Employment Law30.09.2025 Newsletter
Focus on Labour Law – 3rd Quarter 2025
As summer draws to a close, it is now time for our third edition of Focus on Labour Law 2025, which features a current overview of the important labour court rulings from recent months and an update on new legislation. There are two rulings of particular practical relevance: a ruling by the Düsseldorf Regional Labour Court on the obligations of companies to record the working hours of works council members who have been released from their work duties, and a ruling by the Federal Labour Court on damage claims arising from the unlawful transfer of data in the context of a test operation of the software Workday. Finally, in our "Rethinking HR" section, we focus on the year-end rush for HR departments and the items that need to be ticked off your to-do lists before the end of the year.
1. New case law
1.1 Time recording for works council members released from their work duties
1.2 Test operation of Workday: Federal Labour Court confirms damage claim due to unlawful data transfer
1.3 Is a works council member on a fixed-term contract entitled to a contract extension?
1.4 Virtual stock options in focus: how they affect compensation for non-compete clauses
1.5 The prevention procedure under Section 167 (1) SGB IX and when it must be observed
1.7 Decrease in the works council remuneration: Who bears the burden of proof?
1.8 Works council participation rights when setting up an internal reporting office
2. Legislation
2.1 Draft bill on the reform of the Act to Combat Illegal Employment
3. Rethinking HR!
Same procedure as every year year-end rush for HR departments
4. Focus on occupational safety
Where does your company stand?
1. New case law
1.1 Time recording for works council members released from their work duties
Works council members who have been released from their work may not be made "invisible" when it comes to time recording. A ruling by the Regional Labour Court (Landesarbeitsgericht, LAG) of Düsseldorf (dated 27 March 2025 – docket No. 11 SLa 594/24) obliges companies to enable works council members who have been fully released from their work to fully use the electronic time recording system. Furthermore, caps set by the company do not apply here.
The plaintiff had been employed by a chemical company since 1996 and, as a works council member, was fully released from her work duties. Time recording and breaks were regulated by shop agreements. The plaintiff demanded, among other things that – contrary to company practice - the automatic deduction of 45 minutes for breaks was not made in cases where she actually took shorter breaks and that her works council activities were recorded in full in the electronic time recording system without being capped when certain time limits were exceeded. The defendant refused such comprehensive time recording, as works council activities were not subject to employer’s instructions and the system was not designed for this purpose.
The Regional Labour Court upheld the plaintiff's claim regarding the recording of works council activities. According to Section 37 of the German Shop Constitution Act (Betriebsverfassungsgesetz, BetrVG), the release replaced the obligation to work with the obligation to perform works council duties during working hours. According to the established case law of the Federal Labour Court (Bundesarbeitsgericht, BAG), even works council members who are fully released from their work have a legitimate interest in the documentation, subsequent determination and verification of their attendance times, among other things to avoid unjustified reductions in remuneration. The company is therefore obliged to enable them to participate in a company time recording system. However, company regulations that automatically deduct break times and cap working hours above certain limits do not apply to released works council members. Works council activities performed outside working hours are governed exclusively by Section 37 (3) BetrVG; this provision is mandatory and cannot be changed by collective agreement or shop agreement.
According to the ruling of the Düsseldorf Regional Labour Court, companies should expressly make electronic time recording systems available to works council members who are released from their work duties and must ensure complete documentation. However, since works council activities do not constitute working time within the meaning of the German Working Hours Act (Arbeitszeitgesetz, ArbZG), automatic deductions or capping should be avoided. In contrast, it would make sense to have a clear provision in a shop agreement on the overall procedure in accordance with Section 37 (3) BetrVG, i.e. on the documentation, application and compensation of works council activities conducted outside working hours, both for members who have been released from their work and for those who have not.
Dr. Alexander Willemsen
1.2 Test operation of Workday: Federal Labour Court confirms damage claim due to unlawful data transfer
The protection of data in employment relationships remains a minefield. The Federal Labour Court has ruled that the unlawful transfer of employee data within a group for the purpose of testing the software Workday can establish a claim to immaterial damages. In future, companies will have to examine even more closely what data they really need – and what data they should not transfer under any circumstances.
