Employment Law Newsletter IV/2019

A  year ago, it was only possible to speculate at this point about the considerable effects that the rulings of the European Court of Justice of November 2018 on the treatment of holiday claims could have on German holiday law. In fact, the year 2019 was marked by a large number of decisions by the German Federal Employment Court [Bundesarbeitsgericht, BAG] on recreational leave, in particular on the expiration, transferability, compensation and hereditability of holiday claims. We can thus round off the year 2019 with another important decision on holidays and, in this last Newsletter for 2019, also inform you of other judgements by the employment courts of importance to business practice.

1. Current case law

1.1 Recreational leave and the employer's obligation to cooperate

1.2 I know what you did last summer - The Federal Employment Court rules on seasonal employment contracts

1.3 No time-off in lieu to reduce overtime without an express release from duties in a court settlement

1.4 Overtime compensation also for employees with "trust-based working hours"

1.5 Compliance with data protection by the works council

1.6 Deviation from equal pay only with full reference to the collective agreement

1.7 Validity of the three-step pension scheme under company pension law also in the event of the replacement of a company pension within the scope of a transfer of business

1.8 Employee characteristic of crowdworkers

2. Legal developments

2.1 New Professional Instructions of the Federal Employment Agency on the AÜG

1. Current case law

1.1 Der Erholungsurlaub und die Mitwirkungsobliegenheit des Arbeitgebers

1.1 Recreational leave and the employer's obligation to cooperate

As a consequence of the ECJ ruling of November 2018, the BAG has virtually “revamped” German holiday law with a series of decisions in February 2019. One of the decisive changes is the employer's significantly increased cooperation obligation. The employer cannot plead the forfeiture of holiday claims from previous calendar years if it previously did not put the employee into a position in which he was able to exercise his holiday claim, i.e. the employer bears the burden of initiative as regards the realisation of the holiday claim.

In a further decision, the BAG has now reconfirmed and developed these principles (BAG of 25 June 2019, docket No.  9 AZR 546/17). The suing employee demanded compensation for 65 days of holiday from the years 2012 to 2015 following the termination of his employment relationship in 2016. The employer had informed him by e-mail in December 2015 that residual leave had to be taken by 31 March 2016. In the proceedings, the employer pleaded the expiry of the holiday claims.

Whilst the previous instance had still affirmed the expiration of the holiday claims for the years 2012 to 2014 according to old BAG case law, the BAG reversed this decision and referred the matter back to the Regional Employment Court [Landesarbeitsgericht, LAG] for a new decision. According to the more recent case law, it cannot be assumed that holiday claims automatically expire at the end of a holiday year. The LAG had to clarify whether the employer had complied with its cooperation obligation; the e-mail of December 2015 per se certainly was not enough, since neither the number of remaining days of holiday nor their impending forfeiture after expiry of the specified period had been mentioned. However, the BAG made it clear that these stricter rules only apply to the statutory minimum holiday of four weeks and do not also cover any additional contractually agreed holiday. Rather, the parties to the employment contract are at liberty not only to freely regulate holiday and holiday compensation claims with regard to the additional holiday, they can also structure the cooperation obligation differently with respect to this part of the holiday. The decisive factor for the different treatment of the additional holiday, however, is the clear expression of the parties' willingness to deviate from the rules. Without such clear expression, one has to assume that the statutory holiday and the contractually agreed holiday are to be handled consistently.

This makes it clear once again that a clear distinction in the provisions of the employment contract between minimum and additional holiday can reduce the employer's risk of at some point having to compensate holiday claims that have accumulated over several years. It is therefore advisable to amend or revise holiday clauses in employment contracts.

Kathrin Vossen

1.2 I know what you did last summer - The Federal Employment Court rules on seasonal employment contracts

Sometimes, the key issue of an employment law dispute does not come to light until the third instance: The BAG recently had to decide in a dispute over the validity of the limitation of the term of employment of a lifeguard to the months of April to October of each calendar year. In contrast to the previous instances, the BAG held that this was a "limited" employment relationship as opposed to a limited-term employment relationship However, limits also applied in such a case (BAG of 19 November 2019, docket No. 7 AZR 582/17).

