Employment Law Newsletter I/2019

The first quarter of the new year 2019 is drawing to a close and the employment courts are producing a steady flow of practice-relevant decisions. Hardly any other field of law is ‘tweaked’ on almost a daily basis in such a way as employment law. For company personnel work, therefore, it is essential to be aware and keep abreast of the developments in employment law jurisprudence. Only in this way can a legally sound organisation and management of the work performance of innumerable employees be achieved. The legislator is far less active when it comes to setting the course of employment law. Nevertheless, even the Federal Government consistently sets strong accents, currently with its considerations on the "Home Office Act" [Home-Office-Gesetz]. We will report on this as soon as a draft bill becomes available. At the moment, drafts of the Act on the Immigration of Skilled Workers [Fachkräfteeinwanderungsgesetz] and the Act against Illegal Employment and Social Benefit Fraud [Gesetz gegen illegale Beschäftigung und Sozialleistungsmissbrauch] are already available and are presented by us below. 

1. Current case law

1.1 Ability to offset severance payments under a social plan and compensation for disadvantages

1.2 Previous employment in case of contractual terms that are limited for no material reason

1.3 Cancellation agreement is not a “doorstep” transaction - but fair negotiations are required

1.4 Clauses stipulating a minimum term of 10 years are invalid in case of survivors' benefits

1.5 Operational integration management even in case of the loss of an official work permit

1.6 Work 4.0 - home-office work cannot be ordered by the employer

1.7 Remunerable working hours and openness to shop agreements

2. Legal developments

2.1 Act on the Immigration of Skilled Workers

2.2 Law against illegal employment and social benefit fraud

1. Current case law

1.1 Ability to offset severance payments under a social plan and compensation for disadvantages

According to the case law of the Federal Employment Court [Bundesarbeitsgericht, BAG] of 12 February 2019 (docket No. 1 AZR 279/17), severance payments under a social plan and compensation for disadvantages can be offset. The subject of the decision, which is currently only available as a press release, was an action for severance pay under a social plan brought by an employee who was dismissed for operational reasons.

In March 2014, the employer decided to close the business. After informing the works council through the associated mass dismissal notification and before negotiating a compromise of interests with the works council, the sued employer dismissed all employees as a result of the closure of the business. On grounds of the dismissal, which breached the German Works Constitution Act [Betriebsverfassungsgesetz, BetrVG], the claimant secured in court compensation for disadvantages in the amount of EUR 16,307.20. Previously, the business partners had agreed on a social plan which envisaged severance pay in the amount of EUR 9,000.00 for the claimant. The sued employer did not pay the claimant the severance compensation under the social plan, with reference to its payment of the compensation for disadvantages.

The claimant substantiated his renewed legal action, now directed towards payment of the severance under the social plan, on the argument that the ability to offset severance payments under the social plan and compensation for disadvantages was in breach of the EU Directive on Mass Dismissals. In addition, the employer had neither sufficiently informed the works council about the planned mass dismissal nor conducted substantial negotiations and discussions with the works council.

The BAG rejected the claimant's appeal on points of law The BAG justified its decision on the basis of the purpose of both payments under works constitution law, which was essentially congruent. The payment of compensation for disadvantages in accordance with § 113 (1) and (3) BetrVG also fulfilled the claim to severance pay under the social plan. Furthermore, a breach of the EU Directive on Mass Dismissals was not apparent, since a breach of the employer's obligation to consult the works council prior to a mass dismissal resulted in the invalidity of the dismissal. An additional sanctioning of the employer was therefore not required under Union law.

In its new judgement, the BAG continues its earlier case law from 2001 (BAG of 20 November 2001, docket No. 1 AZR 97/01) and thus makes it clear that severance pay under the social plan and compensation for disadvantages can be offset even if no provision for such a possibility is made in the social plan.

Nevertheless, the employer is still well advised to explicitly provide in a social plan that claims under the social plan can be offset against any other possible payments in connection with the loss of the job.