In 2017, a German group company planned to introduce Workday as a uniform group-wide personnel management system. To this end, it concluded a so-called "toleration shop agreement" (Duldungs-Betriebsvereinbarung) with the works council, which specified which master data could be transferred for testing purposes. However, the company also transferred further personal data to the group's parent company in the USA. The plaintiff, who was the chairman of the works council, claimed immaterial damages for this under Art. 82 (1) GDPR. The Federal Labour Court upheld the claim and awarded him damages of EUR 200 (judgement of 8 May 2025 – 8 AZR 209/21).
The Federal Labour Court clarified that Section 26 (1) of the German Federal Data Protection Act (Bundesdatenschutzgesetz, BDSG) (data processing for purposes relating to the employment relationship) does not constitute a "more specific provision" within the meaning of Article 88 GDPR (data processing in the employment context), as it lacks the necessary safeguards. This means that the permissibility of data processing in the employment context is governed directly by the GDPR. The data transfer can fundamentally be considered justified under Art. 6 (1) (f) GDPR ("legitimate interests") if dummy data is not sufficient for a test run. In the present case, however, the processing was inadmissible because it went beyond the data expressly permitted in the shop agreement.
For this reason, the Federal Labour Court affirmed that immaterial damage had been caused. The unlawful transfer of sensitive data to the parent company was in itself sufficient to trigger a damage claim. The amount awarded, EUR 200, illustrates that courts do not necessarily award high sums, but the financial and reputational consequences for a company can be substantial if a large number of employees are affected by the unlawful data processing.
The Federal Labour Court's decision clearly shows what to watch out for when using a testing system:
- Conclusive list of the data to be collected by the test system
- Preferential use of dummy data or justification of the need to use real data
- Review of the legal situation within the group with regard to international data transfers
- Agreement on prior processes in cases of additions/extensions to the data use
In practice, this means that it is essential to conclude a carefully drafted (toleration) shop agreement.
The current ruling on the damage claim under data protection law does not contradict other developments in case law. Although the Hesse Regional Labour Court ruled on 4 December 2024 (5 TaBV 4/24) that data protection regulations cannot be enforced in a shop agreement because they are already stipulated by law, the company must comply with (data protection) regulations, especially if it has actually agreed to them in a (voluntary) shop agreement.
Jörn Kuhn und Annabelle Marceau
1.3 Is a works council member on a fixed-term contract entitled to a contract extension?
The Federal Labour Court has ruled that the election of an employee with a fixed-term employment contract to the works council does not automatically invalidate the limitation of the contractual term. However, a company may not discriminate against works council members due to their works council activities, for example by refusing to offer them a follow-up contract –the company may otherwise face a claim to the conclusion of the refused follow-up contract as compensation (Federal Labour Court, judgement of 18 June 2025 – 7 AZR 50/24).
The defendant was a logistics services company and, at the beginning of 2021, concluded an employment contract with the plaintiff that was initially limited to one year without objective reason and that was extended until 14 February 2023. In the summer of 2022, the plaintiff was elected to the works council. Of the 19 employees with expiring fixed-term contracts, 16 received an offer of a permanent contract – but not the plaintiff. He claimed that this was solely due to his works council activities, in particular his candidacy on the trade union list. The company justified its decision on the basis of the plaintiff's work performance and conduct, not his works council activities.
