Newsletter: Employment Law I/2020

Without a doubt, the COVID 19 pandemic is a topic that also dominates labor law at present. Home offices, claims to a release from work for childcare purposes, protective hygienic measures, short-time work - these are just a few of the key terms that have been determining our everyday life and work with increasing intensity for weeks now. We are keeping you up-to-date on all relevant labor law issues in connection with the pandemic through our newsflashes, webinars, FAQs and other formats. We therefore wish to take the first newsletter of the year 2020 as an opportunity to mainly provide you with our customary overview of other developments in labor law.

1. Current case law

1.1 Liability for damages based on advice and information provided by the employer

1.2 Caution required when notifying mass dismissals: the decisive factor is the definition of “Betrieb”!

1.3 Shop agreements and remunerable travel times of field staff

1.4 Error as to the position of employer and obligation to pay social security contributions

1.5 Adjustment of an individually agreed company pension

1.6 The conciliation board as an in-house tribunal? For the purpose of company complaints procedures

1.7 Continued payment of remuneration in case of illness despite the end of the employment relationship

1.8 Recording working time by fingerprint

2. Legal developments

2.1 Short-time work compensation - current development

2.2 Coronavirus - what now?

1. Current case law

1.1 Liability for damages based on advice and information provided by the employer

On 18 February 2020, the German Federal Labor Court [Bundesarbeitsgericht - BAG] ruled that although the employer is generally not obliged to safeguard the financial interests of its employees, if it nevertheless provides information, this must be correct, clear and complete (judgment of 18 February 2020 - 3 AZR 206/18). Otherwise, the employer is liable for any damage suffered by the employee as a result of the incorrect information.

The claimant, who was employed by the defendant, retired in 2014. Against the background of a collective agreement on deferred compensation that came into force at the beginning of 2003, the defendant concluded with a pension fund a framework agreement for the company pension. In April 2003, a works meeting was held at the defendant's premises, at which an expert advisor from the local savings bank provided information on the opportunities and possibilities of deferred compensation as a pension option. The claimant attended this. In September 2003 he subsequently concluded a deferred compensation agreement with a capital option and had the pension from his pension fund paid out as a one-off capital sum at the beginning of 2015. However, due to a change in the law in 2003, he had to pay social security contributions.

The claimant demanded the reimbursement of these social security contributions from the defendant. He held that the defendant should have informed him of the legislative procedure that had already been in process before his conclusion of the agreement, since he would have chosen another form of pension provision in such case.

The claimant was unsuccessful before the BAG. According to the judgment, which is only available as a press release to date, the Senate did not answer the question of whether the employer is under any obligation at all, above and beyond the information provided by it on a voluntary basis, to draw the employees’ attention to current or imminent changes in the law or plans to change the law which are to the detriment of the employees. In the opinion of the BAG, however, such an obligation presupposes in all events that the employer had actually provided concrete information about the subject matter affected by a possible change in legislation. In the present case, the works meeting had not addressed the issue of social security contribution obligations, with the result that this requirement for an obligation to provide information had already not been fulfilled. Therefore, there was no need for the BAG to decide whether the defendant should be held responsible for the conduct of the expert advisor of the savings bank.

In practice, however, employers should be cautious when providing information. Even if it provided on a non-obligatory basis, the information provided must always be complete and correct. Otherwise, the employer may be liable for damages.

Anja Dombrowsky

1.2 Caution required when notifying mass dismissals: the decisive factor is the definition of “Betrieb”!

When notifying mass dismissals, the definition of “Betrieb” [business] of relevance for § 17 German Unfair Dismissals Act [Kündigungsschutzgesetz - KSchG] must be taken as the basis. If the term "business” is misunderstood and the notification is made to an employment agency that does not have the local competence, the result is the invalidity of all of the dismissals.

