Employment Law29.09.2021 Newsletter
Focus on Labor Law - 3th Quarter 2021
An exciting federal election lies behind us. Exploratory talks are now starting on the formation of a future governing coalition, which is expected to consist of at least three parties at federal level for the very first time. It is still uncertain which labour law programme the new government will introduce. We will keep you informed about the legislator’s activities as usual in our Labour Law Focus. Today, we can already inform you of the existing decisions of the labour courts of significance to daily HR practice.
1.2 Undermined probative value of a certificate of incapacity for work
1.3 Employee's inability to work as an unfair negotiating situation?
1.4 Employer may order return from home office
1.5 Compensation for minus hours only in case of explicit regulation
1.6 Works council has no claim to salary lists in an analysable file format
1.8 No joint and several liability between employer and external pension provider
1.9 Non-discriminatory calculation of company pensions for part-time employees
2.1 In the opinion of the EU Commission, the group-wide establishment of a whistleblower system is insufficient
3. Thirteenth Labour Law Day at Oppenhoff on 11 November 2021
1. New case law
1.1 Termination without notice due to holiday taken arbitrarily by employee in employment relationship continued during litigation
Even in an employment relationship that is continued during litigation, an employee may not arbitrarily take holiday that has not been granted. By judgement dated 20 May 2021, docket No. 2 AZR 457/20, the German Federal Labour Court [Bundesarbeitsgericht - BAG] clarified that, when an employee takes holiday arbitrarily, this in itself is already enough to justify an extraordinary termination.
The peculiarity of the case had less to do with the grounds for the termination per se and more to do with the fact that the employee, whose employment relationship had been continued during litigation, took holiday arbitrarily. The employer had initially terminated the employment relationship with the employee by giving due notice. This was contested by the employee, who asserted a claim to continued employment. Prior to the judgement in the first instance - which upheld the action - the parties had already entered into a contractual "employment relationship during litigation” [Prozessarbeitsverhältnis]. Within the scope of this, the employee had applied for holiday, which was not granted by the employer. Despite this, the employee did not come to work the next day, which prompted the employer to terminate the employment contract again - this time without notice.
The BAG concluded that the "employment relationship during litigation" agreed between the parties constituted a continuation of the existing employment relationship subject to a condition subsequent, as opposed to a continuation of the employment relationship in order to avert compulsory enforcement, since a first-instance judgement had not existed at the time of concluding the agreement. In cases where a terminated employment contract is continued subject to a condition subsequent, the parties have the same rights and obligations as in a non-terminated employment relationship. This also includes the prohibition of arbitrary holiday and of not properly fulfilling the work performance obligation.
For employers, contractual employment relationships during litigation should always be treated with caution. The continued employment of a dismissed employee could actually document the fact that the relevant reason for the dismissal does not in fact exist. If an employment relationship during litigation is nevertheless agreed, the obligations under the employment contract continue to apply. The situation is different if, following a judgement, the employment is continued only in order to avoid compulsory enforcement. In this case, claims such as the claim to the continued payment of remuneration in case of illness or to holiday only exist if the termination actually turns out to be invalid.
1.2 Undermined probative value of a certificate of incapacity for work
An employee who hands in his notice and is written off sick on the same day does not automatically retain his entitlement to the continued payment of remuneration. The employer can undermine the probative value of the "sick note”, especially if the certified incapacity for work covers the exact duration of the notice period (BAG 8 September 2021, docket No. 5 AZR 149/21).
After the claimant had terminated her employment on 8 February 2019 with effect as per 22 February 2019, she presented the defendant with a “first-issue” certificate of incapacity for work dated the same date as the termination and covering the period up to 22 February 2019. The defendant subsequently refused to continue to pay the employee's remuneration. The probative value of the medical certificate was undermined by the fact that it covered the entire remaining duration of the employment relationship after the claimant’s resignation. The claimant, however, demanded the continued payment of her remuneration; she had been duly written off as incapacitated for work and had been facing a burn-out.