The plaintiff was unsuccessful in all three instances. The Federal Labour Court considered the fixed term of the employment contract to be valid. Election to the works council does not automatically lead to the removal of the limitation of the contractual term. Neither Directive 2002/14/EC nor Articles 27, 28 and 30 of the Charter of Fundamental Rights require a reduction of Section 14 (2) of the German Part-Time and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz, TzBfG) in conformity with EU law. Works council members are sufficiently protected by the prohibition of discrimination in Section 78 (2) BetrVG. In disputes concerning possible discrimination against a works council member through the refusal to offer a follow-up contract, there is a graduated system regarding the burden of representation and proof. The works council member must present evidence to the effect that the company's decision is based on their works council activities, as this is an "internal fact" of the company that cannot be directly proven. Here, critical statements by the company that suggest a link to the works council activities can be considered incriminating evidence. In the case in question, however, the company was able to demonstrate that the plaintiff was not offered a follow-up contract solely on the basis of his work performance and behaviour. The plaintiff was unable to provide sufficient evidence to prove discrimination.
The decision shows that election to the works council does not automatically result in the removal of the limitation of the contractual term. However, companies should proceed with caution in order to avoid the impression of discrimination. They should always comprehensibly document why a follow-up contract is not being offered. Managers should also be made aware of the special protection afforded to works council members and the prohibition of favouritism and discrimination, also when dealing with limitations of contractual terms.
Isabel Hexel
1.4 Virtual stock options in focus: how they affect compensation for non-compete clauses
Virtual stock options have long been considered an attractive remuneration instrument because, due to their acknowledged speculative nature, they are subject to less stringent rules than, for example, traditional bonuses. This has changed, however: the Federal Labour Court has set new standards and handed down a landmark ruling. How do virtual stock options now affect compensation for post-contractual non-compete clauses?
An employee had agreed a non-compete clause with his company that prevented him from working for competing companies for 12 months after the end of his employment. As compensation, he was to receive compensation amounting to 50% of his last contractual remuneration. The point of contention was whether or not virtual stock options (so-called "VSOPs") granted to the employee during his employment were to be regarded as part of the contractual benefits.
In its ruling of 27 March 2025 – 8 AZR 63/24, the Federal Labour Court clarified that VSOPs must be considered towards the compensation when calculating such compensation for a post-contractual restraint of competition if they were exercised during the existing employment relationship. If they were not exercised, they should not be considered towards the compensation. The speculative nature of the options no longer precludes their consideration, as other variable remuneration components such as bonuses or commissions are also regularly included in the compensation for non-compete clauses.
The value of the VSOPs to be considered must be determined on the basis of the average market value of the last three years or the average over the entire employment relationship. In this respect, companies are obliged to disclose the basis for calculating the value of the VSOPs so as to ensure a transparent and comprehensible calculation.
The Federal Labour Court ruling clearly shows that companies should closely scrutinise their remuneration models and contractual provisions. In particular, employment contracts with post-contractual non-compete clauses must be checked. Companies should ask themselves whether such a non-compete clause is really necessary for certain employees or whether it would make more sense to drop this clause in good time. If the non-compete clause cannot be waived, companies can reckon with compensation payments for virtual stock option programmes being significantly higher in future.
Where it is not possible to waive a post-contractual restraint of competition in an individual case, companies should consider the possibility of structuring the VSOP differently. One option would be to grant the virtual options through the parent company as opposed to directly through the company. In this case, the VSOPs would no longer be considered contractual benefits within the meaning of Section 74 (2) of the German Commercial Code (Handelsgesetzbuch, HGB). Another conceivable option would be to allow the virtual options to be exercised only after the employment relationship has been terminated. These adjustments can help to reduce the financial impact on the compensation for the non-compete clause while still complying with legal requirements.
In all events, the ruling once again shows the need to regularly review remuneration models and adapt them to current developments in order to minimise the resulting financial risks for companies.
Alexandra Groth
1.5 The prevention procedure under Section 167 (1) SGB IX and when it must be observed
The Federal Labour Court addressed the question of whether the dismissal of a severely disabled person always has to be preceded by a prevention procedure, and came to a conclusion that can be welcomed by companies.
The defendant company hired the severely disabled plaintiff in January 2023; the company was aware of their severe disability. In March 2023, the company terminated the employment relationship with effect from 15 April 2023. In the unfair dismissal proceedings, the plaintiff argued that the dismissal was invalid, among other things because a prevention procedure pursuant to Section 167 (1) of the German Social Code Book IX (Sozialgesetzbuch IX, SGB IX) had not been carried out.