This once again concerns Air Berlin’s insolvency. The airline maintained so-called stations at several airports. Employees in each of the divisions ground, cabin and cockpit worked at these stations. As the representative bodies of the ground, cabin and cockpit personnel were organized separately under collective agreements (cf. § 117 (2) German Shop Constitution Act [Betriebsverfassungsgesetz - BetrVG]), Air Berlin proceeded on the basis that a separate cockpit business existed and therefore filed the mass dismissal notification for this business concerning the entire cockpit personnel employed in Germany with the Berlin-Nord employment agency, the competent agency for its headquarters, since it was from there that the flight operations were controlled. The claimant was employed as a pilot in Düsseldorf. His employment contract was terminated due to the suspension of flight operations.

The unfair dismissal action brought by him was dismissed in the first and second instances, but his appeal on points of law to the BAG was successful (BAG, judgment of 13 February 2020 - 6 AZR 146/19). According to the definition of business [Betrieb] under Union law, on which the mass dismissal notification procedure is based, the stations were each "businesses" in the sense of § 17 (1) KSchG. In the standard view, it was at these stations that the effects of the mass dismissal occurred which were to be counteracted with the notification of mass dismissals. Consequently, Air Berlin should have made the notification for the pilots assigned to the Düsseldorf station to the competent employment agency for this in Düsseldorf. Furthermore, the notification should not have been limited to information regarding the cockpit personnel, but should also have included the ground and cabin personnel assigned to the station. The fact that the employee groups were embedded in other representation structures under collective law is irrelevant to the definition of a business within the meaning of § 17 KSchG.

This judgment once again shows that caution must be exercised when notifying mass dismissals. The effects of an invalid notice are devastating. If there are doubts as to the competence of the employment agency, then as a precautionary measure the notification of mass dismissals should therefore be made to all agencies that come in consideration.

Isabel Hexel

1.3 Shop agreements and remunerable travel times of field staff

Regulations in a shop agreement which reduce the remunerable travel times of field staff are invalid due to a violation of the collective bargaining blocking provision of § 77 (3) sentence 1 BetrVG, if the regulation in the shop agreement concerns an object which has been conclusively regulated through collective bargaining (BAG, judgment of 18 March 2020 - 5 AZR 36/19).

The claimant worked for the defendant as a service technician in field service. On grounds of its membership in the employers' association, the defendant was bound by the Wholesale and Foreign Trade Collective Agreements for Lower Saxony [Tarifverträge des Groß- und Außenhandels Niedersachsen], which applied to the employment relationship of the parties by virtue of a dynamic reference in the employment contract.

A shop agreement from the year 2001 also applied to the employment relationship between the parties. Section 8 of the shop agreement stipulated that travel time to the first and from the last customer did not count as working time if it did not exceed 20 minutes. According to the shop agreement, only the travel time in excess of 20 minutes counted as remunerable working time. 

The claimant demanded that his working time account be credited with travel time for March to August 2017 in the amount of 68 hours and 40 minutes or, alternatively, that he be paid the remuneration accruing thereon. The lower instances negated the claimant’s claim.

The BAG granted the claimant’s appeal on points of law. The BAG held that section 8 of the shop agreement violated the collective bargaining blocking provision of § 77 (3) sentence 1 BetrVG, since the industry-wide collective bargaining agreement did not contain an “opening clause” in favor of deviating shop agreements. In addition, the industry-wide collective bargaining agreement provided conclusive regulations for the remuneration of work performed, also with regard to the travel times of field staff. According to the BAG, the works council had no right of co-determination because the defendant was bound by the relevant Wholesale and Foreign Trade Collective Bargaining Agreements for Lower Saxony.

The BAG's ruling, which is only available as a press release to date, is ultimately not surprising. The parties to the business are barred from regulating in shop agreements matters that have been conclusively regulated by collective bargaining agreement if the employer is bound by the collective bargaining agreements on grounds of the statutory collective bargaining blocking provision. However, the question of the implied “openness” of employment contracts to shop agreements remains unanswered. The Fifth Senate’s stand on this matter would have been welcomed in the light of the inconsistent views held by other senates of the BAG.