The claimant was employed as a lifeguard and occasionally also to clean and maintain the swimming pool. The employment contract stipulated that he was “hired in each case for the season from 1 April to 31 October of a calendar year”. In urgent cases, however, he also had to render work services at the employer's request beyond this period. In the 2016 season, the sued municipality hired on an indefinite basis a skilled bathing facilities employee who was employed throughout the entire year - and not just for the seasonal business between April and October. The claimant subsequently applied for the judicial establishment of his indefinite employment relationship. He considered the limitation of his employment contract to the period between April and October of one year to be invalid. In addition, he made reference to the Collective Agreement for the Public Sector [Tarifvertrag des öffentlichen Dienstes, TVöD], which provides for a maximum limitation term of five years in § 30 (2); this was exceeded here.

The lower courts assumed that the parties concluded a fixed-term employment relationship anew each year for the period from April to October of a calendar year and considered this to be valid. The BAG did not share this opinion: The employment relationship had been concluded for an indefinite period. The only peculiarity was that the obligation to work and pay remuneration was limited to the months of April to October of each calendar year. The BAG deemed this fundamentally permissible. In its press release, however, it made reference to an examination of general terms and conditions pursuant to § 307 (1) of the German Civil Code [Bürgerliches Gesetzbuch, BGB], and examined whether the claimant was put at an unreasonable disadvantage through the limitation.

Although the 7th Senate rejected this because, at the time of concluding the employment relationship, the municipality could assume that it would only be requiring the claimant’s employment during the bathing season, an application of the examination of general terms and conditions meant that a concrete time limit for seasonal work (including any preparatory and follow-up work) had to be materially justified. What criteria are applicable in this case remains open until publication of the reasons for the decision; however, the examination would have to be less stringent than an examination of the material reason for a time limitation pursuant to § 14 (1) German Part-Time and Fixed-Term Employment Act [Teilzeit- und Befristungsgesetz, TzBfG], because the claimant had known with certainty in this case that he could be re-employed at the beginning of the new season.

Dr. Alexander Willemsen

1.3 No time-off in lieu to reduce overtime without an express release from duties in a court settlement

The BAG clarified in its decision pronounced on 20 November 2019 (docket No.  5 AZR 578/18) that a release from duties in a court settlement only fulfils the employee's claim to time-off in lieu to reduce the working time account if this is expressed with sufficient clarity in the settlement.

The lawsuit was brought by an employee who had originally been dismissed without notice and who had reached a court settlement with her employer in unfair dismissal proceedings. The settlement provided that the employment relationship between the parties ended with the expiry of 31 January 2017 by ordinary termination of the employer. In addition, the claimant was irrevocably released from her obligation to work until the time the employment relationship ended, with the continued payment of her agreed remuneration and offsetting any existing residual holiday claims. Not included in the settlement, on the other hand, was the offset of claims to time-off in lieu and a general compensation clause.

After the employment relationship had ended, the claimant demanded compensation of 67.10 hours of overtime. The Employment Court [Arbeitsgericht, ArbG] of Münster ruled in the claimant’s favour; the LAG Hamm dismissed the case upon the defendant’s appeal.

In its decision, which has only been published as a press release to date, the BAG ruled that a release from the duty to work in a court settlement is only suited to compensate the claim to time-off in lieu to reduce overtime on the working time account if the employee is also able to recognize the release from the obligation to work to this end. However, this is not the case if the court settlement does not sufficiently state, either explicitly or impliedly, that the release from duties also serves to reduce the working time account or that it serves to fulfil the claim to time-off in lieu arising from the working time account.

The BAG's decision is convincing. In terms of its practical implications for the employer, this clearly illustrates that any residual overtime can only be reduced in a legally secure manner by explicitly granting it during the release from duties. An alternative option for the conclusion of court settlements and termination agreements is the explicit regulation of a comprehensive settlement clause which - with the exception of a few indispensable claims – in all events settles a large part of the reciprocal payment claims with the fulfilment of the settlement.