The plaintiff's challenges to the dismissals were ultimately unsuccessful before the Federal Labour Court (judgement of 3 April 2025 – 2 AZR 178/24). In particular, the Federal Labour Court found that there had been no violation of Section 167 (1) SGB IX, as this provision does not apply during the first six months of employment. This is due to its alignment with the applicability of the German Unfair Dismissals Act (Kündigungsschutzgesetz, KSchG), which, according to Section 1 (1) KSchG, first becomes applicable after a six-month waiting period. The basis of Section 167 (1) SGB IX is the "occurrence of personal, behavioural or operational difficulties" in the employment relationship and thus it makes clear reference to the terminology of the KSchG. Although the prior implementation of a prevention procedure is not a formal requirement for the validity of a dismissal, Section 167 (1) SGB IX specifies the principle of proportionality, which in turn only applies within the temporal and material scope of the KSchG.
Section 167 (1) SGB IX is a provision that is hardly ever noticed in practice, but that definitely has the potential to further complicate the already difficult termination of employment relationships with severely disabled or equivalent employees. Unlike Section 167 (2) SGB IX, which regulates workplace integration management for all employees, Section 167 (1) SGB IX actually only applies to employees with disabilities. However, the consequences of disregarding Section 167 (1) SGB IX are similar to those of violating Section 167 (2) SGB IX: for this reason alone, a dismissal by the employer may prove to be disproportionate and therefore invalid. The integration office may also take the lack of a prevention procedure into account to the company’s detriment when deciding on whether or not to grant its consent in accordance with Section 168 SGB IX.
In practical terms, a somewhat incidental statement by the Federal Labour Court can be welcomed: It is true that a company’s violation of regulations containing procedural and/or support obligations to the benefit of severely disabled persons can regularly give rise to a presumption of discrimination on the grounds of disability, with such breaches of duty possibly giving the impression that the company has no interest in employing severely disabled persons. However, if the company was aware of the disability at the time of hiring, it is questionable whether this presumption can indiscriminately be made if disability-specific regulations are only violated during the course of the employment relationship. This guidance from the Federal Labour Court may prove helpful if companies are confronted with a damage claim due to alleged discrimination on the grounds of disability under Section 15 of the German General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG) and the associated relaxation of the burden of proof under Section 22 AGG.
Kathrin Vossen
1.6 Garden leave clause invalid: Lower Saxony Regional Labour Court emphasises importance of the interest in employment
A blanket clause in an employment contract that allows the company to release an employee from their duties within the notice period without any further conditions being met is invalid under Section 307 of the German Civil Code (Bürgerliches Gesetzbuch, BGB). This was the ruling of the Lower Saxony Regional Labour Court in its judgement of 22 May 2025 (5 SLa 249/25), thereby increasing the requirements for the formulation of valid garden leave clauses from the perspective of general terms and conditions law.
The plaintiff, who was employed by the defendant, sought compensation for the withdrawal of his company car during the ongoing notice period after he had been released from duties due to his own resignation, on the grounds that the release from duties was not valid. The garden leave clause in the employment contract entitled the defendant “to release” the plaintiff “from work with the continued payment of remuneration upon or after the pronouncement of the termination – regardless of which party initiated it”. The company car policy, in turn, provided for the possibility of revoking the use of the company car in the event of the plaintiff's garden leave.
The Lower Saxony Regional Labour Court upheld the claim on the grounds that, in accordance with the provisions of the employment contract, the effective revocation of the use of the company car was only possible in the event of an effective and lawful release from work duties. However, a garden leave provision that grants the company the right to release an employee from his work duties in the event of termination without any special conditions being met is incompatible with the fundamental principles of the right to employment recognised by the highest court and is therefore invalid due to an unreasonable disadvantage pursuant to Section 307 (1) sentence 1, (2) No. 1 BGB. Until the end of the notice period, the right to employment can only be waived if there are overriding interests of the company that merit protection or objective reasons at least. However, the latter must also reflect a specific interest of the company in releasing the employee from work duties. The duty to employ in the current employment relationship is so important that the mere fact of a termination is not a sufficient expression of the contrary interests of the company.
