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Continuity and Clarifications - The employment agenda of the new German Government 2021 in a nutshell

08 December 2021

With the coalition agreement finally adopted on 07 December 2021, the Social Democrats Germany (SPD), the Green Party (Bündnis90/Die Grünen) and the Liberal Democrats Germany (FDP) have inter alia announced provisions on their agenda for employment and industrial relations. This Legal Update presents the new government's respective programme and evaluates the plans from the perspective of international employers. 

In brief: The Labour Ministry, which continues to be led by Labour Minister Heil, is committed to modernised continuity, with legal clarifications to be made in important areas. This is likely to have a relieving effect on most employers in Germany, as clear regulations reduce complexity and ultimately allow them to act with precision. On closer inspection, however, the linguistically emphasised statements on strengthening collective labour relations are limited to an attempt to secure the status quo. With the introduction of a minimum wage of €12 per hour, a central election promise of the SPD will be implemented as expected. Apart from that, there are a number of programmatic compromise formulas, the binding implementation of which in in legal statutes is already rather unlikely.

I. Employment law issues

  1. Statutes related to the employment relationship

There is little change in traditional labour contract law. There are plans in the area of working time, home office/workplace, fixed-term contracts and equal pay. Hardly anything new is created, but existing regulations are taken up again and clarified. Test runs for flexible working time shall be made possible in order to take into account the wishes of many employees and employers; this programme sentence is not linked to a concrete regulatory project.

Working time law: The eight-hour working day, which is the rule in the Working Time Act, shall continue to apply. Collective agreements are to allow for a more flexible organisation of working time, and agreements with a works council are to be permitted only on the basis of collective agreements. This means that the softening of the regular working time and the maximum daily working time (currently 10 hours) should only be available to employers who are bound by collective agreements. It is questionable whether company agreements of employers who are not bound by collective agreements will actually remain blocked. The entire project is to be implemented in the short term but is intended to be limited in time; it shall initially be applied in so-called experimental areas in order to test the new working time patterns. In view of the EU regulations on the recording of working time, the implementation of which is of much greater concern to practitioners, the proposed flexibility of regular and maximum daily working time is of little consequence.

The coalition agreement does not have an answer to the challenge of the required recording of working time, as it states: "Confidential working time is to be maintained". The concrete measures shall be examined together with the unions and employer associations. The new federal government has not succeeded in bringing together the opposites of "working time recording" on the one hand and "trust-based working time" on the other in a sensible regulatory approach. At present, this task subject to expanding case law, whereby trust-based working time is increasingly proving to be Janus-faced in cases of conflict under labour law.

Mobile working: The SPD-led Ministry of Labour and Social Affairs had already presented drafts to regulate mobile working in the previous legislative period. These plans, which were not adopted by the Grand Coalition, are now included in the "traffic light" coalition agreement. A Mobile Work Act is to introduce a right to discussion on mobile working. A clear distinction is made between home office and mobile working on the one hand and teleworking on the other. The employer can only object to the desire for mobile working (this includes the home office) if business concerns conflict with it. This objection threshold is accompanied by the explanation that the refusal must not be irrelevant or arbitrary. However, since the regulation deeply interferes with the organisational sovereignty of the employer, one can already expect that the legal basis and its application will have to be clarified in many different ways before the courts.

It is positive that the home office is excluded from the scope of application of the Workplace Regulation, even if regulations on the necessary design and equipment of the home office are announced. As far as "coworking spaces in the rural region" are postulated in the sense of a modern name-dropping, this is not underpinned by a concrete regulatory approach either.

The programme sentence: "Mobile working should be possible throughout Europe without any problems" is not really connected with any initiative to reduce existing obstacles to cross-border mobile working. From the point of view of legal advisors, the problems of social security and tax law, the national limits of health and safety laws and comparable public labour standards, and national collective labour law should be mentioned. None of these fields can be dealt with by Germany alone, so that tangible results can hardly be expected within the next four years.