Cornelia-Cristina Scupra

1.4 Error as to the position of employer and obligation to pay social security contributions

If the employer wrongly assumes that he is not an employer, this can exclude a criminal liability for the withholding and embezzlement of work remuneration according to § 266a German Criminal Code [Strafgesetzbuch - StGB]. Only those who, at least after making a lay assessment, have realized that they might possibly be an employer and that an obligation to pay social security contributions might exist, are said to act intentionally.

As a result of the change in the case law of the Federal Court of Justice [Bundesgerichtshof - BGH] in its decision of 24 September 2019 - 1 StR 346/19, the question of whether a criminal offence for the withholding and embezzlement of work remuneration is punishable now depends on whether the employer recognized and accepted that, due to the circumstances of the individual case, he might have to assume that the person deployed by him is in dependent employment and that this results in an obligation to pay social security contributions. Whether someone is or is not an employer is determined by social security law. According to this, dependent employment regularly exists in case of an employment activity where the employee follows instructions, in particular in terms of the time, duration, place and type of execution of the activity, as well as his integration into the work organization of the instructing party.

The case at hand concerned the agency activities of a sole entrepreneur to procure Eastern European nursing staff for private households in Germany. For his agency activities he concluded contracts with the persons in need of care or their relatives. He did not have a direct contractual relationship with the nursing staff, nor did he have contact with them during the assignments. Since it was not evident to the Federal Court of Justice whether the persons to be cared for or their relatives had at least in a lay capacity assumed that they were employers, the agent’s liability for aiding and abetting the withholding and embezzlement of work remuneration also did not come into consideration. The Federal Court of Justice thus assumed that an error as to the status of employer constitutes a so-called error as to the type of offense [Tatbestandsirrtum] and not, as previously, a so-called error as to the prohibited nature of the act [Verbotsirrtum]. The latter is usually avoidable and therefore does not regularly lead to impunity for the acting persons.

Although the change in case law of the Federal Court of Justice certainly offers more potential for defense in individual cases, companies should note that when employing freelancers they may also be subject to obligations to make inquiries, the violation of which could indicate an acceptance of the position as employer and thus a possible obligation to pay social security contributions.

Alexandra Groth

1.5 Adjustment of an individually agreed company pension

In a decision dated 19 November 2019 - 3 AZR 336/18 on the adjustment of a company pension scheme, the BAG comments on the principles for interpreting clauses in individual contracts as well as dogmatically clarifying the application of the principle of the most favorable condition [Günstigkeitsprinzip].

In the case up for decision, the sued employer had initially promised the claimant an overall company pension scheme that contained different pension components. In the termination agreement that ended the employment contract, the parties cancelled the overall pension and replaced it with a payable monthly company pension. With regard to the adjustment, the termination agreement made reference to the defendant's company provisions which referred to the statutory pension increases and which were regulated in a shop agreement. The claimant was of the opinion that, due to the individual contractual reference, the pension of the pension fund also had to be adjusted in addition to the company pension. The BAG confirmed the decision of the lower court to the effect that only the company pension agreed in the termination agreement had to be adjusted accordingly, but not the other pension components.

More important than the company pension law aspects are the legal-dogmatic principles of the decision. The BAG initially interpreted the clause of the termination agreement according to the general principles of § 133, 157 German Civil Code [Bürgerliches Gesetzbuch - BGB]. The BAG is of the opinion that the clause in the termination agreement can be interpreted regardless of whether it is a GT&C clause according to § 305 (1) BGB, a one-time clause according to § 310 (3) No. 2 BGB, or an individual contractual agreement. The interpretation of clauses in termination agreements according to the general principles of interpretation is generally permissible by the labor courts.

Furthermore, the BAG examined whether the provisions of the shop agreement should be considered differently. In this respect, the BAG stated that the principle of most favorable condition should be applied in stages: The principle of most favorable condition applies in the relationship between individual contractual regulations and the norms of a shop agreement regulating their content. Which regulation is more favorable for the employee is to be determined by making a comparison of subject groups. A regulation in a comparable subject group is only more favorable if the favorable treatment of the regulation for the employee is already established in advance in abstract terms. It does not suffice if it only becomes apparent which regulation is more favorable to the employee in the specific case of application. In the case at hand, the claimant had not even argued that the provision in the termination agreement was less favorable for him.