While the lower courts affirmed the claimant's claim to the continued payment of her remuneration for the duration of the notice period, the BAG ruled in the employer’s favour. It was true that the claimant had initially proved her purported incapacity for work with the certificate of incapacity for work, which is the evidence envisaged for such purpose. However, the probative value could be undermined if actual circumstances were presented and, if necessary, proven which raised serious doubts as to the incapacity for work. This requirement had been met by the defendant in this case. Due to the coincidence – time-wise - between the termination of 8 February 2019 as per 22 February 20219 and the certified incapacity for work for the same period, serious doubts as to the certified incapacity for work had been sufficiently substantiated.
The claimant would subsequently have had to substantiate and prove that she had indeed been unable to work. This evidence could be provided, in particular, by questioning the attending doctor who was released from the duty of confidentiality. The claimant did not fulfil this requirement - despite the Senate's indication.
Employers will no doubt be positively surprised by the BAG's decision, as this can put a stop to the abusive submission of certificates of incapacity for work. However, one should not lose sight of the fact that the specific circumstances of the individual case will doubtlessly continue be decisive in undermining the probative value.
1.3 Employee's inability to work as an unfair negotiating situation?
The employer does not already violate the requirement of a fair negotiation arising from Section 241 (2) German Civil Code [Bürgerliches Gesetzbuch - BGB] if the employee is incapacitated for work during the negotiation of a termination agreement. Rather, for it to constitute a violation, the employer must create or exploit a situation of psychological pressure that inadmissibly impairs the employee's freedom of decision.
The claimant had worked for the defendant as a project engineer for many years. After two warnings, the parties entered into negotiations to conclude a termination agreement. The claimant agreed to the defendant’s draft in good time in late 2017, after its review by his lawyer, and both parties signed the contract in mid-January 2018. In court, however, the claimant asserted the invalidity of the termination agreement. At the decisive time of the negotiation, he had been incapacitated for work on grounds of psychological problems and had been at least partially legally incapacitated due to medication. The termination agreement had been concluded in breach of the requirement of a fair negotiation.
The Regional Labour Court [Landesarbeitsgericht - LAG] of Hesse, did not share this opinion in its decision of 11 June 2021, docket No. 10 Sa 1221/20. Lacking concrete information, the medical certificate was insufficient as evidence of merely "limited" legal capacity. The claimant also had not been treated unfairly during the contract negotiations. The discussions had taken place over a long period and he had always had the opportunity to contribute towards the content of the contract. Furthermore, the period for consideration, within which the claimant was even able to seek legal advice, shows that no attempt was made to catch him off his guard or to exploit his psychological problems. Had the claimant wanted an extension of the deadline, he should have indicated his purported incapacity for work. The LAG emphasises the difference between this and the first landmark decision of the BAG of 7 February 2019, docket No. 6 AZR 75/18, in which the employer visited the employee at home and ordered him to sign the termination agreement he had brought with him. In such case, a violation of the fair hearing requirement had been affirmed.
The ruling further defines the boundaries of the fair negotiation of termination agreements for employers. Employers need to ensure that the talks are conducted at the workplace and that the employee has a reasonable period for consideration so that he can seek legal advice.
1.4 Employer may order return from home office
The LAG Munich ruled by judgement dated 26 August 2021 (docket No. 3 SaGa 13/21) that an employer is entitled to unilaterally terminate a home office activity again by exerting its right of instruction, provided that the place of work has not been determined as the home office either in the employment contract or by virtue of an express or tacit agreement. In particular, the general risk of contracting COVID-19 on the way to work and the general risk of infection at the place of work did not preclude an obligation to attend the office.
The injunction petitioner was employed full time as a graphic designer. Since December 2020, the employees, who otherwise worked at the office, worked from their respective places of residence with the managing director’s permission. By instruction dated 24 February 2021, the employer ordered the injunction petitioner anew to attend the office. The latter then applied for an interim injunction ordering the employer to allow him to work from his home office and to only interrupt this home office activity in exceptional cases, insofar as his presence in the office was actually necessary.
The petition was rejected by the court of both first and second instances. This is due to the fact that the employer is entitled to re-determine the place of work by instruction pursuant to Section 106 of the German Industrial Code [Gewerbeordnung - GewO], subject to the exercise of equitable discretion. The place of work was not determined as the home office either in the employment contract or by virtue of a subsequent express or tacit agreement. A right to home office work also did not arise from Section 2 (4) of the German SARS-CoV-2 Occupational Health and Safety Ordinance [SARS-CoV-2-ArbSchVO]. The instruction had observed the requirement of equitable discretion, since the employer was able to demonstrate that the technical equipment at the home workplace did not correspond to that at the office location. Moreover, the employee had not demonstrated that the company’s data were protected against access by third parties and by the employee’s wife, who worked for the competition.