Cornelia-Cristina Scupra

1.4 Overtime compensation also for employees with “trust-based working hours”

Even “trust-based working hours" [Vertrauensarbeitszeit] do not per se preclude employees from being entitled to overtime pay. This was ruled by the BAG in its judgement of 26 June 2019 (docket No. 5 AZR 452/18).

In the underlying case, an employee (a trade union secretary) filed a lawsuit against the employer (ver.di) for compensation for overtime worked, whereby the parties had agreed on “trust-based working hours”. The employment relationship was subject to the General Terms and Conditions of Employment, which were concluded as company-wide shop agreements and which provided for trade union secretaries to be granted a flat rate of nine working days off per calendar year for "regular" overtime. In contrast, other employees received time-off in lieu as well as an overtime bonus or corresponding remuneration for each hour of overtime worked.

The BAG declared the shop agreement to be invalid insofar as it stipulated that employees receive a flat rate of nine days time-off in lieu for "regular" overtime within the framework of the agreed “trust-based working hours”. To the extent such a provision denies employees falling within its scope the concrete calculation of overtime, the overtime settled within the scope of the flat rate had to be sufficiently clear from the shop constitutional norm itself. Furthermore, the judges considered the regulation to be a violation of the principle of equal treatment under shop constitutional law on grounds of its differentiation between the groups of employees. Furthermore, according to the BAG, the agreement of “trust-based working hours” could not automatically lead to a forfeiture of overtime pay. If the employer assigns the employee so much work that he can no longer compensate for overtime on one day by working shorter hours on other days, the employer bears the risk of being obliged to remunerate overtime despite the “trust-based working hours”.

The case shows the limits of a flat-rate settlement of overtime by shop agreement. It is clear that - as with standard employment contracts - when concluding shop agreements, the observance of existing limits such as the requirement of the clarity of norms and the principle of equal treatment have to be ensured. The judgement also documents how problematic it can sometimes be if employers do not recordthe working hours of their employees and it is not possible to prove the actual working hours worked.

Alexandra Groth

1.5 Compliance with data protection by the works council

Following the entry into force of the General Data Protection Regulation (GDPR), the BAG is increasingly ruling on its effects on employment relationships. For example, the BAG ruled (decision of 9 April 2019, docket No. 1 ABR 51/17) that works councils must also comply with the provisions of the GDPR.
In the underlying case, the works council of an aerospace company requested information on all pregnant employees, as it was responsible for ensuring compliance with the laws applicable to female employees. The employer refused to provide this information because the employees concerned objected to the disclosure. Contrary to the previous instances, the BAG considered the employer's appeal to be well-founded.

The BAG ruled that the works council only has a right to information pursuant to § 80 (2) sentence 1 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG] if the requested information is necessary in the individual case to perform its duties, whereby the mere reference to its obligation to monitor the applicable laws is not sufficient. In addition, both the employer and the works council are obliged to observe the requirements of data protection. Insofar as the works council is entitled to information under shop constitution law, the transmission of data to fulfil legal obligations under employment law is generally permissible pursuant to § 26 (3) German Federal Data Protection Act [Bundesdatenschutzgesetz, BDSG]. Here, the works council must take data protection precautions to protect the personal data of employees, which - in the case of health data - must meet the requirements of § 22 para. 2 BDSG (restriction of access, pseudonymisation, encryption, etc.). The absence of such measures precludes a right to information.

The BAG's comments on the requirements of the works council's request for information correspond to previous case law and therefore come as no surprise. A welcome fact, however, is that the BAG - without conclusively clarifying the liability position of the works council - also considers the works council to be obliged to comply with the GDPR. Accordingly, the works council must pay particular attention to the proper storage of data in its offices. However, here as well, it does not state who in turn is to monitor the works council’s compliance with the data protection requirements. It remains to be seen whether the company data protection officer might have such authority.

