Note: This article was sent in the form of an ADVANT Beiten special newsletter in July 2022.
On 23 June 2022, the German Bundestag approved the draft law implementing Directive (EU) 2019/1152 of the European Parliament and of the Council of 20 June 2019 on transparent and predictable working conditions in the European Union. The "Working Conditions Directive" aims to improve working conditions by promoting transparent and predictable employment while ensuring the adaptability of the labor market. The law has passed the German Bundesrat and will come into force as early as 1 August 2022. This ADVANT Beiten newsletter provides you with information on what needs to be done by 31 July 2022 with regard to (almost) all existing model employment agreements, as well as by August 2022 at the latest with regard to already existing employment agreements.
The goal of the Working Conditions Directive shall be achieved with the help of the following measures:
The seemingly mundane amendments to the German Act on the Notification of Conditions Governing an Employment Relationship (Nachweisgesetz - NachwG). significantly extend the employer’s obligation to provide (prospective) employees with information about key aspects of the employment relationship. Crucially, while the Act previously played an insignificant role, fines may now be imposed for failure to comply.
The package establishes minimum working conditions concerning the maximum duration of any probationary period, parallel employment, minimum predictability of work, requests for a transition to a different form of employment as well as mandatory training. This will lead to changes, e.g. to the German Vocational Training Act (Berufsbildungsgesetz - BBiG), the German Act on Temporary Employment (Arbeitnehmerüberlassungsgesetz ‑ AÜG), the German Trade, Commerce and Industry Regulation Act (Gewerbeordnung - GewO) and the German Part-Time Work and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz - TzBfG).
The package also implements enforcement provisions, including fines, to ensure the compliance with the new regulations.
Previous legal situation
The NachwG already requires employers to record in writing and provide to the employee with all the essential contractual terms at the latest one month after the agreed start of the employment relationship. Essential contractual terms include the name and address of the parties, the start of employment, the term of the employment relationship for fixed-term employment, the place of work, a job description, the composition and amount of remuneration and other remuneration components (e.g. allowances, bonuses etc.), the agreed working time, the duration of annual leave, notice periods as well as a reference to collective agreements applicable to theemployment relationship.
Until now, the NachwG has had little or no impact. Even if there was no written employment contract , the law did not provide any sanctions. This will change from August 2022. The NachwG will play a larger role in practice because violations will be penalised.
The changes to the NachwG
The numbering currently included in the NachwG will be amended to implement the "Working Conditions Directive" and extended to include a few essential aspects. In a nutshell, these are the changes to the NachwG from 1 August 2022:
In case of fixed-term employment relationships, the end date shall be determined if a limited term was agreed.
In case of a remote work, the agreement must specify that employees are free to choose their place of work.
The duration of any agreed probationary period needs to be recorded.
The components and the amount of the remuneration (basic remuneration, any premiums, special payments, allowances, bonuses etc.) must be listed separately.
In addition to agreed working hours, information on the agreed breaks and rest periods must be provided. In the case of shift work, the shift system, the shift schedule and the prerequisites for a shift change must also be indicated.
For on-demand work, the agreement regarding on-demand work, the minimum number of paid working hours, the time period set for the performance of the working hours as well as the respective notice period for the employer must be specified.
Whether there is a possibility to order overtime hours as well as their requirements must also be specified in writing.
Any entitlements to training courses provided by the employer must be documented.
In case of a commitment under a company pension scheme, the name and address of the pension provider must be indicated unless the pension provider is obliged to provide this information.
The procedure to be complied with in case of a termination of the employment agreement must also be specified. Information regarding the written form requirement for termination, the notice periods as well as the period for filing a complaint for unfair or wrongful dismissal are required as a minimum.
The written form requirement under the new law will be fulfilled either if the employment agreement is concluded in writing, i.e. signed in its original form, and a signed original is presented to the employee, or if the essential contractual terms are printed, signed by a representative of the employer in its original form and provided to the employee. The employee does not need to countersignin order to comply with the information obligation under the NachwG. However, employees should still be required to sign employment contracts in order to create factual proof for an obligation and to receive a verifiable consent to the conditions laid down in writing from a legal point of view.
Shorter periods for the written information concerning new and existing agreements
Until now, employers had one month from commencement of the employment relationship to specify in writing the essential working conditions included under the NachwG. In the case of new employment relationships starting from 1 August 2022, employers will have to inform employees in writing about the details of the contractual parties, the remuneration as well as the working hours (including breaks and rest periods) at the latest on the first day of work. In addition, the employer has one month from the agreed commencement of the employment relationship to inform the employee about the duration of an nual leave, any entitlement to training courses, the details of the pension provider, the procedure for giving notice as well as to make reference to any collective agreements; all other information must be provided to the employee by the seventh calendar day after the agreed commencement of the employment relationship.