In the said decision, the permitted home office activity lasted only two months. However, employers who have allowed their employees to work continuously from home offices since the beginning of the pandemic without a legal basis therefor face an increased risk that the implied conduct may lead to a contractual limitation of the exercise of the employer’s right of direction. Employers are therefore urgently advised to agree on a legal basis for the right to work from the home office or mobile working which is in line with the employees’ interests and, if necessary, is limited time-wise. If this is to be regulated collectively by shop agreement, the new co-determination criterion of Section 87 (1) No. 14 German Shop Constitution Act [Betriebsverfassungsgesetz - BetrVG] must be observed.
1.5 Compensation for minus hours only in case of explicit regulation
If employers want to have minus hours on the working time account taken into consideration when an employee leaves, this requires explicit regulation. In addition, it must also be actually possible for the employee to still balance out his account.
The sued employer had initially given the claimant extraordinary notice of termination. In the unfair dismissal proceedings, the parties agreed by court settlement to end the employment relationship on the basis of an ordinary termination by the employer. Besides the claimant's irrevocable release from his duties, the settlement also provided that "holiday entitlements and any time credits are to be contributed in natura”. In addition, the settlement contained a general settlement clause for mutual financial claims.
This subsequently led to another litigation between the parties. In this context, the employer asserted that it had a repayment claim against the employee for approx. 40 minus hours recorded by the employee on his working time account.
The LAG Nuremberg negated this claim in its judgement of 19 May 2021, docket No. 4 Sa 423/20, for several reasons. First of all, according to the case law of the BAG, when an employee leaves a company, compensation for minus hours is only possible if a corresponding agreement exists. There was no such agreement in this case. Another prerequisite for the deduction of minus hours is that the employee is actually given the opportunity to balance out the minus hours before leaving the company. The fact that the employer deprived the employee of this option with the immediate termination and subsequently with the agreement on his release from duties went to the employer’s detriment.
In addition, it was clear from the settlement that there was to be no further dispute about the amount on the working time account. A regulation according to which only any plus hours were to be included in the settlement, whereas minus hours still had to be deducted from the remuneration, was contradictory. If only credit hours were to be made non-contentious, this would have to be expressly included in the settlement.
Finally, the LAG Nuremberg also considered the employer to have no claim because the claim fell under the general settlement clause.
Against the background of the decision, employers are advised to include express provisions on the possible compensation of minus hours both in the agreement on working time accounts and in termination agreements and court settlements upon termination of an employment relationship.
1.6 Works council has no claim to salary lists in an analysable file format
The works council’s wish for gross pay lists in an analysable file format is normally great: it is not only issues such as pay transparency and equal pay within companies that are linked to this. Often, such files also serve as a meaningful basis for "calculating" social plan volumes or benefits in the context of potential volunteer programmes.
The works council asserting this claim stated that it required an analysable file containing the gross salaries of all employees on grounds of its duties under pay transparency and shop constitution law. In the alternative, it would also be sufficient if it was given a paper copy (but in scannable format), was provided with a PC containing the relevant files but without network access or, finally, if it was given access to an analysable file including appropriate office staff to transcribe the lists.
By decision dated 23 March 2021, docket No. 1 ABR 7/20, the BAG – as in the previous instances - rejected the works council's application. The German Transparency in Wage Structures Act [Entgelttransparenzgesetz - EntgTranspG] only gives the works council a right to be provided with analysable gross remunerations in case of a concrete individual request for the provision of information. However, this was not the case here. A claim also did not arise from the German Shop Constitution Act (BetrVG): pursuant to Section 80 (2) BetrVG, only a right to inspect the wage lists exists. The works council's inspection request was also ruled out because the associated demand for office staff to make transcripts made it clear that the works council specifically did not intend just to inspect the files.
