsuccessful. The BAG initially left it open whether the original regulation existing at V GmbH continued to apply normatively after the transfer to V SEA GmbH, as this ultimately was of no consequence. In the case of its continued normative applicability at V SEA GmbH after the first transfer of business, even in case of the merger with the defendant, only a transformation of the provision into the employment relationship according to § 613a (1) sentence 2 German Civil Code [Bürgerliches Gesetzbuch, BGB] came into consideration as the business of V SEA GmbH no longer existed. Even in the absence of its normative validity at V SEA GmbH, the provision could only be transformed into the claimant's employment relationship pursuant to Section 613a (1) sentence 2 of the BGB, since previously transformed norms fundamentally also retained their collective character at the acquirer. In both cases, a replacement of the previous provision by the GBV of the defendant pursuant to § 613a (1) sentence 3 BGB was therefore possible. In addition, the BAG denied a violation of Union law, since no general prohibition of deterioration could be derived from the case law of the ECJ ("Scattalon") either.

The BAG's decision shows what influence several transfers of businesses can have overall on shop constitution provisions. Furthermore, the decision is of great practical relevance, as it shows what scope for action is available to an employer acquiring a company and, in particular, considers the possibility of replacement provisions that entail a deterioration to be permissible.

Annabelle Marceau

1.5 No holiday entitlement during the release phase of partial retirement

Holiday entitlement is a long-running issue in supreme court jurisdiction. In a decision presently only available as a press release, the BAG had to decide whether a holiday claim can also accrue during the passive phase of partial retirement in the block model (BAG dated 24 September 2019, docket No.  9 AZR 481 18).

The parties had concluded a partial retirement agreement under which the claimant was to be obliged to work in the same scope as previously in the period from 1 December 2014 to 31 March 2016 (active phase) and subsequently be exempted from work services until 31 July 2017 (passive phase). During the entire period he received a correspondingly reduced salary plus top-up amounts. Under the terms of the employment contract, the claimant was entitled to 30 work days of holiday; in 2016, the claimant was granted eight days of holiday. With his action, the claimant claimed compensation for 52 days of holiday (22 days of holiday for the calendar year 2016 and 30 days of holiday for the calendar year 2017).

Like the previous instances, the BAG also dismissed the action. The Ninth Senate confirmed that an employee who is in the release phase of a partial retirement relationship and who is released from the obligation to work for the entire calendar year is not entitled to statutory recreational holiday in the absence of an obligation to render work services. The release phase should apply as 'zero' work days. According to the BAG, this also applies to that part of the contractually agreed holiday which exceeds the statutory minimum, unless the parties have reached an agreement deviating from § 3 of the German Federal Holiday Act [Bundesurlaubsgesetz, BurlG] for calculating the holiday entitlement during partial retirement.

The decision is to be welcomed, even if it comes as no surprise in the context of comparable cases: Only recently in the spring, the BAG confirmed that holiday entitlements also could not accrue during special leave  (BAG dated 19 March 2019, docket Nos.  9 AZR 315/17 and 9 AZR 406/17). No action need therefore be taken in case of partial retirement contracts insofar. However: holiday entitlement remains a turbulent issue. In the coming weeks, employees are likely to feel the practical effects of the more recent ECJ and BAG rulings on the forfeiture of holiday claims, especially when employers’ first requests to take remaining holiday for the current holiday year flutter into employees’ mailboxes.

Dr. Alexander Willemsen

1.6 Proper clarification within the framework of business integration management 

In its decision of 17 April 2019 (docket No. 7 AZR 292/17), the BAG again emphasized the importance of proper clarification in the context of business integration management [betriebliches Eingliederungsmanagement, bEM] in accordance with § 167 (2) German Social Code Book IX [Sozialgesetzbuch IX, SGB IX] and tightened the legal requirements for it.

The defendant airline and the claimant last employed as a flight attendant disputed over the termination of her employment relationship due to her incapacity for flight duty. According to the applicable collective agreement, the determination of her unfitness for service was deemed a condition subsequent. The claimant had not agreed to the implementation of a bEM; a staff meeting which was not attended by the employee representation established at the airline, did not lead to a consensual determination of further employment opportunities.