The decision is particularly important with regard to the application of the principle of most favorable condition that is often sought by employees and provides arguments for its rejection; for this reason, in particular, the decision is of great practical relevance.

Jörn Kuhn

1.6 The conciliation board as an in-house tribunal? For the purpose of company complaints procedures

According to §§ 84, 85 BetrVG, employees can address complaints to the works council if they feel they have been treated unfairly or have been disadvantaged. If the works council and the employer disagree on the justification of the complaint, the works council can refer the matter to the conciliation board. In a case before the Hessian Regional Labor Court [Landesarbeitsgericht - LAG] (judgement of 17 December 2019 - 4 TaBV 136/19), the works council referred the matter to a company tribunal: Allegations that a supervisor had discriminated in promotions were to be investigated by a conciliation board. However, the Hessian LAG did not permit such a form of internal investigation.

Both parties had presented contradictory versions of the facts of the case: According to the works council, a superior of the defendant freight handling firm had informed three internal applicants for a promotion position that they would not be considered for the shift management with Turkish or Arabic names. The supervisor presented the situation differently; according to him, he had merely stated that he could understand problems with applications if the applicant had a Turkish or Arabic name. Which side was telling the truth could not be clarified. However, the employer had made it clear through various discussions and statements that it would not tolerate discrimination on the grounds of name and origin.

The works council was not satisfied with this and wanted clarification of the matter by the conciliation board. However, the court procedure before the Hessian LAG to appoint a conciliation board was unsuccessful: According to the judges, the purpose of conciliation board proceedings pursuant to § 85 (2) BetrVG was not the abstract clarification of the facts of a case. Rather, its purpose is to determine whether the employer must take corrective action in response to a justified complaint. If it has already done so as a precautionary measure, the conciliation board procedure is pointless.

The decision makes it clear that § 85 BetrVG is not about conducting company tribunals, but is primarily aimed at remedying a concrete situation. Expensive conciliation board proceedings in connection with company complaints can therefore be avoided if precautionary measures are taken to remedy the situation.

Dr. Alexander Willemsen

1.7 Continued payment of remuneration in case of illness despite the end of the employment relationship

Employers may be obliged to continue paying remuneration despite the end of the employment relationship. The prerequisite for this is that the employer terminated the employment relationship on the grounds of an incapacity to work. A recent decision of the LAG Nuremberg (judgement of 10 December 2019 - 7 Sa 364/18) focused on the provision of § 8 German Act on the Continued Payment of Salary in case of Illness [Entgeltfortzahlungsgesetz - EFZG].

At the start of his employment in a quarry, the claimant received instruction on how to drive a wheel loader. Whilst still in his probationary period, he caused two accidents with the vehicle and subsequently expressed doubts himself to the defendant as to his suitability for this job. On 27 October 2017, he had another conversation with the defendant, in which the latter suggested that he would do better to look for a new job. From 2 November 2017 onwards the claimant was essentially permanently incapacitated for work due to illness. In a dismissal letter dated 14 November 2017, which was received by the claimant on 15 November 2017, the defendant declared the ordinary termination of the employment relationship in compliance with the (particularly short) notice period under the collective bargaining agreement during the trial period of one day, i.e. as per 16 November 2017.

The claimant asserted claims for the continued payment of his remuneration beyond 16 November 2017, referring to § 8 EFZG. The termination had been declared in close temporal connection to his illness. For this reason, prima facie evidence would suggest that the defendant had dismissed him on grounds of this incapacity for work.
He was ultimately unsuccessful with his lawsuit. Although the LAG Nuremberg confirmed the appearance of a so-called "induced termination" [Anlasskündigung] in the meaning of § 8 EFZG, since there was a close temporal connection between the incapacity for work and the dismissal, the defendant was able to demonstrate to the court's conviction that the claimant's lack of suitability was the reason for the dismissal. 

