New Coalition Agreement: strategic considerations for HR managers

The Coalition Agreement contains many topics of employment law relevance. Whether and how they are to be implemented will be handled during the legislative period. Although the details have not yet been determined, HR departments are advised to address individual topics and lay the groundwork now. Focal points of employment law relevance are working hours, the minimum wage and collective bargaining coverage. We have answers to the most important questions.

1. Working time

A reform of the German Working Time Act [Arbeitszeitgesetz, ArbZG] is planned. Instead of a daily maximum working time, a weekly maximum working time is to be introduced in line with the European Working Time Directive.

The electronic recording of working time will become mandatory, although the trust-based working time model without time recording is to remain possible. It is to be implemented unbureaucratically and appropriate transitional arrangements will be created for small and medium-sized enterprises.

Companies are advised to review their existing working time regulations now for any required adjustments to ensure that they are able to make use of the new flexibilisation options quickly once the legislative process is concluded.

1.1 EU Working Time Directive

A brief overview of the main regulatory areas of the EU Working Time Directive (Directive 2003/88/EC on certain aspects of the organisation of working time), to the extent relevant here, includes the following points:

• Article 3 Daily rest period: At least 11 hours of uninterrupted rest per 24 hours.
• Article 4 Rest breaks: If the working time exceeds 6 hours, an appropriate rest break is stipulated.
• Article 5 Weekly rest period: At least 24 hours once a week. As a rule, this rest period should be granted in one session (often at weekends), but may be postponed in justified cases.
• Article 6 Maximum weekly working hours: At most 48 hours per seven-day period, including overtime (calculated as an average over 4 months).
• Art. 7 Annual leave: At least 4 weeks' paid annual leave.

There are also various exceptions. For example, there may be exceptions for rest periods in certain sectors (e.g. healthcare, transport, emergency services), provided that this is compensated for (e.g. through later rest periods). Under certain conditions, collective agreements or shop agreements may also contain deviating regulations on breaks.

1.2 Recording of working time 

The legal requirements for recording working time have been developed further by case law. The current status is as follows:

In a much-noticed decision in 2019 on questions of Spanish working time law, the European Court of Justice made important statements on the European legal requirements for recording working time (CCOO decision dated 14 May 2019, case C-55/18). According to this ruling, the member states are obliged to ensure that employees have "an objective, reliable and accessible system for recording working time" at their respective employers.

The Federal Labour Court [Bundesarbeitsgericht, BAG] adopted this case law in its decision of 13 September 2022 (case: 1 ABR 22/21) and "translated" it into national law. It stated that the obligation of companies to introduce a system for recording the daily working hours worked by employees, which includes the start and end and thus the duration of working hours, including overtime, can be derived from the general clause of Section 3 (1) of the German Occupational Health and Safety Act [Arbeitsschutzgesetz, ArbSchG]. The new requirements formulated by the Federal Labour Court therefore go far beyond the documentation obligation expressly regulated in the German Working Time Act pursuant to Section 16 (2) ArbZG (obligation to keep records from the 9th hour onwards).

On 19 December 2024, the European Court of Justice (case: C-531/23) ruled that individual occupational groups may not be excluded from the recording of working hours, as this would obviously violate EU law and might even be discriminatory in the case at hand. The decision was based on the fact that the law being examined, Spanish law, contains no obligation to record working hours when employing domestic workers. The decision strongly emphasised the observance of the protection requirements of the Working Time Directive in favour of the employees; this is only guaranteed if working hours are recorded.

1.3 Preparations for the change of direction

It is not possible to predict with certainty to which extent the legislator will succeed in eliminating the considerable legal uncertainties in working time law resulting from the aforementioned decisions. Our answers to initial questions that have arisen are summarised below:

With a view to the statements made on employees in the Coalition Agreement, can working time recording be dispensed with?

At present, an explicit legal obligation to document working hours only exists pursuant to Section 16 (2) ArbZG. This is not applicable to groups of persons who are not covered by the ArbZG (among others, executive employees within the meaning of Section 5 (3) of the German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG]). There are currently no further-reaching explicit legal obligations on documentation, although the Federal Labour Court does derive an obligation to record the start and end of daily working hours from Section 3 (1) ArbSchG.

