1. What state-sponsored support is there for employers and their workforce during the global COVID-19 crisis?
The government has established various financial aid programs (such as immediate payments for small companies; loans; tax measures etc.), but the most important one was changing the laws on short-time work on 13 March 2020.
• Short-time work is the partial or complete reduction of working hours with a corresponding reduction in remuneration.
• The employees' missing earnings can be partially reimbursed through the short-time work compensation paid by the Federal Employment Agency.
• The short-time work compensation amounts to 60-67% of the lump sum net salary difference between the regular net income (based on a maximum amount of EUR 6,900 gross) and the reduced net income.
• The Federal Employment Agency can pay social security contributions in full.
• Short-time work requires a considerable loss of working hours due to economic reasons or an unavoidable event. The loss of working hours must be temporary and unavoidable (possibly required is the reduction of overtime and residual holiday from 2019). This applies in particular to a (partial) shutdown of the operation due to the COVID-19 crisis (e.g. due to order reductions, activity bans, quarantines).
• The loss of work must reach a certain minimum level. According to the current legal situation, 10% of the employees of an operational unit or a part of an operational unit must be affected by a loss of earnings amounting to more than 10% of their monthly gross income.
• The implementation of short-time work requires a legal basis. This can result from a collective bargaining agreement, a works agreement or an agreement with the employee. In this respect, please review your employment contracts to check if they already provide a corresponding provision.
• The statutory period of remuneration for short-time work is currently 12 months. This period can be extended to up to 24 months.
o As a first step, the employer must notify the Federal Employment Agency of the loss of working hours and the implementing of short-time work in writing or electronically. This notification can be made by using a form provided by the Federal Employment Agency. The employer (after receiving information from the employment agency) calculates the short-time working allowance and pays it out to the employees.
o As a second step, the employer must submit an application for a reimbursement of short-time work compensation within a cut-off period of three months.
2. What are the main challenges facing employers and how are they responding?
The main challenges are:
• Dealing with a multitude of legally relevant issues at the same time (employees, customers, suppliers, investors, finance partners, leases etc.).
• Economic difficulties because of a decline in/lack of orders.
• Interruption/break down of supply chains because of closed borders.
• Need to change the structure of work (e.g. mobile working instead of office work; flexible working).
• Closure of businesses and other institutions (restaurants, hotels, gyms, hairdressers, retail; shops; aviation; schools/kindergartens).
• Dealing with infected employees/fear of infection/fear of virus existence.
We envisage that employers will need to address the legal and organisational challenges involved post-lockdown in phases:
• Information phase: gathering answers to the completely new challenges and what the legal implications are (such as what to do in case of an infection of employees; which measures can be taken in general; how to deal with business travel; can employees be terminated for operational reasons; questions around remuneration).
• Taking action phase: Change the organisation of work (working on IT infrastructure; sending employees to the home office etc.), applying for short-time work/ financial aids, negotiations and conclusion of agreements with works councils and employees.
• Observation and implementation phase: Observe the almost daily changing developments and implement changes (e.g. health and safety measures such as ordering employees to wear masks but we also saw single lawsuits against the measures taken by the government).
• Preparation phase: Prepare for post-lockdown.
3. How are employers applying the local laws on holidays during lockdown?
We experienced different questions regarding holiday becoming relevant during the different phases of the pandemic:
• During the first phase of the pandemic questions came up on what is legally permissible in terms of holiday.
o Can employers ask employees to take unpaid leave? Can employers impose compulsory holiday/ furlough?
• Demanding (unilaterally) that employees take unpaid holiday is in principle not possible as the employer bears to risk of operation (Sec. 615 S.3 BGB, Civil Code) and therefore needs to continue to pay the employees.
• Unilaterally ordering compulsory holiday/ furlough is also problematic as the employer needs to consider the employee's holiday requests according to Sec. 7 para 1 BUrlG, Federal Vacation Act. When push comes to shove it could be that the courts consider the holiday was not taken so the employees are still entitled to an unreduced amount of holiday.
o Can employers order company holidays?