The BAG's decision makes it clear that a liberal approach to gross wage lists entails risks: there is no compelling reason to provide the works council with, for example, an Excel file containing all wage data. On the contrary: for reasons of data protection, extreme caution is advised when the works council requests the provision of such files. Only if there are concrete, comprehensible reasons - for example, ongoing negotiations on a social plan and its funding framework - does it seem appropriate to make wage data temporarily available to the works council in an analysable form. However, in addition to a deletion period, these files should in this case also be provided with copy and password protection. The new Section 79a sentence 2 BetrVG clarifies that the employer is also responsible for data protection in this area.
1.7 Does the works council also have a right of initiative concerning the introduction of the electronic recording of working time?
Contrary to the previous case law of the BAG, the LAG Hamm has affirmed for the first time a right of initiative of the works council pursuant to Section 87 (1) No. 6 BetrVG in its decision of 27 July 2021, docket No. 7 TaBV 79/20. This enables the works council to force the introduction of electronic time recording.
The employers conducted unsuccessful negotiations with the works council on a company agreement on the recording of working time. The works council then sought the appointment of a conciliation board, after whose appointment the proceedings were suspended, however, in order to have the courts decide on whether the works council has a right of initiative concerning the introduction of electronic time recording. The LAG Hamm has affirmed this and thus deviates from a BAG decision dating 1989, which had rejected a right of initiative of the works council in connection with Section 87 (1) No. 6 BetrVG (BAG 28 November 1989, docket No. 1 ABR 97/88). The BAG justified this at the time by stating that the purpose of Section 87 (1) No. 6 BetrVG was to counter the danger of infringements of personal rights by technical control devices. It is irreconcilable with this defensive function if the works council itself is able to demand the introduction of these devices. In contrast, the LAG Hamm based its reasoning first of all on the wording of the standard provision, which explicitly includes the "introduction". Secondly, the legislator had omitted a selective restriction of Section 87 (1) No. 6 BetrVG regarding the right of initiative.
It now remains to be seen whether the BAG will follow this decision. The LAG Hamm allowed the appeal on points of law and the proceedings are now pending at the BAG (docket No. 1 ABR 22/21). If the BAG follows the decision of the LAG Hamm, this could pave the way for numerous works council initiatives to introduce IT applications in view of the broad scope of Section 87 (1) No. 6 BetrVG. The decision also gains even more explosive force through the decision of the European Court of Justice (ECJ) of 14 May 2019, docket No. C-55/18 - CCOO, according to which the member states are obliged to create national regulations for the introduction of a comprehensive time recording system.
1.8 No joint and several liability between employer and external pension provider
By judgement dated 13 July 2021 (docket No. 3 AZR 298/20), the BAG ruled that the subsidiary liability of the employer provided for under Section 1 (1) sentence 3 of the German Company Pensions Act [Betriebsrentengesetz - BetrAVG] only leads to a joint and several liability if the pension is provided via a provident fund or where discrimination prohibitions are affected.
The claimant had been promised retirement benefits from two pension funds. From 1 April 2018 onwards, he received a full disability pension; his employment was terminated as of 28 February 2019. From 1 March 2019 onwards he drew a disability pension from the pension funds. The claimant sued both the employer and the external pension providers as joint and several debtors for payment of a disability pension for the period from 1 April 2018 to 28 February 2019.
The action was unsuccessful at all instances. The BAG stated that the statutory subsidiary liability specifically does not impose joint and several liability. The statutory subsidiary liability is merely an obligation of the employer to vouch for the fulfilment of the pension commitment. Joint and several liability according to general principles is also only given in case of an external pension provision if this is conducted via the provident fund or where discrimination prohibitions are affected. The peculiarity of the provident fund compared to other external pension providers is that the employee has a direct claim against it, which means that - for joint and several liability to exist in this case - the claims against the employer on the one hand and the external pension provider on the other must be on the same level. However, this was not the case here.
The BAG also rejected a sole subsidiary liability of the employer in the present case, however, because the prerequisites for this did not exist. The issue was not a refusal of pension funds to pay benefits, but rather the interpretation of the pension regulations of the external pension providers.
The BAG's decision provides greater practical legal clarity. Many employers who provide pension services via external pension providers are finding themselves exposed to claims by former employees, above all with regard to subsidiary liability, but also, most recently, to possible joint and several liability.
1.9 Non-discriminatory calculation of company pensions for part-time employees
The Regional Labour Court of Schleswig-Holstein ruled by judgement dated 29 June 2021 (docket No. 1 Sa 22/21) that the entire duration of the employment relationship must be taken into account when determining the part-time factor decisive for the amount of the company pension.