Based on the decision of the Federal Labour Court, it is the task of the authorities responsible for occupational health and safety to work towards the introduction of working time recording systems that meet the requirements set by the Federal Labour Court in accordance with Section 22 (3) ArbSchG. We are not aware of any corresponding official intervention to date, although in North Rhine-Westphalia, for example, corresponding requirements issued to the responsible district governments by decree of the Ministry of Labour, Health and Social Affairs of North Rhine-Westphalia have existed since 2023.

Would an exemption from electronic time recording in the form of the trust-based working time model even be in compliance with European law?

In its ruling of 19 December 2024, the ECJ vaguely hinted that there might be some room for manoeuvre for the national legislators. The coalition parties must now define such room for manoeuvre in compliance with European law.

Can trust-based working time be introduced at present?

A trust-based working time model in the strict sense is not feasible under the current legal situation. With trust-based working time, employees decide for themselves when they fulfil their contractual obligations. In this working time model, working hours are neither recorded nor monitored.

Due to the decision of the ECJ and the Federal Labour Court, the trust-based working time model is considered questionable because the obligation to record all working hours that was established by these courts is not fulfilled. The Coalition Agreement, however, explicitly states that trust-based working time should remain possible without time recording "in line with the EU Working Time Directive". Companies therefore currently find themselves in a dilemma: should they relinquish trust-based working time in light of the decisions of the ECJ and the Federal Labour Court despite the fact that the coalition is promising an imminent legal basis for it? Or should they run the risk of contravening possible upcoming new regulations by initially retaining existing models?

Even if the legislator wanted to "revive" trust-based working time, would this concept be nipped in the bud by the works council’s monitoring?

There are indeed several decisions by the regional labour courts that oblige the employer to provide the works council with information on the actual working hours of employees in the case of a trust-based working time model. Here, the goal of reviving trust-based working time as set out in the Coalition Agreement must be viewed in several ways: Even if the legislator were to clarify in future that trust-based working time is possible, the works council could de facto undermine this working time model by exercising its monitoring and information rights.

A particularly interesting question in connection with the new regulation is therefore whether a statutory regulation on trust-based working time will have an impact on the previous case law concerning the employer's obligation to provide information on employees’ actual working hours.

Should a shop agreement on working time already be terminated and renegotiated now in anticipation of a change in the law?

We consider this to be premature. To date, only the Coalition Agreement has been agreed. Whether the plans set out in it will actually be implemented in full cannot be predicted. Furthermore, it is still unclear when the legislator will tackle the respective plans. However, we recommend that companies check their termination deadlines now, follow the political developments and prepare the internal coordination of the intended changes so that they can act quickly when the time comes.

Do severability clauses lead to the continuation of a shop agreement without those provisions that were obviously agreed in the context of previous working time requirements?

In case of changes, such as amendments to the law, which render individual provisions invalid, severability clauses should ensure in practice that the invalidity of individual components does not affect the validity of the remaining provisions of such shop agreement.

The following three points will need to be considered:

1) Firstly, one must examine whether a new statutory provision can even lead to invalidity in this sense. This may already be doubtful.

2) Additionally, even without the invalid part, a shop agreement must remain a meaningful and coherent regulation in itself.

3) The Federal Labour Court takes a very critical view of severability clauses in shop agreements. The provisions of a shop agreement have a normative effect similar to a law or collective agreement.

We therefore recommend not using the argument of the severability clause but rather renegotiating and/or terminating the shop agreement.

Can ongoing negotiations on a shop agreement on working time be unilaterally suspended?

No. The Coalition Agreement does not provide sufficient justification for unilaterally suspending ongoing negotiations. This would only lead to one side declaring the breakdown of the internal negotiations and being able to appeal to the conciliation board. In our opinion, the chairperson's discretion is not restricted in the conciliation board either, because the Coalition Agreement only contains key points for a new regulation of working time law. At best, this could be the case when a concrete new regulation, for example in the form of a complete draft bill, is available.

2. Minimum wage

A highly sensitive political issue is the discussion concerning the minimum wage. From 2026, a statutory minimum wage of 15 euros gross per hour “should be achievable”.

This will not be prescribed by law. Rather, this is to be achieved by the Minimum Wage Commission as part of the regular adjustments. The Commission will orient this on the development of collective agreements in Germany and 60% of the median gross wage of full-time employees.