Cornelia-Cristina Scupra

1.2 Previous employment in case of contractual terms that are limited for no material reason

The BAG recently decided (judgement of 23 January 2019, docket No. 7 AZR 733/16) that a limitation of the term of an employment contract for no material reason pursuant to § 14 (2) sentence 2 German Part-Time and Fixed-Term Employment Act  [Teilzeit- und Befristungsgesetz, TzBfG] is not permissible in a case where an employment relationship of a duration of one and a half years had already existed between the employee and the employer eight years previously, the subject matter of which had been comparable work tasks.

The claimant had been employed by the defendant as an industrial employee for a fixed term in the period from 19 March 2004 to 30 September 2005. With effect from 19 August 2013, the defendant hired the claimant again on the basis of a fixed-term employment contract and extended it several times. After the defendant informed the claimant that the employment relationship would not be extended again, the claimant filed an action contesting the fixed-term employment.

The lawsuit was successful.  Although the BAG had ruled in 2011 that § 14 (2) sentence 2 TzBfG specifically does not cover previous employment that occurred more than three years previously (judgement of 6 April 2011, docket No. 7 AZR 716/09), last year, however, the German Federal Constitutional Court [Bundesverfassungsgericht, BVerfG] ruled that the BAG had exceeded the limits of a justifiable interpretation of the Act in its decision, as it was clearly not the intention of the TzBfG to regulate such a grace period (judgement of 6 June 2018, docket Nos. 1 BvL 7/14, 1 BvR 1375/14). However, a constitutionally compliant interpretation of the scope of application of § 14 (2) sentence 2 TzBfG was permissible in principle as long as there was no risk of a repeated practice of limiting the employment term and any previous employment was in the distant past.

The BAG has now reacted to the judgement of the BVerfG and ruled that a previous employment eight years ago is not long enough in the past, with the result that a new limitation of the term without material reason was inadmissible.

The decision itself, which is only available as a press release to date, was passed in response to the ruling of the BVerfG. This was to be expected. It is interesting, however, that the BAG states in the press release that the defendant could not rely on the judgement of the BAG from 2011. When concluding the contracts, one had to consider the possibility that the constitutionally compliant interpretation of the BAG might not prevail before the BVerfG. This raises the practical question as to the extent to which one will still be able to rely on the "constitutionally compliant" interpretation of the BAG in the future.

Hopefully, the reasons for the decision will provide further indications as to where the BAG sees the limits of the relevant "previous employment" in terms of time and/or content.

Annabelle Mertes

1.3 Cancellation agreement is not a “doorstep” transaction - but fair negotiations are required

By judgement of 7 February 2019 (docket No. 6 AZR 75/18), which is currently only available as a press release, the BAG ruled that the consumer protection rules on the revocation of “doorstep” transactions do not apply to the conclusion of cancellation agreements. However, a failure to observe the principle of fair negotiations could result in their invalidity.

The claimant had concluded, in her own apartment, a cancellation agreement with the defendant that envisaged the immediate termination of her employment relationship without any severance pay. The details were disputed between the parties. Subsequent to the conclusion, the claimant had contested and, in the alternative, revoked the cancellation agreement on grounds of a misconception, fraudulent misrepresentation and an unlawful threat.

The BAG ruled that the claimant had neither a right of rescission nor a right of revocation, as cancellation agreements under employment law do not fall within the scope of §§ 312 et seqq. German Civil Code [Bürgerliches Gesetzbuch, BGB]. The BAG thus confirmed its previous case law in this context.

What is new about the ruling, however, is that the BAG believes that the cancellation agreement needed to be reviewed with regard to the requirement of fair negotiations. In the opinion of the BAG, this requirement constitutes a secondary obligation under the employment contract and is violated if the employer creates a situation of psychological pressure at the conclusion of contract, making it considerably more difficult for the employee to reach a free and considered decision.