With its decision, the Lower Saxony Regional Labour Court raises the question of whether standardised wording for releasing employees from work solely on the basis of a termination can be valid. If this is not the case, employment contracts will have to be reviewed and, if necessary, amended. The appeal on points of law is pending under docket No. 5 AZR 108/25. Against this background, the eagerly awaited decision of the Federal Labour Court is likely to have a massive impact on the drafting of employment contracts in practice.
Lisa Striegler
1.7 Decrease in the works council remuneration: Who bears the burden of proof?
The Federal Labour Court has provided clarity with its ruling of 20 March 2025 – 7 AZR 46/24: Companies bear the burden of representation and proof when they correct previously granted remuneration increases that the works council member could be expected to understand as an adjustment of their remuneration in accordance with Section 37 (4) sentence 1 BetrVG. In this case, the company must represent and prove that the previously granted remuneration increase was objectively incorrect.
According to the decision of the Federal Court of Justice (Bundesgerichtshof, BGH) of 10 January 2023 – 6 StR 133/22 on the criminal liability for breach of trust when excessive remuneration is paid to a works council member in violation of the prohibition of preferential treatment under shop constitution law, the defendant was compelled to review the classification and remuneration it had granted to the plaintiff, a works council member who had been put on garden leave since 2002. As a result, his remuneration was "corrected" downwards – he was downgraded from remuneration level 20 to remuneration level 17 and 18. The works council member subsequently took the matter to court.
The lower court, the Lower Saxony Regional Labour Court, ruled in its judgement of 8 February 2024 – 6 Sa 559/23 that the burden of representation and proof also still lies with the works council member concerned in case of the correction of a remuneration increase. In this case as well, the legal grounds for a claim to an adjustment of the remuneration must be presented by the works council member.
However, these principles did not hold up before the Federal Labour Court. In its decision, the Federal Labour Court clarified that in the event of a correction of a remuneration increase, the burden of representation and proof is reversed. This is because, in the case of a remuneration increase granted on the basis of Section 37 (4) sentence 1 BetrVG, the works council member can generally assume that the company is fulfilling its adjustment obligation under shop constitution law. As a result, the works council member has no cause to take their own precautions to secure their claim to a remuneration adjustment and ultimately relies on alleviations of the burden of representation and proof.
The Federal Labour Court's decision poses new challenges for companies. If a company wishes to reverse a remuneration adjustment that has already been made in accordance with Section 37 (4) sentence 1 BetrVG, it is now obliged to specifically represent and prove why the previous remuneration development does not correspond to that of comparable employees. Merely claiming that a payment is excessive does not constitute sufficient evidence. Companies should therefore carefully and legally document the factual basis, in particular the specific data of the persons used for comparison purposes and their customary salary development, in order to be able to fully meet the requirements of the burden of representation and proof in the event of a dispute. Despite the associated higher burden of proof, the remuneration of works council members released from their work duties should be adjusted, particularly in light of the Federal Court of Justice ruling on criminal liability for breach of trust, insofar as excessive remuneration was granted in the past.
Dora Udovičić
1.8 Works council participation rights when setting up an internal reporting office
The use of an internal reporting office for whistleblowers requires the co-determination of the works council in accordance with Section 87 (1) No. 1 BetrVG (Labour Court (Arbeitsgericht, ArbG) of Zwickau, decision of 20 March 2025 – 9 BV 12/24).
The company, a retirement and nursing home, had set up an internal reporting office at group level and published procedural instructions on the intranet governing the handling and procedure for internal reporting across the company. The local works council established at the company subsequently asserted its co-determination rights with regard to the use and design of the internal reporting office. The company also has a group works council.