When introduced in 2015, the minimum wage was 8.50 euros gross per hour; since 1 January 2025, it has been 12.82 euros per hour. Regardless of whether or not 15 euros gross per hour is achievable in the future, it is clear that there will be an increase.

An increase in the minimum wage affects not only companies that actually pay the minimum wage, but also employers for whose salary systems the minimum wage is the reference value.

2.1 Offsetting remuneration components

According to Section 1 of the German Minimum Wage Act [Mindestlohngesetz, MiLoG], the minimum wage is the wage due per hour. The prospective increase in the statutory minimum wage may result in the contractually agreed hourly wage of employees falling below the statutory minimum wage. This gives rise to a differential pay claim in accordance with Section 3 MiLoG, as the employer is in all events obliged to pay the minimum wage. This requires no contractual amendment.

One should bear in mind that, in cases where the statutory minimum wage is not met, other benefits granted by the employer must also be taken into consideration with an effect on the minimum wage and that the minimum wage could therefore be fulfilled in the overall assessment. This is because each remuneration component that is related to the work rendered has an effect on the minimum wage (BAG dated 25 May 2016 - 5 AZR 135/16). According to established case law, the following affect the minimum wage:

• extra pay and bonuses for special skills of employees;
• supplements for work on Sundays and public holidays;
• bonuses and commissions;
• compensatory payments to preserve acquired rights and
• attendance bonuses.

Please note that such payments that

• are made by the employer without regard to the work performance or
• are based on a special statutory purpose (e.g. night bonuses in accordance with Section 6 (5) ArbZG) or
• expressly do not constitute additional remuneration (e.g. collectively agreed additional holiday pay)

may not be offset against the minimum wage.

​​​​​​​2.2 Admissibility of offsetting remuneration components 

Remuneration components may only be offset against the minimum wage if the contractually agreed basic remuneration per working hour is below the statutory minimum wage (BAG dated 11 October 2017 - 5 AZR 621/16). If the contractually or normatively owed basic wage is already as high as the minimum wage, there is no room for offsetting remuneration components and hence these components must be granted additionally.

The offsetting of remuneration components can be agreed in the employment contract or in shop agreements. Its regulation in an employment contract is subject to the review of general terms and conditions (AGB-Kontrolle) and must, in particular, comply with the transparency requirement.

​​​​​​​2.3 No co-determination when adjusting the minimum wage

According to the case law of the Federal Labour Court (BAG dated 27 April 2021 - 1 ABR 21/20), the wage adjustment to be made in certain remuneration levels due to the increase in the minimum wage does not automatically lead to a change in the remuneration groups that requires co-determination pursuant to Section 87 (1) No. 10 BetrVG, nor is the employer automatically obliged to increase the other remuneration groups proportionally in such case.

3. Collective bargaining and trade union rights

Strengthening collective bargaining coverage is a central theme in the Coalition Agreement and is mentioned in at least three places. It refers to

• the implementation of the Federal Act on Compliance with Collective Bargaining Agreements [Bundestariftreuegesetz];
• the creation of a digital access right for trade unions and
• tax incentives for trade union membership.

The “traffic-light” coalition government already had draft bills for both the Federal Act on Compliance with Collective Bargaining Agreements and digital access law, which could be adapted with little effort. As the Coalition Agreement links the digital access right to the possibility of digital works council elections (next election cycle in 2026), there is a certain trend towards quickly putting the key collective bargaining issues on the agenda.

From a company perspective, this raises two questions:

1) Internally: Will the company want to participate in public contracts with the federal government in the future? If the answer is yes, then the emerging questions concerning the application of collective agreements in employment relationships should be addressed promptly.

2) Externally: Does the legislator not have to simultaneously close the loopholes in German collective bargaining law (in particular concerning the law on industrial action) if it demands far-reaching collective bargaining coverage from companies?

And here the answer is clear: yes. The legislator fails to recognise that the evasion of collective bargaining coverage has also been accelerated in recent years due to the unpredictable law on industrial action, which is based on an excessively developing case law of the Federal Labour Court.

Please feel free to contact us with any questions you may have or other topics you would like to discuss!

If you have any questions or comments, please contact our authors at [email protected]​​​​​​​

Back to list