The requirement of fair negotiations has already been addressed in earlier BAG judgements in connection with cancellation agreements (docket No. 2 AZR 135/05; docket No. 2 AZR 281/03). It focussed in this respect on protecting employees against the possibility of being surprised through contract negotiations conducted at unusual times or places. In the present decision, the requirement gains greater significance for the first time as a potentially independent ground for invalidity, detached from the challenge and revocation of a declaration of intent.

In practical terms, there are upsides and downsides of the judgement: a welcome fact is that no revocation is possible if the situation is comparable to that of a “doorstep” transaction. This reinforces the legal certainty for contracts concluded outside the company. At the same time, however, the BAG increases this uncertainty with its current dogmatically ambiguous "requirement of fair negotiations". It is not possible to determine with certainty when negotiations have been conducted "fairly". In any case, employers should allow employees enough time for consideration when concluding cancellations agreements in order to avoid the pressure situation referred to by the BAG.

Dr. Alexander Willemsen

1.4 Clauses stipulating a minimum term of 10 years are invalid in case of survivors' benefits

The BAG recently recognized as fundamentally permissible regulations in pension schemes with which employers wish to limit their economic risk, such as age difference and late marriage clauses. A further means of limitation, in contrast, was deemed by the BAG to be invalid.

By judgement of 19 February 2019 (docket No. 3 AZR 150/18), the BAG ruled that a minimum duration of 10 years in general terms and conditions of a survivor's pension constitutes an unreasonable disadvantage for the pension beneficiary and is therefore invalid.

The action was brought by a widow whose husband had died in 2015. The latter had been promised a survivor's pension by his employer, which was to be cancelled, however, if the marriage had not existed for at least ten years at the time of death of the pension beneficiary. Since the couple had only married in 2011, the widow was not entitled to a survivor’s pension pursuant to this provision. The widow sued for payment of the survivor's pension as of May 2015.

The BAG upheld the claimant’s claim. In the opinion of the BAG, general terms and conditions of a pension commitment which contain a minimum-duration clause of ten years constitute an unreasonable disadvantage for the pension beneficiary and are invalid pursuant to § 307 (1) sentence 1 BGB. In the context of a survivor’s pension, it corresponds to the nature of the contract created by law that the spouses of the pension beneficiaries are also covered. A restriction by the employer of the group of persons covered by this provision is therefore subject to the examination of its reasonableness under the law governing general terms and conditions. However, the disputed minimum-duration clause represented a deviation from the nature of the contract that was characteristic to a survivor's pension. Since the exclusion clause is based on arbitrarily applied time periods without an inner connection to the employment relationship and its pursued purpose, it therefore unreasonably discriminates against the pension beneficiary, particularly as it jeopardises the point of a survivor's pension.

Employers should therefore check their pension commitments as to comparable minimum-duration clauses and bring them into line with the BAG’s case law. To be noted in this connection is that in the statutory pension insurance scheme, § 46 (2a) German Social Code Book VI [Sozialgesetzbuch VI, SGB VI] provides for a minimum duration of one year. Accordingly, it can be assumed that the BAG would not consider a minimum-duration clause based on this provision to be arbitrary and therefore deem it permissible.

Anja Dombrowsky

1.5 Operational integration management even in case of the loss of an official work permit

The sued airline and the claimant, who was employed as a pilot, disputed the validity of an ordinary dismissal declared on personal grounds. The claimant had been persistently unable to work since 10 May 2010. On 15 October 2015 he announced that he was suffering from aerotoxic syndrome caused by polluted cabin air in the workplace. It was not foreseeable whether he would ever be able to resume his employment. The claimant thus lost his airworthiness status, which he required for his flight licence. The employer terminated the employment relationship on personal grounds. It did not carry out an operational integration management [betriebliches Eingliederungsmanagement, BEM]. 

The BAG established the invalidity of the dismissal (judgement of 21 November 2018, docket No. 7 AZR 394/17). The loss of the flight licence alone was not sufficient to justify the dismissal. In view of the periods of incapacity for work, a BEM should have been carried out, during the course of which it might have been possible to identify other employment opportunities for the claimant. The employer could not demonstrate that a BEM would have been objectively useless.

