Employment Law17.08.2022 Newsletter

Foreign postings in the context of the amended German Act on Proof of Working Conditions and the EU Working Conditions Directive

Everyone is currently talking about the implementation of the EU Working Conditions Directive in the German Act on Proof of Working Conditions Governing an Employment Relationship [Nachweisgesetz, NachwG]. The new obligations to provide information and proof also affect employee postings abroad. Companies will therefore also have to take action in this respect, which we have summarised below.

As of 1 August 2022, employers face not just new stricter information requirements regarding applicable working conditions, but also new obligations to provide evidence, with the failure to comply with these requirements being subject to fines. The new provisions of Sec. 2 (2) and (3) NachwG provide explicit information requirements for foreign postings.

The version of the NachwG in force until 30 July 2022 required the documentation of the term of the work to be performed abroad, the currency in which the remuneration is paid, any additional remuneration and related additional benefits in kind associated with the stay abroad, and the agreed conditions for the employee's return. Following the amendment of the NachwG for foreign postings, extended documentation and evidence requirements now apply. 

For example, from 1 August 2022 onwards, employees on foreign postings lasting longer than four consecutive weeks outside the Federal Republic of Germany need to be informed of the following prior to travelling abroad in accordance with Sec. 2 (2) NachwG:

  • the country or countries in which the work abroad is to be performed and the planned duration of the work,
  • the currency in which the remuneration will be paid,
  • if agreed, the cash or non-cash benefits associated with the stay abroad, in particular posting allowances and travel, board and lodging expenses to be reimbursed,
  • whether the employee’s return is envisaged and, if so, the conditions of his or her return.

New regulations now also apply to postings within the scope of the German Act on the Posting of Employees [Arbeitnehmerentsendegesetz, AEntG] in accordance with Sec. 2 (3) NachwG. Here, the employee also has to be informed of the remuneration he or she is entitled to claim under the applicable law in the host country. The employee must also be provided with a link to the official national website of the host country according to the Internal Market Information System (IMI, see Home - IMI - European Commission (europa.eu)).

At first glance, the innovations may not appear to be serious. However, in view of the possible punishment of the violation of the obligation to provide proof as an administrative offence with a fine of up to four figures, the corresponding requirements should be checked and implemented with particular care. 

However, foreign posting are complex from a legal perspective not only in the context of the NachwG. For example, already at the contract drafting stage, the question arises of which contract model (one-contract or two-contract model) can be implemented. As a guideline, when an employee is integrated into the business organisation of a foreign group employer, the two-contract model must be implemented - i.e. suspension of the employment relationship with the German company and conclusion of an employment contract with the foreign company. One should also bear in mind that countries require foreigners to have an employment relationship with a domestic company of the foreign state. 
It is not clear from the new legal provisions whether there is an obligation, subject to a fine, to inform the employees to be posted about possible consequences under individual law and, if applicable, also under social security and payroll tax law prior to the posting in the case of a suspended employment relationship in the two-contract model. However, this information should be given in any event, as such an obligation already exists under the employer's duty of care. Once again, we must repeat the criticism of the NachwG: the documentation to be provided to the employee must be in writing. This is an even bigger package in case of foreign postings. In view of the fact that, pursuant to Sec. 2 (3) No. 2 NachwG, the legislator requires that a web link be sent to the employee, this is still difficult to understand. It is simply unrealistic to expect a link to be provided in hard copy and then accessed. Whereas the explanatory memorandum to the 2021 German Works Council Modernisation Act [Betriebsrätemodernisierungsgesetz] still took digitisation and the resulting changes in the world of work into account, this is no longer seems to be the case. 

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Jörn Kuhn

Jörn Kuhn

PartnerAttorneySpecialized Attorney for Employment Law

Konrad-Adenauer-Ufer 23
50668 Cologne
T +49 69 707968 140
M +49 173 6499 049