Fixed-term contract law: Revolving fixed-term contracts, even if they are justified by a judicially reviewable objective reason as currently prescribed, are widely regarded as anti-social and, according to the new government's agreements, will be limited to a total duration of six years with the same employer. To implement this, it is expected that the German part time laws (TzBfG) will contain a concrete maximum limit. Exceptions are to be possible, but the scope of the public sector as a fixed-term employer, which has always been generous (and annoying for private sector employers for reasons of competition), is to be restricted by abolishing the budgetary fixed-term contract. As a declaration of intent, it was also stated that unlimited fixed-term contracts are to be reduced in employment relationships with the Federal Republic; apart from that, unlimited fixed-term contracts will not be touched either in the public administration of the German federal states or for the private sector.

Pay Transparency Act (Entgelttransparenzgesetz): The Pay Transparency Act (Entgelttransparenzgesetz), which was introduced to combat the gender pay gap, has so far not been able to achieve the hoped-for success due to its conception. However, the coalition partners could not agree on a fundamentally different approach. Therefore, the assertion of claims under the Act will be facilitated in future by the introduction of legal standing by associations, so that employees no longer have to bring them themselves.

Church labour law: The new government is to examine whether church labour law can be brought into line with state labour law. The churches are to be included in this process. Activities related to preaching are to remain exempt. It is to be expected that the path already marked out by the courts to exclude church regulations with an influence on the private lives of employees who are not in the public eye will continue.

  1. Works council and union laws

When it comes to works councils and trade unions, it is obvious that the future Federal Chancellor, as a former labour lawyer, wants to set a focus together with Minister Hubertus Heil, who has been associated with him with trust for many years. However, it is not so much a question of extending legal power as of protecting the status quo and providing incentives for employers to use the leeway available only to the collective bargaining partners by retaining or even returning to collective bargaining. For example, public contracts should only be awarded under the conditions of a collective agreement that is customary in the sector, in order to prevent competitive advantages for companies that are not bound by collective agreements. However, a restriction to companies bound by collective agreements could not be enforced.

The attempt to make it unattractive to spin off a business just for the sake of avoiding collective bargaining by stipulating that the previously applicable collective agreement continues to apply if the previous owner remains the same, will hardly be implemented. The complexity of the interplay between the constitutionally guaranteed freedom of association, the judicial dogma on the TUPE-rules (as prescribed by EU law) and the individual rights of the employees does make statutory intervention unlikely, even if agreed in this Coalition Agreement.

Works constitution law: Within the framework of a further development of the Works Constitution Act (BetrVG), the digital cooperation of works council members is to be an option with equal rights, i.e. this amounts to the continuation of section 129 of the Works Constitution Act (BetrVG). The committees may decide for themselves whether they want to work together digitally; the restrictions on digital cooperation in the works council, which currently still exist and are rather unclear in their effects (such as the priority of presence), are to be dropped. The election to the works council should also be made possible digitally, although this should initially be tested in a pilot project, and of course, the constitutional principles of a democratic election should be respected. Technical solutions for this have existed for a long time, but the implementation of the pilot project for the works council elections in spring 2022, which have already started in many places, will probably not be completed in time.

Whereas up to now obstructing or disrupting the activities of the works council was only punishable on application, it is now to be made an official offence, which means that the public prosecutor's office must start investigations ex officio if it becomes aware of such incidents. As far as is known, however, the provision itself is not to be made more stringent, neither in the elements of the offence nor in the threats of sanctions.

The coalition agreement provides for the introduction of a contemporary right for trade unions to digital access to workplaces. Currently, the unions' purely personal right of access is regulated in particular in sec. 2 of the Works Constitution Act (BetrVG), so this provision will be supplemented by digital rights.