In practice, the constellation is unlikely to be that rare: The employee reports unfit for work "yet again”, the employer's loses patience and terminates the employment relationship shortly after the employee reported sick. However, by giving notice during the period of incapacity for work, the employer does not always shorten the claim to continued remuneration, as can be seen from § 8 EFZG at least for cases in which the period of notice ends before expiry of the six-week period of continued remuneration. In order to avoid the appearance of an induced termination and thus an obligation to continue to pay remuneration beyond the end of the employment relationship, the notice of termination should be given with a reasonable time interval after the reporting of the illness and with a sound reason for termination.

Kathrin Vossen

1.8 Recording working time by fingerprint

In October 2019, the Labor Court [Arbeitsgericht - ArbG] of Berlin ruled that the recording of working hours by means of fingerprints was not necessary for the performance of the employment relationship. Accordingly, a corresponding recording of time necessarily requires the consent of the data subject, since otherwise one must presume an inadmissible processing of data within the meaning of the General Data Protection Regulation (GDPR).

In the case on which the decision of 16 October 2019 - 29 Ca 5451/19 was based, the defendant had introduced a system for recording working time by means of fingerprints. For this purpose, the system extracts so-called minutiae of the fingerprint (non-heritable forks in the finger lines), which are then used to compare the employee’s fingerprint at log-on/log-off. The claimant refused to use the system and was cautioned for this, against which he took court action.

The Labor Court of Berlin ruled in the claimant’s favor and ordered the employer to remove the caution from the employee’s personnel file. A minutiae data record constitutes biometric data and thus concerns special categories of personal data whose processing is fundamentally prohibited under Article 9 (1) GDPR and is only permitted by way of exception if it is necessary for the performance of the employment relationship, § 26 (3) German Data Protection Act [Bundesdatenschutzgesetz - BDSG].

The Labor Court of Berlin ruled that the scanning of fingerprints significantly encroaches upon the fundamental rights of the persons concerned. In particular, one could not automatically assume an abusive use of the recording of working time, for example by colleagues "stamping in” on behalf of others, as the vast majority of employees behave in a legally compliant manner. Accordingly, the express consent of the person concerned is required.

Although the statements of the Labor Court of Berlin initially appear stringent, they fail to consider the ECJ's opinion of May 2019 that member states are obliged to create an "objective, reliable and accessible" working time recording system. The recording of working time by means of fingerprints prevents misuse and therefore could be classified as a "reliable" time recording system. It remains to be seen what stand will be taken by the LAG Berlin-Brandenburg as an appeal body in this respect.

Annabelle Marceau

2. Legal developments

2.1 Short-time work compensation - current development

On 27 March 2020, the German Ordinance Facilitating Short-Time Work Compensation [Verordnung über die Erleichterungen zum Kurzarbeitergeld] was published in the Federal Law Gazette [Bundesgesetzblatt - BGBl.]. This enters into force retroactively as of 1 March 2020 and essentially contains the following regulations:

• It suffices if 10 percent of a company’s workforce is affected by a loss of work for the company to be able to apply for short-time work.
• Social security contributions will be fully reimbursed by the Federal Employment Agency [Bundesagentur für Arbeit] in the event of short-time work.
• In businesses which use agreements on working time fluctuations no accumulation of negative working time accounts is required.
• Short-time work compensation is also possible for employees in temporary employment.

On 27 March 2020, the Act on Facilitated Access to Social Security and on the Deployment and Protection of Social Service Providers due to the Coronavirus SARS-CoV-2 [Gesetz zur erleichterten Zugang zu sozialer Sicherung und zum Einsatz und zur Absicherung sozialer Dienstleister aufgrund des Coronavirus SARS-CoV-2] ("social protection package") was passed. With this, a new regulation relevant for the calculation of short-time work compensation was standardized in § 421c German Social Code Book III [Sozialgesetzbuch - SGB III]. In the period from 1 April 2020 to 31 October 2020, remuneration from employment in key sectors and professions will not affect the amount of short-time work compensation, provided that it does not exceed the level of regular remuneration. Employees are still obliged to notify the employer of any commencement of employment during the short-time work.