Annabelle Marceau

1.6 Deviation from equal pay only with full reference to the collective agreement

In its judgement of 16 October 2019 (docket No. 4 AZR 66/18), the BAG clarified a dispute of significance to temporary employment practice concerning the possibility of deviating from the principle of equal pay by way of exemption from the collective agreement.  According to this, suppliers of temporary workers can only deviate from the principle of equality by virtue of an employment agreement if the collective agreement on temporary employment is fully and not only partially applicable to the term of the assignment.

In the case underlying the decision, the employment contract of a temporary worker contained a dynamic reference clause to the collective agreements on temporary employment concluded between the German Trade Union Confederation [DGB Tarifgemeinschaft] and the Association of German Temporary Employment Agencies [Interessenverband Deutscher Zeitarbeitsunternehmen, IGZ]. The employment contract also contained provisions that partially deviated from the collective agreement to the detriment of the employee. The temporary worker subsequently demanded the difference between the remuneration paid to him and the higher remuneration received by comparable regular workers of the hiring company for the term of the temporary employment assignment. Both the Employment Court (ArbG) and the Regional Employment Court (LAG) dismissed the complaint, referring to the allegedly effectively agreed exemption from the collective agreement.

The Federal Employment Court (BAG), on the other hand, granted the claimant’s claim to equal pay for the duration of the temporary employment assignment on the merits of the case. Its reasoning was that the parties had not concluded an agreement which entitled them to deviate from equal pay pursuant to § 9 (2) German Temporary Employment Act [Arbeitnehmerüberlassungsgesetz, AÜG], old version. According to the systematics and purpose of the provisions of the AÜG, namely, this presupposes the full application of a collective agreement pertaining to the supply of temporary workers. However, the employment contract of the parties contained deviations from the provisions of the collective bargaining agreement that were not exclusively in the employee’s favour. This decision, which is currently only available as a press release, can be applied 1:1 to the current legal situation under § 8 (2) AÜG, old version, whereby the tariff dispositivity is now generally limited to a period of 9 months. So far, however, it has been a point of controversy in the legal literature whether the reference to factually and content-wise related regulatory complexes is not already sufficient for the tariff exemption from equal pay. Suppliers of temporary workers who wish to invoke a collective bargaining exemption pursuant to § 8 (2) AÜG are therefore strongly advised to review their temporary employment contracts in order to avoid equal pay claims.

Isabel Hexel

1.7 Validity of the three-step pension scheme under company pension law also in the event of the replacement of a company pension within the scope of a transfer of business

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 Employee characteristic of crowdworkers

In a decision dated 4 December 2019 (docket No. 8 Sa 146/19), which is currently only available as a press release, the LAG Munich ruled that it is not sufficient for the assumption of an employment relationship that the agreement between platform and crowdworker merely provides for the possibility of offering orders and accepting them.

In the factual situation underlying the decision, the sued company carried out checks on the presentation of goods. It awarded the contracts for this via the "crowd", an Internet platform, to third parties, so-called crowdworkers. The claimant carried out such checks on the defendant’s behalf for approximately 20 hours per week. After the defendant terminated the cooperation, the crowdworker filed a lawsuit and asserted the existence of an employment relationship. The defendant, in contrast, took the view that the claimant was self-employed.

In the opinion of the LAG Munich, no employment relationship existed. The agreement reached between the company and the crowdworkers did not constitute a basis for an instruction-bound and dependent employment relationship in the absence of a respective obligation on the part of the parties to broker orders or to accept the orders offered. Nor could any obligation on the part of the crowdworker arise from the fact that he made a substantial part of his living from the orders and was thus also under pressure to continue accepting orders.

However, this decision does not yet provide final legal clarity. The LAG expressly did not decide on the question of whether a fixed-term employment relationship was established when an order was clicked on. This was not of relevance here, since the invalidity of a time limitation should have been asserted within a period of three months; which did not happen here, however.

