Employment Law28.01.2022 Newsletter

Short-time work: legal certainty and surprises from the BAG

The German Federal Labour Court [Bundesarbeitsgericht - BAG] has ruled on important issues relating to short-time work, simultaneously providing both legal certainty and surprises. For example, in its decision on corona-related business closures, which has generated a high degree of interest, the BAG pointed out in an "obiter dictum" that employers could be obliged in individual cases to introduce short-time work in the event of business closures. In another decision, the BAG clarified questions concerning holiday entitlement - entirely in line with its previous case law – to the effect that periods of short-time work performed can reduce the employees' holiday entitlement.

Our labour law experts explain the key points of the decisions below.

Liability for damages if short-time work is not introduced?

The BAG addressed the question of whether an employer must pay its employees remuneration if the business has to be closed due to a general order to contain the corona pandemic and employees are therefore unable to work (ruling dated 13 October 2021 - 5 AZR 211/21). The decision was controversial because the employer in question had introduced short-time work during the business closure, but the suing employee, who was a part-time employee in marginal employment [“geringfügig Beschäftigte”], was not eligible for the short-time work benefits.

Business closures ordered under public law are not a general business risk

In the matter, the BAG ruled that a business closure ordered under public law in order to combat the corona pandemic did not fall under the general business risk. What this actually means is: there is no obligation to continue to pay wages if this is a sovereign intervention which was imposed to combat a dangerous situation that affects society as a whole and which the individual employer neither caused nor is responsible for. The situation is different if the measure is specifically aimed at minimising a particular risk inherent at the employer's business. This can be the case if, for example, the production methods or conditions chosen by the employer pose a particular risk of contagion to employees.

Monitoring of the obligation to introduce short-time work 

On a matter not of decisive relevance to the BAG's decision - but no less relevant in the current corona situation - the BAG additionally stated: employers may, under certain circumstances, be required to introduce short-time work if the conditions for doing so are met. This can make it possible for employees to receive short-time work benefits, which could mitigate financial disadvantages for employees resulting from an ordered business closure. If the employer does not comply with this obligation, employees may have a claim to damages against their employer in the amount of the short-time work benefit lost.

Scrutiny of the purpose of public law measures

In the current pandemic situation, further restrictions cannot be ruled out, including restrictions in the form of business closures ordered under public law. These can be mitigated by the introduction of short-time work, meaning that employers should make use of this measure if the corresponding conditions are met. This applies in particular against the background of the obligation indicated by the BAG. As far as the risks of having to continue to pay wages is concerned, in case of business closures employers should closely scrutinise the purpose of the public law measure and the risks that such order are supposed to counteract. Thus, cases such as those of the plant closures in the meat industry or the restrictions for seasonal workers might have to be assessed differently in individual cases.

Permissible reduction of holiday entitlement in case of “zero short-time work”

In two similar cases, the BAG has now ruled that the loss of entire working days due to short-time work have to be taken into account when calculating the annual holiday entitlement (ruling dated 30 November 2021 - 9 AZR 225/21). The sued employers had introduced short-time work due to the corona pandemic. In one case, it was introduced by contractual agreement with the employees, whereby the agreement did not include any agreement on the reduction of the holiday entitlement. In the second case, short-time work was introduced by shop agreement. As a result, in each case the employees had not performed any work for several months on grounds of the “zero short-time work”. The employers subsequently reduced the annual holiday entitlement proportionately.

In the opinion of the BAG, this procedure is permissible. The loss of entire working days due to short-time work justifies a recalculation of the holiday entitlement during the course of a year. Here, the BAG bases this on its previous line of case law on the reduction of holiday claims in the case of unpaid special leave or for periods of a release phase in the case of partial retirement. In each of these cases, there was no existing work obligation on the part of the employees. If working days are lost due to short-time work agreed under individual contracts or collective agreements, periods are not to be equated with a work obligation either under national law or under Union law. In contrast, according to the provisions of the German Federal Holiday Act [Bundesurlaubsgesetz - BUrlG], there is a link between the number of days of holiday and the number of days on which a work obligation exists. For this reason, also in these cases, the holiday claim is to be calculated according to the BAG’s general formula: 24 working days x number of days with a work obligation / 312 working days.

The same also applies to contractually agreed additional holiday entitlement if no agreement deviating from the provision of § 3 (1) BUrlG has been reached in the employment contract for the calculation of these claims.

Still unclear: reduction of holiday also outside of “zero short-time work”?

The question of whether a reduction in holiday entitlement can also be considered outside of short-time work has still not been clarified by the Supreme Court, however. Due to the current regulations on short-time work, this will doubtlessly remain an exciting legal issue in the new year. According to a decision of the Osnabrück Labour Court (ruling dated 8 June 2021 - 3 Ca 108/21), which is not yet final, a proportionate reduction is to be inadmissible in these cases. Reasoning: this situation precisely is not comparable with a continuous interruption of the mutual performance obligations arising from the employment relationship. The appeal is pending before the Regional Labour Court [Landesarbeitsgericht - LAG] of Lower Saxony under docket No. 6 Sa 711/21.

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