The parties disputed the amount of the monthly company pension payable to the claimant under a pension scheme. The claimant worked for the defendant's legal predecessor initially for almost 22 years on a full-time basis and subsequently for more than 3 years on a part-time basis at a part-time factor of 50%. According to the applicable pension scheme, the amount of the claim to the company pension was calculated on the basis of 1/12 of the last annual salary received before reaching the age of 65. For employees who were not only temporarily employed part-time over the last five years before reaching the age of 65, the pension scheme instead limited the pensionable earnings to 1/60 of the gross earnings received over the last five business years before reaching the age of 65 instead.
In the opinion of the LAG Schleswig-Holstein, the pension scheme thus violates the prohibition of discrimination against part-time employees pursuant to Section 4 (1) German Part-Time and Fixed-Term Employment Act [Teilzeit- und Befristungsgesetz - TzBfG]. Although it is permissible and, in accordance with the pro rata temporis principle pursuant to Section 4 (1) TzBfG, also necessary that the defendant grants part-time employees a company pension on a pro rata basis in accordance with the proportion of their work time, this does not objectively justify the fact that the amount of entitlement for part-time employees is calculated on their average salary over the last five years before termination of the employment relationship. Instead, the "part-time factor" to be taken as the calculation basis must be the entire duration of the employment relationship.
The decision’s practical relevance should not be underestimated since, in the opinion of the LAG Schleswig-Holstein, such a restriction in the determination of the claim of part-time employees to the last five years of employment has no longer been objectively justified since the TzBfG came into force on 1 January 2000 and the underlying BAG decision (BAG 27 September 1983, docket No. 3 AZR 297/81) ceased to apply. The appeal on points of law has been admitted to the BAG.
2. Legal developments
2.1 In the opinion of the EU Commission, the group-wide establishment of a whistleblower system is insufficient
The EU Commission has now unexpectedly disappointed the expectations of globally active large companies that currently maintain a central whistleblowing system and also regarded this as sufficient with regard to the EU Whistleblower Directive. In a recently published statement, the EU Commission clarified that all legal entities with more than 49 employees must provide their own whistleblowing system. This is clear from the wording of the Directive and is required both for reasons of the efficiency of the systems and because of the likely different implementation of the EU Directive at national level. In addition, group companies cannot be qualified as "third parties" in the area of outsourcing whistleblower systems.
Although it is fundamentally permissible for medium-sized subsidiaries (50 to 249 employees) to pool some of their resources, they should also be able to benefit from the investigative capacities of the parent company. However, this applies only under the following conditions:
- the subsidiary's reporting channels must remain in place and available;
- the person making the report must be clearly informed and give his consent to the designated person/department at headquarters being authorised to access the report (in order to carry out the necessary investigation);
- the responsibility to provide feedback to the whistleblower and to remedy or sanction the reported misconduct remains with the subsidiary.
For many companies, this statement will be very sobering and unworldly, as it is more than likely to actually effectively torpedo the efficiency of the reporting channels. Although the opinion of the EU Commission is not binding for German courts, we can assume that the German legislator will follow this opinion to ensure its implementation in conformity with the Directive, which must take place by 17 December 2021. For this reason, large group subsidiaries with 250 or more employees should already take action now to set up their own reporting and investigation unit that can process reports independently of the group's other legal units. Depending on the company structure, the outsourcing of the reporting office to external third parties should also be considered from a cost perspective.
3. Thirteenth Labour Law Day at Oppenhoff on 11 November 2021
As already announced, in light of the pandemic, this year's Labour Law Day is once again being held exclusively online.
In the morning, we will explain the 2022 works council elections and the possibilities of keeping a check on the costs of a works council. In the afternoon, we will start with the employment law challenges posed by the corona pandemic and conclude with an overview of the most important innovations in labour law jurisprudence and legislation. We will also be giving an outlook on the labour law developments to be expected in the coming legislative period.
We would be pleased to welcome you to this day of interesting lectures and lively discussions. More information can be found here…
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Anja Dombrowsky
PartnerAttorney
Bockenheimer Landstraße 2-4
60306 Frankfurt am Main
T +49 69 707968 184
M +49 151 1164 8694