This ruling is the latest judicial decision in the currently much discussed issue of the employee status of workers in the so-called Gig-Economy. It remains to be seen whether the Erfurt judges will also share the view of the LAG Munich; because of the fundamental significance of the case, the appeal on points of law was admitted to the BAG.

Jörn Kuhn

2. Legal developments

2.1 New Professional Instructions of the Federal Employment Agency on the AÜG

On 1 August 2019, the Federal Employment Agency [Bundesagentur für Arbeit, BA] updated its Professional Instructions on the German Temporary Employment Act [Arbeitnehmerüberlassungsgesetz, AÜG]. It did so within the context of the last AÜG reform at the end of March 2017. The Professional Instructions are internal administrative instructions which define the "work programme" of the Federal Employment Agency and give the authority binding instructions on how to interpret and apply the provisions of the AÜG.

• The main change can be found in point 8.5 Nos. 5 and 6. There, the Federal Employment Agency has incorporated the jurisprudence of the Federal Social Court [Bundessozialgericht, BSG] from 2016 (judgement of 12 October 2016 - B 11 AL 6/15 R). According to this, mixed enterprises which are not members of an employers' association for temporary employment and which do not predominantly provide temporary employment services may deviate from the principle of equal treatment in § 8 (1) sentence 1 AÜG by making reference to a collective agreement for the temporary employment sector. However, according to the new regulation of the Professional Instructions, this is only possible if the inclusion of the collective agreement is comprehensive and complete, i.e. both for periods of assignments and for periods without assignments. This has far-reaching consequences in practice, since in many mixed enterprises, on grounds of additional agreements concluded for a limited period of time, the respective collective agreement only applies if the employee is actually employed within the scope of temporary employment.
• In addition, the Federal Employment Agency establishes that the naming of the employees to be supplied and thus their concretisation is subject to the written form requirement form if the supply of specific employees is an essential part of the contract (point 1.1.6.7 (2)).
• The Federal Employment Agency also determines which features are to be taken into account when determining the entitlement to equal pay with a view to the comparable employee (point 8.1 (5)).
• With regard to work on call, the Federal Employment Agency states that such work may be agreed and that the provisions of § 12 TzBfG and § 11 (4) AÜG must be observed (point 11 (8)).
• In conformity with the wording of the law, the Federal Employment Agency also declares in clarification when a case of invalidity occurs pursuant to § 9 (1) No. 1a AÜG, namely if the contract is not designated as a temporary employment contract and if the identity of the temporary worker is not specified (point 9 (5)).
• In addition, the Federal Employment Agency states that the written form requirement of the temporary employment contract extends to the entire legal transaction, i.e. also to modalities and ancillary agreements. Furthermore, it establishes the minimum contents of the temporary employment agreement (point 12 (1) and (2)).
• With regard to the controversial question in the legal literature as to whether the period for the maximum duration of the temporary employment assignment must be according to §§ 187, 188 BGB or § 191 BGB, the Federal Employment Agency continues to adhere to a calculation in accordance with §§ 187, 188 BGB in the new instructions (point 1.2.1 (1)). According to this, the period determined in months shall begin on the first day of the temporary employment assignment and end on the expiry of the day of the last month preceding the day which, by its designation or number, corresponds to the start date of the period. The Federal Employment Agency also argues that the contract start should be regarded as decisive, which is made clear once again by the newly inserted paragraph 4 of point 1.2.1 of the Professional Instructions. This stipulates that the term of the assignment of the respective employee either results directly from the contractual regulation or is determined within the contractually determined term of the assignment. Finally, according to point 1.2.1 (1), suppliers of temporary workers must document the working hours of the respective employees by recording and storing suitable evidence in text form in their business records.

Cornelia-Cristina Scupra

Dr. Gilbert Wurth, Kathrin Vossen, Jörn Kuhn, Isabel Hexel, Dr. Alexander Willemsen, Anja Dombrowsky, Annabelle Marceau, Cornelia-Cristina Scupra, Alexandra Groth

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