Due to the abovementioned changes, the employment agency published on 30 March 2020 its “Instruction on Improvements of Short-Time Work Compensation until 31 December 2020” [Weisung Verbesserungen für das KUG bis 31.12.2020] (click here). In particular, the following statements of the employment agency should be highlighted:

• No minus hours need to be accumulated in order to avoid short-time work.
• It is generally permissible under labor law to agree on short-time work in the event of a loss of work also for the past, provided that wages have not yet been cleared and disbursed.
• Until 31 December 2020, the employment agency will refrain from demanding that residual vacation from the current vacation year be taken in order to avoid short-time work.
• The reasons for the loss of work are to be presented in a simple form. Individual contractual agreements or terminations pending a change in contract to introduce short-time work do not have to be submitted with the notification, but only stored for review purposes.
• The final reviews, which are generally carried out after seven months, will be postponed until resolution of the crisis situation.

Jörn Kuhn

2.2 Coronavirus - what now?

It is foreseeable that coronavirus will have a sustained effect on many enterprises and businesses. Employers therefore have to prepare themselves for many things:

• Remuneration issues
  
  In many companies the question arises whether and to what extent employees’ pay can be adjusted. This applies in particular to the payment of bonuses/directors’ bonuses for 2019, which are often due in the spring, or to a stop in salary developments for 2020. The possibility of agreeing salary waivers or a deferral of parts of the remuneration is also being discussed.
  
  In the aftermath of the financial crisis of 2009/2010, jurisprudence exists on the issues raised, which is now more topical than ever. Crucial in this respect is the company's decision and adequate documentation of the possible effects of disbursing these remunerations on the company and its ability to survive.
  On this basis, follow-up measures then have to be implemented at individual contractual or collective law level. 

• Implementation of restructuring measures
  
  Business restructuring projects are also being caught up by the developments over the past few days: In many ailing businesses where personnel measures have been prepared, the short-time work required in the short term due to the COVID 19 pandemic collides with plans for staff cutbacks required in the medium term. Since short-time work (temporary loss of employment) and dismissals for operational reasons (permanent loss of employment) are mutually exclusive, the short-time work regulations required at present threaten to "block" later restructuring. Employers would be well advised to make explicit reference to the COVID 19 pandemic in shop agreements on short-time work that are currently being concluded and to justify the necessity of short-time work solely on the basis of these aspects.
  
  However, caution is also required in cases where only the longer-term consequences of the current pandemic lead to a need to restructure: The current short-time working regulations apply for a maximum of 12 months. The enterprise then has to observe a three-month period without short-time work before being able to re-apply for short-time work again. Staff cutbacks over the coming months will be dominated by discussions with the works council as to whether a continuation of short-time work would not suffice as an alternative to compulsory redundancies. The delimitation of the reasons for the loss of employment - i.e. "classic" economic reasons or effects of the COVID 19 pandemic - will be a decisive factor in these discussions.

• Restart plan
  
  In case of a temporary complete or partial closure of a business, e.g. because short-time work had to be ordered or because the majority of employees are working from a home office, restart plans need to be drafted.
  
  A central focus continues to be the employer's duty of care. Thus, all employers should refrain from simply shelving the hygiene measures that have been established, ensuring that the hygiene rules that have been practiced in the course of the current pandemic also continue to be observed in the future. The volume of requests for information from workers is also likely to remain unchanged for the time being, since in the current situation workers remain obliged to inform the employer if they have had contact with infected persons.
  
  Part of the restart plan will include the return of employees from home offices. Here, an assessment is needed as to whether this should be done in stages. The order to return to the company workplace is subject to the right of direction, which means that the employer should also provide a notice period.
  
  Should the employer have adopted urgent and emergency measures without the necessary involvement of the works council, it is obliged to inform the works council of this and to subsequently conduct the co-determination procedure insofar.
   

Jörn Kuhn & Dr. Alexander Willemsen

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Your contacts for Employment Law at Oppenhoff & Partner:

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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