Electronic time recording - BAG creates compliance risk for companies
Surprisingly, the German Federal Labour Court [Bundesarbeitsgericht, BAG] has ruled by decision dated 13 September 2022 (docket No. 1 ABR 22/21) that companies must systematically record the working hours of their employees. This could be derived from the Union-conform interpretation of the German Occupational Health and Safety Act [Arbeitsschutzgesetz, ArbSchG], with which the BAG now implements the "CCOO" decision of the ECJ (judgement of 14 May 2019, docket No.: C-55/18), which already caused a furore in 2019, into German law for the first time by way of judicial further development of the law. Thus, employers are currently already required to maintain a time recording system that can objectively and reliably determine the daily and weekly working hours performed by their employees. From a compliance perspective, this holds enormous explosive power as far as the recording of working hours is concerned.
Key message and problem
The said decision of the BAG actually dealt with the question of whether the works council had a right of initiative with regard to the introduction of an electronic time recording system and whether it could thus unilaterally force the employer to set up a conciliation body on the introduction of a digital time clock. However, according to Sec. 87 (1) introductory sentence of the German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG], the works council only has co-determination rights in social matters if and to the extent that the operational matter is not already regulated by law. And it was precisely at this point that the BAG caused a stir: in the opinion of the Erfurt judges, namely, according to the Union-conform interpretation of Sec. 3 (2) No. 1 ArbSchG, employers are currently already obliged to introduce a system with which employees’ working time can be recorded. Because of this already existing legal obligation, the works council cannot force the introduction of a system of (electronic) working time recording in the company with the aid of the conciliation body.
Employers were already previously obliged to document overtime (i.e. hours worked in excess of the daily working hours pursuant to Sec. 3 German Working Hours Act [Arbeitszeitgesetz, ArbZG]) as well as work on Sundays and public holidays pursuant to Sec. 16 (2) ArbZG. The extent to which additional data, such as the start and end of the daily work and break times, now has to be recorded is (still) unclear on the basis of the press release, and is only a purely labour law issue at first glance. This is because the obligation – which applies with immediate effect - to record working time systematically, i.e. objectively, reliably and accessibly, in accordance with the CCOO ruling of the ECJ, could lead in company practice to the documentation and disclosure of any working time violations as well. In times of increasingly flexible working hours - buzzword "workation" or "remote work", this already becomes virulent as far as, for example, the eleven-hour rest period after the end of the daily working hours is not observed.
When it comes to recording working hours, therefore, the compliance focus immediately has to be put on two aspects: violations of both the recording obligation arising from the ArbSchG and of the ArbZG must be ruled out. This all the more so in that we can already expect today that, in addition to employees and works councils, occupational health and safety authorities will also demand and increasingly monitor the documentation of work time recording.
Obligation to record working hours electronically?
Whether it is now mandatory to record working time electronically has currently not yet been conclusively clarified. According to the Opinion of the Advocate General in the CCOO proceedings before the ECJ, even a simple paper record is sufficient. Insofar, we must await the reasons for the BAG decision of 13 September 2022 and examine them as to whether more concrete specifications on the type of documentation of working time can be derived from them. In addition, it is possible that the legislator could also legislate more specific requirements in this regard at any time.
Violation of the obligation to keep records
Furthermore, still unclear as yet is what the legal consequences will be of a breach of the recording obligation, which applies with immediate effect. In this respect, the ArbSchG does not link any direct consequences to a violation of Sec. 3 (2) No. 1 ArbSchG; insofar this neither constitutes an administrative offence according to Sec. 25 ArbSchG nor a criminal offence according to Sec. 26 ArbSchG. Here, we must await the - hopefully illuminating - reasons for the decision.
However, it is conceivable that, following this BAG decision, the legislator will promptly issue a legal ordinance pursuant to Sec. 18 (1) ArbSchG on the organisation of working time recording systems, the violation of which could then be subject to a fine according to Sec. 25 ArbSchG.
In addition, the competent (supervisory) authorities already currently have various rights to information, for example pursuant to Sec. 1 in conjunction with Sec. 17 (1) ArbZG, insofar as the safety and health of employees require them to check how the working time is organised. According to this, the authority is in particular entitled to demand the submission of "necessary" information. A corresponding claim to information and the provision of documents also follows from Sec. 22 (1) ArbSchG.
Legal consequences of a violation of the Working Hours Act (ArbZG)
Pursuant to Sec. 22 (1) No. 1 ArbZG, it is also a regulatory offence for an employer to intentionally or negligently employ a worker beyond the limits of the permissible working hours. The responsibility for compliance with the protective regulations of the ArbZG under the law regulating fines lies solely with the employer. If the employer is a legal entity or a partnership, Sec. 9 (1) German Administrative Offences Act [Gesetz über Ordnungswidrigkeiten, OWiG] extends the responsibility under the law governing fines to the legal representatives who act in place of the actual addressee of the norm. Accordingly, managing directors are also personally liable for working time violations in the company for which they are appointed.
In accordance with Sec. 9 (2) OWiG, persons who are retained by the proprietor of a business or by an otherwise authorised person to manage the business in whole or in part (e.g. plant manager, plant department manager) or who are expressly retained to perform on their own responsibility tasks that are incumbent on the proprietor of the business (e.g. plant foreman) are also deemed to be equal to the employer. In this case, the employer must take appropriate supervisory measures to ensure that the obligations under the ArbZG are fulfilled, or it otherwise acts in breach of the regulations pursuant to Sec. 130 OWiG.
The obligation to record and check working hours therefore has to be increasingly reflected in companies' compliance systems. In the short term, compliance officers should work to ensure that a time recording system is implemented in the company, especially because employees can directly demand the company to do this at any time on the basis of their claim to fulfilment under Sec. 618 BGB in conjunction with Sec. 3 ArbSchG. In addition, employees can turn to an existing works council, which can also assert a breach of the record-keeping obligation on grounds of its obligation to monitor pursuant to Sec. 80 (1) No. 1 BetrVG. Failure to act may result in internal disputes before the labour courts. On the other hand, there is the arguably more serious risk that violations will be reported to the responsible occupational health and safety authorities (usually the trade supervisory offices or the state offices for occupational health and safety) from within the workforce, with the above-mentioned consequences. The chance of the management or directors avoiding a possible fine is already considerably reduced at this stage.
If a time recording system is implemented in the short term, companies can also benefit from this. For example, the BAG recently ruled (see judgement dated 04 May 2022 - 5 AZR 359/21) that the requirements of Union law on working time do not affect the principles on the distribution of the burden of representation and proof in proceedings for the remuneration of overtime. Insofar, proper timekeeping makes it possible to effectively counter employees suing for the remuneration of overtime.
In the medium term, we await the reasons for the decision and the reaction of the German legislator. Compliance officers will have to keep an eye on this process.