While the question of "whether" an internal reporting office may be established is not subject to co-determination by the works council due to the legal obligation under Section 12 (1) German Whistleblower Act (Hinweisgeberschutzgesetz, HinSchG), the "how" of its establishment, i.e. the specific use of the reporting office, is subject to co-determination by the works council under Section 87 (1) No. 1 BetrVG. In the court's opinion, it is irrelevant whether or not employees have a duty to report. The only decisive factor is that the behaviour of employees is to be guided by procedural instructions on the use of the internal reporting office; however, guidance is not achieved solely through mandatory requirements. The "target requirements" specified in the procedural instructions are also suitable for guiding employees’ conduct.
Furthermore, the Labour Court clarified that the works council also has the right to initiate negotiations on procedural instructions. Even if the company only sets up an internal reporting office and does not issue any corresponding procedural instructions, the works council can, on its own initiative, demand regulations on the use of the internal reporting office.
It is important for companies to note that neither the decision to "outsource" the reporting office nor the commissioning of a specific third party to set up the reporting office is subject to co-determination. The company is therefore free to decide, for example, whether to outsource the reporting office to an external law firm (see LAG Schleswig-Holstein, decision of 8 July 2025 – 2 TaBV 16/24).
Companies that are part of a group can also establish the internal reporting office at another group company and thus make use of streamlined structures, cf. Section 14 (1) sentence 1 alternative 2 HinSchG (so-called "group solution"). This offers the significant advantage that uniform group-wide guidelines can be established for the internal reporting office. In this constellation, the group works council is responsible for negotiating the procedural instructions for the use of the internal reporting office, thus avoiding diverging sets of rules and ensuring the participation rights are only exercised by one body.
In the case to be decided by the Zwickau Labour Court, the local works council was ultimately unable to assert any participation rights due to the primary responsibility of the group works council pursuant to Section 58 (1) BetrVG. The application was therefore rejected.
Marko Vraetz
1.9 No special protection against dismissal for works council initiators during the waiting period pursuant to Section 1 (1) KSchG
Since June 2021, so-called "preparatory initiators" (Vorfeld-Initiatoren) of a works council election have also enjoyed special protection against dismissal. These are employees who have taken preparatory action to establish a works council and have submitted a publicly certified declaration pursuant to Section 129 BGB stating their intention to establish a works council. In a ruling dated 20 August 2025 (10 SLa 2/25), the Munich Regional Labour Court has now decided that this special protection against dismissal under Section 15 (3a) KSchG does not apply during the six-month waiting period under Section 1 (1) KSchG. It was also clarified that the right to invoke this special protection against dismissal may be forfeited if the employee does not inform the company promptly that the requirements of Section 15 (3) (b) KSchG have been met.
According to the decision, which is only available as a press release, the Munich Regional Labour Court, unlike the lower court, denied special protection against dismissal under Section 15 (3) (a) KSchG to a security employee who was still in the waiting period and who, shortly after starting his employment, had initiated the establishment of a works council and documented this by notarised declaration in accordance with Section 15 (3) (b) KSchG. The ordinary termination with notice issued by the company during the employee’s probationary period after the employee had informed it of his intention to establish a works council did not fall under Section 15 (3) (a) KSchG. The interpretation of the statutory provision showed that it applied exclusively to dismissals within the temporal scope of the KSchG. Furthermore, the plaintiff had forfeited his right to invoke the special protection against dismissal under Section 15 (3) (b) KSchG because he had not informed the defendant within three weeks of receiving the notice of termination, and in all events not within three months of submitting the publicly certified declaration of intent, that the requirements of Section 15 (3) (b) KSchG had been met.
The ruling of the Munich Regional Labour Court is to be welcomed, as it prevents employees from attempting to obtain protection against dismissal from the very first day of their employment and thus circumventing the 6-month trial period intended by the legislator, during which it is easier for the company to terminate the employment relationship. Companies would therefore be well advised to make even more intensive use of this period to test employees and to react at an early stage if the employee does not fit in with the company culture. Since a dismissal during the probationary period may not be based on the initiative to establish a works council either, reasons for the dismissal unrelated to this initiative also need to be documented.