• Company holiday is the closure of the business for a certain period of time during which the employees are requested to use their holiday entitlement.
• It is questionable if the COVID-19 crisis constitutes an urgent operational concern that allows such company holiday.
• If a works council exists, its co-determination rights would have to be observed.
• In companies without a works council this is basically possible if there is an urgent operational need:
• Urgent operational needs are that companies cannot open the business because of a shut-down by the authorities (e.g. like currently the case for restaurants). This will not be the case for all companies; for others, an urgent operational reason could be a massive reduction in orders that endangers the company's existence. Mere disturbances of the operation, a decrease in orders or a temporary lack of utilisation usually do not count as such a reason. This can be seen differently if the employer intends to prevent all employees from taking holiday after the crisis at the same time. An imminent understaffing is recognised as an urgent operational reason that can be countered by the employee's individual request for leave.
• Furthermore it is not clear how many days of leave could be ordered. According to (not current) case law this could be up to a limit of 3/5 of the annual holiday (e.g. in case of 30 holiday days this equals 18 days). Finally, there needs to be a reasonable notification period of usually between 5 days to 2 weeks, given the current situation it is likely that the courts will accept a shorter notification period.
• Subject to any contractual arrangements it is possible that employers will require employees to take paid time off in lieu of their accrued overtime hours.
Mainly it is recommended to speak with the employees and look for mutual flexible solutions on how to deal with the crisis. Employers should openly communicate the current situation and developments to the employees to make them aware of the complications and to openly discuss with the employees on what measures can be taken so that both sides benefit from it in the future and to avoid terminations.
• In/ before the ramp-up phase, different questions are discussed:
o Can employers withdraw holiday that was already approved?
• It is not possible that an employer withdraws holiday that was already approved.
• However, exceptional situations are conceivable in which an emergency necessitates the employee's employment and the employer is threatened with unreasonable disadvantages if the employee continues to take the holiday. In such cases, the possibility of a "revocation" has already been discussed by courts in isolated cases, but the details remain unclear. Employers should therefore give priority to reaching an amicable agreement on the postponement of leave.
o Can employees withdraw approved holiday?
• No, the employee is bound to their approved holiday.
• This also applies if planned holidays cannot be taken as a result of travel restrictions. If an employee wants to postpone his or her already approved holiday, he or she must obtain the employer's consent.
o What are the impacts of quarantine on approved holiday?
• If an employee has to go into domestic quarantine due to an official order and is actually ill, the period of incapacity for work is not credited against the annual leave (§ 9 BurlG). The employee therefore retains his or her holiday entitlement.
• If, however, the employee is still able to work in quarantine, there are several arguments in favour of taking the holiday that has already been agreed- despite the lack of case law on this subject: just as with travel restrictions, the employer is not responsible for other "disruptive" events (such as quarantine) during the holiday period and therefore does not have to re-grant the holiday.
4. What are the main employment law challenges and emerging themes as conditions return to normal?
The main employment law issues and emerging themes arising could be:
• Factual evaluation of the measures implemented during the crisis:
o Stop the measures and replace them if necessary.
o Continue the measures permanently (hygiene measures; home office; split-teams) if they are still required / if there is potential for synergies.
• Legal review of the implemented measures if they should be continued to be used (e.g. compliance with data protection laws; works council rules).
• Implementing future measures to be prepared for a potential second infection wave:
o Regulations on notification - access and monitoring systems.
o Technical solutions to deal with infected employees (e.g. ample system).
o Regulation on holiday for 2020 so that not all employees intend to take holiday when the economic situation improves.
o Health & Safety measures (particular measures for older employees such as home office or back office).
• Back-up plan for a second infection wave and a second lock-down in order to be prepared and able to act quicker.
• Restructuring and insolvency scenarios.