The lawsuit was successful. The BAG stated that the condition subsequent could only be fulfilled if there was no other employment opportunity for the employee incapacitated for flight duty. However, the defendant had failed to adequately demonstrate the lack of any such employment opportunity. It should have assessed on its own initiative a conceivable alternative or an alternative already named by the claimant, and should have explained in detail why her employment in another position which might have to be "made available" was not possible. The defendant held this extended burden of proof since it had not undertaken a bEM. The absence of a bEM would only be harmless if the employee had been properly informed about the bEM beforehand and had therefore been asked for her consent to the bEM in compliance with the rules. Besides statements on the objectives of the bEM and the nature and extent of the data collected and used for such purpose, this required notifying the employee of her right to choose between the implementation of a bEM with and without the participation of the employee representatives. The defendant did not inform the claimant of her right to such an option.

For the first time, the BAG now speaks of "instruction" and "proper clarification" in connection with the requirements for a due and proper offer to conduct a bEM. From this it should be clear that the content of the information to be provided by the employer pursuant to § 167 (2) SGB IX must be of a significant degree of substance. It is also clear that company provision on a bEM (these are usually likely to be shop agreements) must provide for the possibility of implementing a bEM without the participation of the works council. In many cases, there is likely to be a considerable need for further amendments or additions at companies.

Kathrin Vossen

1.7 No obligation on the part of the employer to instruct employees with long-term illnesses about the expiration of holiday

In the opinion of Regional Employment Court [Landesarbeitsgericht, LAG] of Hamm, an employer's duty to instruct on the expiry of holiday claims in the event that holiday is not taken by 31 December of the calendar year or by 31 March of the following year if carried forward does not exist for employees with long-term illnesses (judgement of 24 July 2019, docket No. 5 Sa 676/19).

In the case on which the decision was based, the claimant had been continuously incapacitated for work since 2017 and could not take advantage of the 14 days of holiday to which she was entitled. In November 2018, the claimant unsuccessfully asked the defendant to compensate her for the holiday for the year 2017. With reference to the decision of the ECJ of 6 November 2018 (docket No. C-684/16) and the underlying judgement of the BAG of 19 February 2019 (docket No. 9 AZR 423/19), the claimant held that her holiday entitlement for 2017 had not expired, since the defendant had not informed her during the course of 2017 that her holiday entitlement would expire at the end of the year.

The LAG Hamm denied a duty to instruct in the case of employees on long-term sick leave. Accordingly, holiday entitlements in the event of incapacity for work do not expire until the lapse of 15 months after the end of the calendar year in which they accrue. The question of their earlier expiration would only have re-arisen after the claimant had recovered and would then have necessitated an instruction by the defendant. With reference to the judgement of the BAG of 19 February 2019, the LAG further explained that the requirements for a "clear" notification were regularly fulfilled by the employer's notice informing that the holiday entitlement would expire at the end of the calendar year if the employee was in a position to take such holiday during the calendar year. Abstract information in an employment contract, an info sheet or collective agreement, for example, does not usually meet the requirements of a concrete and transparent notification.

The decision of the LAG Hamm is not yet legally binding and is pending before the BAG (docket No.  9 AZR 401 19). The decision of the LAG Hamm can nevertheless be welcomed against the background of the recent case law on the expiration of holiday. At least for a certain period of time, employers can be assured with relatively certainty that the obligation to instruct employees incapacitated for work on the expiry of the holiday claim will be critically assessed by the case law of the court of instance. Certainty also exists with respect to the scope of the duty to instruct, which must refer specifically to the particular case and cannot be replaced by abstract information in the employment contract, an info sheet or collective agreement. This opinion will indubitably also be shared by the BAG.

Cornelia-Cristina Scupra

1.8 The employer’s obligation to inform and request the taking of statutory additional holiday for severely disabled employees

The employer's duty to point out the possible expiry of holiday claims, which follows from a decision of the ECJ of 6 November 2018 (docket No. C-684/16), has been extended by the LAG of Lower Saxony by judgement of 16 January 2019 (docket No. 2 Sa 567/18) to include the statutory additional holiday for severely disabled employees according to § 208 SGB IX.