The ruling of the Munich Regional Labour Court is not yet final, as an appeal on points of law has been granted with regard to the as yet undecided legal question of the applicability of Section 15 (3) (b) KSchG during the waiting period and the question of the forfeiture of the right to invoke special protection against dismissal.
Anja Dombrowksy
2. Legislation
2.1 Draft bill on the reform of the Act to Combat Illegal Employment
On 7 July 2025, the draft bill of a law on the modernisation and digitisation of the fight against illegal employment was announced. The coalition agreement stipulated that the Financial Control of Illegal Employment (Finanzkontrolle Schwarzarbeit, FKS) was going to be further strengthened. The amendment now aims to focus checks, strengthen digital procedures and tighten sanctions.
Following the last major amendment to the German Act to Combat Illegal Employment (Schwarzarbeitsbekämpfungsgesetz, SchwarzArbG) in 2019, the FKS's auditing and investigative powers are to be expanded once again. One focus of the draft bill is the amendments to Section 14 (a) of the SchwarzArbG (so-called "small public prosecutor's office" [Kleine Staatsanwaltschaft]). The draft bill reflects in many places that the FKS’ entire approach is to be even more risk-oriented. For example, "law-abiding" companies are to be audited less frequently. Conversely, companies are to be audited with priority according to their risk potential.
The digitisation of processes plays a central role. This is evident in many places and is particularly evident in the area of official data exchange.
The industry catalogue pursuant to Section 2 (a) of the SchwarzArbG is being adjusted to include the hairdressing and cosmetics industry. This means that the identification and recording obligations now apply to a very broad sector that may have previously flown somewhat under the radar. At the same time, the forestry sector is being removed.
Companies, clients and hirers must prepare themselves for extended cooperation and tolerance obligations (Section 5 SchwarzArbG). The draft bill expressly provides for the obligation to provide data electronically and an active obligation to provide explanations.
Of interest is the intended new regulation in Section 7 (1) (a) SchwarzArbG, which provides the basis for collective requests for information from platform and media providers in cases of suspected illegal job placement. This is expected to have a significant impact on certain platforms where work or services are offered.
In addition, there will be further stricter sanctions. One example is the new criminal offence of gang-related or commercial illegal employment.
Jörn Kuhn
2.2 Strengthening company pension schemes – Federal Cabinet approves draft of the Second Company Pension Strengthening Act
On 3 September 2025, the Federal Cabinet approved the draft of the Second Company Pension Strengthening Act (Betriebsrentenstärkungsgesetz II, BRSG II). The content of the now approved draft of the BRSG II is largely based on the original draft from September last year. This does not make some of the changes any less welcome. The draft BRSG II aims in particular to expand the measures of the 2018 Company Pension Strengthening Act. Some of the key aspects are outlined below.
A central component of the draft is the further development of the social partner model and thus of the pure defined contribution commitment as a form of company pension commitment. The aim of the further development is in particular to enable the participation of non-collectively bound companies and employees as third parties. To this end, social partner models are to be made available to all employees in the respective jurisdiction of the trade union, with the consent of the respective social partners. This seems sensible, not only in view of the declining collective bargaining coverage, but also in order to expand company pension schemes in Germany as a whole.
The expanded options for so-called opting-out systems for the automatic deferral of remuneration at the company or shop constitution level are also intended to contribute to the expansion of company pension schemes. In future, the parties within a company will be able to introduce an opting-out system via a shop or service agreement subject to certain conditions, "even without a collective agreement basis". Opting out means that remuneration is automatically deferred without the need for separate consent from each individual employee. Employees must actively object to their participation (opting out) if they do not wish to participate in the company pension scheme.
In future, companies shall - with the consent of the employee - be able to settle entitlements to company pension schemes in twice the previous scope. However, the company must use the settlement amount directly to pay contributions to the statutory pension insurance scheme.