In view of the importance of the BEM and the consequences of its omission, the decision comes as no surprise as the BAG therewith confirms its previous case law. However, it is interesting to note that it might not only be relevant for a dismissal on personal grounds due to incapacity to work. Dismissals on personal grounds that initially appear to be based on other reasons are also affected by the consequences of the omission of a BEM if these reasons are related to the employee's inability to work due to illness, such as in this case the pilot’s loss of his flight licence due to illness.

A relevant connection with an illness-related incapacity to work can also exist beyond the occupational group of pilots and thus in the event of the loss of other requirements of public law for a profession. For example, the withdrawal of a driver's licence from a professional driver due to alcohol addiction is just as conceivable as the withdrawal of a gun licence from a seriously ill bodyguard or an inadequate health certificate of a cook due to an infectious disease. The regulated order contained in § 167 (2) SGB IX must be observed without limitation: in the event of the uninterrupted or repeated incapacity for work of more than six weeks within one year, a BEM must be carried out. It is in the employer’s own interests to comply with this.

Kathrin Vossen

1.6 Work 4.0 - home-office work cannot be ordered by the employer

In its judgement of 14 November 2018 (docket No. 17 Sa 672/18), the Regional Employment Court [Landesarbeitsgericht, LAG] of Berlin-Brandenburg clarified that the employer cannot unilaterally instruct an employee to work from a home office.

Following the closure of its business in Berlin, the defendant offered the claimant a job in Ulm that was equivalent to his previous position. This was linked to the requirement that he temporarily conducted his work via telework from home. The claimant refused to do so and, contrary to the employer's instructions, neither carried out the project tasks assigned to him nor prepared the requested weekly reports on his work from the home office. This prompted the defendant to give the claimant extraordinary notice of dismissal for his persistent refusal to work.

The lawsuit was successful: the persistent refusal to work is only a cogent reason for dismissal without notice if the refused activity was lawfully assigned to the employee, i.e. if it observed all contractual and legal limits.

The LAG’s decision consistently implements the prevailing view of the case law of the lower courts, according to which the employer is in principle responsible for determining the place of work, but cannot order an activity from a home office in the absence of a right of disposal over the employee's home (as already stated in the judgement of the LAG Rhineland-Palatinate, judgement of 18 December 2014, docket No. 5 Sa 378/14). Even though there is a part of the German work force that is occasionally willing to convert its own four walls into a home office, this does not mean that employers may force employees to do so.

Not only in the light of this judgement, employers are advised to procure an amicable contractual amendment of the employment conditions. Working from a home office gives rise to a need for regulation that should not be underestimated, e.g. regarding the employer's right of access, compliance with occupational health and safety regulations or the German Working Hours Act [Arbeitszeitgesetz, ArbZG], or the costs of setting up a home office.

The judgement also reminds us that employees are not bound, even temporarily, by unfair instructions. Should an employee oppose such an instruction, he does not have to fear any legal disadvantages (BAG, judgement of 14 June 2017, docket No. 10 AZR 330/16). For a long time, the BAG had viewed this differently. Employers are therefore well advised to carefully check the legality of their instructions.

Jan Philipp Baale

1.7 Remunerable working hours and openness to shop agreements

In its judgement of 14 December 2018 (docket No. 10 Sa 96/18) the LAG Düsseldorf ruled that a works agreement on a limited remuneration obligation for travel times supersedes the principle that travel time is fully included in the remunerable working time. The decisive factor is that the employment contract must be open to shop agreements. This can regularly be assumed if the employment contract has been specified by the employer for a large number of employment relationships, so that the provisions on general terms and conditions (AGB) according to §§ 305 et seqq. of the BGB apply.

The sued employer was bound by a collective agreement; the suing employee was a sales representative who regularly began and ended business trips to his customers from home. In a works agreement, the employer had agreed with the works council that travel times to the first customer and back from the last customer only count as working time if they exceed 20 minutes. The employer therefore only recorded shortened travel times as working time on the employee's working time account. With his legal action, the employee requested the crediting or remuneration of the actual travel time as working time.