At the end of January 2018, the severely disabled claimant, whose degree of disablement was 50, left her employment relationship with the defendant employer on grounds of a valid dismissal. She brought an action before the court claiming, inter alia, damages for unused additional holiday in the amount of 5 days per year for the years 2012 to 2017. The defendant had not drawn the claimant's attention to the fact that, as a severely disabled person, she was entitled to additional statutory holiday of 5 work days per holiday year.

The LAG of Lower Saxony ruled in the claimant’s favour. The additional holiday entitlement for severely disabled persons pursuant to § 208 SGB IX is a statutory leave entitlement to which the considerations of the ECJ in November 2018 apply in the same scope. The employer was obliged to take the welfare and legitimate interests of the employee into consideration and to protect such employee against health hazards; the subsidiary obligation arising from § 241 (2) BGB in this respect also included the clarification of the contractual partner. These principles are to be transferred to the statutory additional holiday in accordance with § 208 SGB IX.

The judgement of the LAG of Lower Saxony is now legally binding. It is to be expected that other courts will also share this view, should similar legal disputes arise. Therefore, in the necessary implementation of notification and request processes arising at companies on grounds of the recent ECJ case law, the additional statutory holiday entitlements of severely disabled employees must also be taken into account. Another point to be borne in mind is that the employer most certainly is entitled, in an existing employment relationship, to enquire with the employee as to a serious disability or any application to establish disability. For the legality of such a question it is decisive whether the special protection against unfair dismissal according to §§ 168 et seqq. SGB IX already applies; it is a known fact that this is the case after the first six months.

Kathrin Vossen

2. Legal developments

2.1 Employment law aspects of the Third German Cutting Bureaucracy Act

In its session on 18 September 2019, the Federal Cabinet adopted the draft of a Third Act on Cutting Bureaucracy from Medium-Sized Businesses in Particular (Third Cutting Bureaucracy Act [Drittes Bürokratieentlastungsgesetz, BEG III]). With the BEG III, the Federal Government is taking an important first step towards reducing bureaucracy by relieving the economy of a total of at least 1.1 billion Euros in bureaucracy costs per year. In addition to numerous changes in tax law, the draft bill also plans central changes in legislation that will be of fundamental significance for employment law in terms of reducing bureaucracy:

• The planned draft bill intends to extend an electronic registration procedure that already exists between health insurers and employers. An electronic certificate of incapacity for work is going to be introduced as of 2021, and an electronic notification procedure will replace the submission of the paper certificate of incapacity for work. The draft bill envisages that in future health insurance funds will inform employers electronically, upon demand, of the beginning and duration of the incapacity for work of employees with statutory health insurance. The Federal Government hopes that this will save the economy around EUR 568 million a year.

• Future part-time employees will also be affected by the planned legislative changes. The draft bill provides for the introduction of text form for the notification of an employer's decision on a request for part-time employment under the German Part-Time and Fixed-Term Employment Act [Teilzeit- und Befristungsgesetz, TzBfG]. The Federal Government assumes that the introduction of text form will lead to an annual saving of around EUR 94,000 for the economy.

From an employment law perspective, the draft bill is not as far-reaching as originally planned by the German Federal Ministry for Economic Affairs [Bundeswirtschaftsministerium, BMWi]. As early as May 2009, the BMWi published a key points paper for a Third Cutting Bureaucracy Act, which provided for an increase and dynamisation of the mini-job earnings limit to EUR 500, the abolition of subcontractors’ liability for the minimum wage with a few exceptions, and the limitation of the obligation to document work hours in accordance with § 17 of the German Minimum Wage Act [Mindestlohngesetz, MiLoG]. Unfortunately, these key issues have not been implemented in the new draft bill; however, the possibility cannot be ruled out that these issues will be incorporated into another legislative procedure at a later date.

Cornelia-Cristina Scupra

3. 11. Employment law day at Oppenhoff & Partner on 14 November 2019

As already announced, the Employment Law Day is being held for the 11th time in our Cologne offices on 14 November 2019.

The often explosive issues relating to the remuneration of works councils and the developments in legislation on working hours following the decision of the ECJ of 14 May 2019 will be the two main topics of the morning. The afternoon's topics will include individual cases concerning dismissal protection law as well as our customary look at current employment law jurisdiction and legislation.

We would be pleased to welcome you to this day of interesting lectures and lively discussions.

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