This artificially staggered timingis time-consuming and makes the applicable regulations confusing. With the exception of provisions which should bbe set out in a separate agreement for legal reasons, for example, for a post-contractual non-competition obligation or an annual target agreement, all regulations under the NachwG should be included in one employment agreement and the shorter period should apply to all subject matters covered under the respective agreement.
Existing agreements may also require adjustments.Employees who are already in an employment relationship may request a copy of the essential working conditions in writing. This record must be presented to them at the latest seven days after the request.
The seven-day notice period is short. If many employees exercise their right to receive a record in written form or if the employees(ab)use this right as a tactical instrument, companies will face extremely tight deadlines. Therefore, templates for employment agreements should be reviewed professionally without delay. Model wording should be drafted for all scenarios conceivable within the company. This is important because even the shortest failure to observe the time period by the employer can result in a fine.
Consequences in case of violations of the NachwG
So far, there have been no direct sanctions for a violation of the NachwG requirements. Employers merely had the burdens of proof and presentation in proceedings before the labour courts in regard to the essential contractual terms if no written proof was available.
From 1 August 2022, violating the NachwG will be penalised. Violating the obligation to record the essential contract terms in writing is an administrative offence which may result in a fine of up to EUR 2,000.00.
Impact on the company pension scheme
The stricter sanctions of the NachwG will also have a consequence for occupational pension plans. While company pensions were already considered an essential contract term, corresponding records rarely considered this aspect adequately. In addition, the new provisions require considerably more detailed information. In the future, it will not only be necessary to name any external pension providers, but the individual amounts of the benefit and its maturities must also be specified separately based on commitments. However, the Directive does not explain how this is possible, in particular if the benefit amounts - keywords in this respect are purely defined contribution commitments and the contribution-based benefit commitment - and the commencement of the contribution might not even be determined yet.
Employers with occupational pension schemes set forth in collective, works or service agreements are in luck. In this case the extended information obligations may be replaced by a reference to the collective labour law regulation.
Furthermore, subsequent changes to the schemes as well as individual participation or selection decisions of the employees are relevant for individual and general commitments. In this case, too, the employees concerned will have to be informed in writing about every significant change at the latest on the day from which it will apply.
Merely announcing (as usual) changes to the general commitments on a company notice board (if possible, digitally) will not suffice for compliance with the obligations under the new NachwG.
Need for action in other areas
In addition to the NachwG, other laws like the German Vocational Training Act (BBiG), the German Act on Temporary Employment (AÜG), the German Trade, the Commerce and Industry Regulation Act (GewO) and the German Part-Time Work and Fixed-Term Employment Act (TzBfG) will also be amended.
The amendment to the BBiG stipulates that the written record of a training contract must now include the name and address of the contracting parties and, if the trainees are minors, the name and address of their legal representatives. In addition, the training site and any training measures to take place outside of the training site, the amount and composition of remuneration, as well as the remuneration and compensation for overtime must be documented.
The most significant change in the AÜG and TzBfG is that employers are now required to provide temporary agency workers and temporary employees, who express a desire in writing to take over or continue the employment relationship as an unlimited employment relationship, with a reasoned response in text form within one month of receipt of this notification.
With regard to the TzBfG, an agreed probationary period in a fixed-term employment contract must also be in proportion to the expected duration of the fixed-term and the nature of the activity. The legislator does not provide guidance on what is considered proportionate.
The GewO now provides that employees may not be charged for training if the employer is required by law or collective bargaining agreements to offer such training. In addition, training courses must be held during regular working hours.
Employers have little time to prepare before the new regulations take effect. Existing standard employment agreements that do not comply with the provisions applicable from 1 August 2022 will have to be amended as soon as possible.
It is also regrettable that the legislator missed the opportunity to adapt to the digital age. Electronic form continues to be ruled out when it comes to setting down the essential terms and conditions of employment; the strict written form requirement continues to apply. The amendment to the NachwG result infurther formalism, and sanctions non-compliance with the written form with fines. Germany is still lagging behind the digital age, especially by international standards.The implementation of the Directive would have been an appropriate time for Germany to take a step towards greater digitalisation. In addition, the law hinders legislative attempts to encourage the use ofoccupational pensions.
Whether the implementation of the Working Conditions Directive into German law is in line with the spirit of the Directive on transparent and predictable working conditions in the European Union is questionable. Employment agreements will become even more comprehensive and, from the employee's point of view, even more illegible and difficult to understand. However, this does not change the fact that employers in Germany will be required to professionally revise their model employment agreements without delay in July 2022. It is advisable to review employment agreements in general with regard to the current legal situation and to amend them if necessary.
The Employment Law Team of ADVANT Beiten will be happy to answer any questions you may have:
Dr Erik Schmid