The LAG dismissed the action: the travel time not recorded was not to be included as the claimant's remunerable main performance. Although it could be assumed in the employee’s favour that the travel times of a sales representative from his own home to the customer and back are working time in the sense of remuneration law and that the employer is therefore in principle obliged to pay remuneration, a valid works agreement superseded this obligation. The LAG Düsseldorf also did not consider such a works agreement to be in breach of the blocking provision of § 77 (3) of the German Works Constitution Act [Betriebsverfassungsgesetz, BetrVG], since there was no collective agreement and the works agreement exclusively regulated which travel times of the employee were to be regarded as being in fulfilment of the contractually owed main performance obligation.

The judgement of the LAG Düsseldorf is of significance in two respects: first, it confirms the case law of the 1st Senate of the BAG on the fundamental openness of employment contract provisions to works agreements in the form of general terms and conditions. This case law is controversial, however. Secondly, the LAG assumes that savings in travel time can be credited as working time where the travel time of field staff is concerned. It remains to be seen how the BAG will finally position itself on both issues; the appeal on points of law is pending with the BAG (docket No.  5 AZR 36/19).

Alexandra Groth

2. Legal developments

2.1 Act on the Immigration of Skilled Workers

At the end of 2018, the Federal Government adopted a draft law on the immigration of skilled workers. The draft is currently in the legislative process. With the Act on the Immigration of Skilled Workers, the Federal Government wishes to counteract the shortage of skilled workers.

The central new provisions of the Act concern the granting of residence permits to skilled workers for purposes of qualified employment. According to the draft Act, such a residence permit can be granted under the following conditions:
 

• Existence of a concrete job offer by the employer.
• Approval by the Federal Employment Agency [Bundesagentur für Arbeit].
• Existence or confirmation of a licence to execute a profession.
• Determination of the equivalence of the foreigner's qualification or the existence of a German or comparable foreign university degree.
   

An employer who wants to employ a foreign skilled worker will thus be able to assess the possibilities of his employment far more easily in future.

As a further major change, it should be possible for skilled workers to enter the country in order to look for a job or to have the possibility of entering the country in order to look for a training place. In these cases, trial employment contracts of up to 10 hours/week will be permissible in future.

Also new is the so-called accelerated procedure for skilled workers, according to which the employer is able to act on the applying foreigner’s behalf vis-à-vis the immigration authority.

It now remains to be seen whether these changes will be retained in the legislative process. The planned simplifications for the employment of skilled workers will then have to gain a foothold in practice; a six-month transitional period is currently planned for this purpose.

Jörn Kuhn

2.2 Law against illegal employment and social benefit fraud

Furthermore, in February 2019, the Federal Government adopted a draft law against illegal employment and social benefit fraud, which essentially extends the tasks and powers of the Financial Control Authority for Illicit Employment [Finanzkontrolle Schwarzarbeit].

The draft leads to far-reaching changes in the law against illicit employment. It contains a clear extension of the examination and investigation competence of the Financial Control Authority for Illicit Employment. In addition to many other changes, the regulations on the exchange of data between authorities are to be significantly expanded. For example, the Financial Control Authority for Illicit Employment will in future be able to automatically request data from the German Pension Insurance Association [Deutsche Rentenversicherung Bund].

With the bill, a new administrative offence for the reckless withholding and embezzlement of employment remuneration is to be created. The elements of the offence shall stand along side the legal regulation of § 266a German Criminal Code [Strafgesetzbuch, StGB] and shall apply – it can be assumed - in all cases where social security contributions are not paid due to negligence as opposed to intention. The scope of application of this standard provision could thus already begin with incorrect payroll accounting.

In addition, the employment of self-employed persons as external personnel is once again becoming the focus of attention. Also in the future, we can only recommend hiring solo self-employed persons if corresponding proceedings to determine their status have been carried out. Otherwise, employers may find themselves the perpetrators of penalty-proven offences even quicker in future.

Jörn Kuhn

Back to list