In addition, the draft provides for a moderate increase in the earnings limit for the so-called "company pension subsidy" (“BAV-Förderbetrag”) pursuant to Section 100 of the German Income Tax Act (Einkommensteuergesetz, EStG) for employees with low incomes, which will be adjusted regularly in future. This aims to improve access to company pension schemes for employees with low incomes.
The (legal) perspective in company pension schemes is often an analytical, backward-looking approach. The draft bill in question is at least forward-looking.
Moritz Coché
3. Rethinking HR! – Same procedure as every year – year-end rush for HR departments
The last quarter of the year is just around the corner. For many HR departments, this means another busy period. In our "Rethinking HR!" category, we would like to remind you of the to-dos that should be ticked off before the end of the year:
1. Preparation of targets and target agreements
Recently, the Federal Labour Court awarded an employee damages for late target setting (judgement of 19 February 2025 – 10 AZR 57/24). Companies should therefore address personal and company performance-related targets in good time before the end of the year and set and agree on them. Setting and agreeing on targets in good time minimises the risk of costly damage claims. Careful documentation also makes it easier to resolve disputes.
2. Notification of holiday entitlement and expiry of holiday entitlement
Employees should be notified in writing at the beginning of each year of their holiday entitlement and the expiry of their holiday entitlement. According to the ruling of the Federal Labour Court of 19 February 2019 – 9 AZR 541/15, holiday entitlements only expire and become time-barred if the company has informed employees in good time of an impending expiry or approaching limitation period. If a corresponding sample letter does not yet exist, Q4 should be used to create appropriate samples and send them to employees (ideally in text form, e.g. by e-mail). If employees on long-term sick leave have still worked for at least part of the year, they should also be notified of their holiday entitlements and their expiry (cf. BAG, judgement of 20 December 2022, docket No. 9 AZR 245/19).
3. Remuneration adjustments (minimum wage; collectively bargained increases), adjustment of the contribution assessment ceiling, creation of provisions, notifications to the tax office, social security and health insurance companies,
The statutory minimum wage will increase to EUR 13.90 gross per hour on 1 January 2026. This will also be used as a basis for the earnings limit for marginal employment (mini-jobs), which will rise to EUR 603 (currently EUR 556) from 2026. There will also be further pay rises in the public sector in 2026. The contribution assessment ceiling is to be raised in 2026, particularly for pension insurance and unemployment insurance, from the current EUR 8,050 to EUR 8,450 per month. Increases in the contribution assessment ceiling are also planned for health and long-term care insurance. Companies should ensure at an early stage that notifications to the tax office, social security and health insurance funds are made on time and, to the extent necessary (at least 10 employees), that they carry out an annual income tax adjustment. Any provisions (holidays, pensions, variable remuneration components, allowances, overtime, severance payments) should also be made at an early stage in order to be able to meet future obligations.
4. Implementation of the EU Pay Transparency Directive
With the Pay Transparency Directive 2023/970/EU, European legislators are attempting to close the gender pay gap between men and women for equal or equivalent work. The goal of achieving pay transparency and equal pay is to be achieved, among other things, through significantly more extensive obligations for all companies and significantly stricter consequences for violations. Member States must transpose the Directive into national law by 7 June 2026. The Directive applies to all private and public companies, regardless of their size, meaning that companies should start reviewing their existing remuneration systems at an early stage.
Katharina Schäffer
4. Focus on occupational safety: Where does your company stand?
In all honesty: how consistently does your company implement its occupational safety? Our compact overview shows you the most important measures and provides a practical checklist for organising your occupational safety. This will enable you to see at a glance in what respects your company is already well positioned – and where there may still be undiscovered risks.
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Moritz Coché
Junior PartnerRechtsanwalt
OpernTurm
Bockenheimer Landstraße 2-4
60306 Frankfurt am Main
T +49 69 707968 272
M +49 151 7037 8228