One-Third Participation Act and Co-Determination Act (DrittelBG): The German right of co-determination in the staffing of corporate bodies is a German peculiarity that is to be preserved and protected according to the coalition's plans. The announcements are very concrete and suggest that they will be implemented soon, especially as they can be interpreted more as a correction of existing legislative omissions:

In the One-Third Participation Act, which regulates co-determination in companies with between 500 - 2000 employees, the employees of a subsidiary only counted for the purposes of co-determination if an express domination agreement was concluded. However, such a control agreement is hardly ever needed for business purposes, as the de facto voting rights are enforced even without a control agreement, and the management contract required for tax purposes does not alone trigger the attribution of employees. The situation is different under the Co-determination Act (MitbestG), which regulates participation in the supervisory board of companies with more than 2,000 employees - here the employees of the dependent companies are added if there is genuine de facto control of the parent company and can thus reach the quorum for the establishment of co-determination. The intended alignment of the provisions in the DrittelBG with the attribution provisions in the MitbestG would ensure synchronisation.

Another model of limiting the provisions of corporate co-determination is to be prevented by changing the constitution of SE companies under Community law. Up to now, it has been the case that a German corporation retains its co-determination constitution when it is converted into an SE, even if it later employs further employees or such employees are attributed to it, so that the thresholds of 500 or 2000 employees would be exceeded, the so-called freezing effect. An amendment to this regulation to the effect that the future development of the number of employees should also trigger the regulation of company co-determination has also been discussed in the past, but has so far not been able to find a majority. The amendment would currently affect about 620 SE companies, although difficult questions of trust protection and at least applicable transitional periods would follow.

  1. Platform work and forms of occupation

The coalition agreement makes a positive assessment of the employment of employees and self-employed persons by means of so-called digital platforms, on which, depending on the design, orders or work offers are made available on demand, and recognises them as an enrichment for the world of work. It does not see a concrete need for regulation, but instead calls for the application of the general provisions of labour law if the conditions are met in order to guarantee good and fair working conditions.

First of all, the data basis for a better understanding of the processes on the platforms should be created in dialogue with platform providers. The EU Commission's initiative to improve working conditions on platforms should be constructively supported.

  1. Rise in statutory minimum pay: 12 Euro/hour

A central election promise of significant parts of the new government was to raise the statutory minimum wage from the current €9.60 per hour (January 2022: €9.82) to €12 per hour. A one-time legal regulation is planned, after which the minimum wage commission will be responsible for further increases.

The coalition agreement does not specify when the new minimum wage will come into effect, but it was politically announced that the upcoming Chancellor Scholz would raise the minimum wage when he took over the reins of government. The increased hourly wage can therefore certainly be expected in the short term.

  1. Mini-Job Scheme adjustments

The existence of mini-jobs or marginal employment was not discussed in the coalition negotiations, but the future wage limits were. In future, the limit for a mini-job will be based on the minimum wage for a weekly working time of 10 hours; the rounded-up amount is therefore to be fixed at 520 €. If the employee earns more than the minimum wage, either the number of hours per week will be lower or the job will slip into the so-called transitional zone (formerly known as the sliding zone).

The new government also intends to remind employers of mini-jobs that they are essentially full employment relationships, so that in particular there is an entitlement to leave, continued payment of wages in case of illness and protection against dismissal, which shall be more strictly controlled in the future.

The threshold for the transitional allowance is to be increased from currently 1,300 € to 1,600 €. This means a reduced social security contribution for the employee. For employers, practically nothing will change, but many part-time workers will notice the advantage in an immediate net wage increase. As with any reduction, the question of the incentive effect arises with the transition from the reduced contribution zone to the fully contributory remuneration to the same extent as before with the limit of 1,300 €.

II. Agenda issues related to employment law

  1. EU-Whistleblower Directive

The EU Whistleblower Directive has not yet been implemented by Germany. The deadline for implementation is 17 December 2021, and it is foreseeable that no regulation will come into being in the remaining time. As a result, individual aspects of the Directive could become directly relevant in Germany: the central provision is that whistleblowers in companies should be protected if they either disclose breaches of EU law or report significant breaches of German regulations or other significant misconduct, the disclosure of which is in the particular public interest. In the absence of a legal implementation, whistleblowers who suffer damage from the lack of implementation could turn to the German state with claims for compensation.

The new government therefore plans an essentially quick and directive implementation of the regulations. It will fall back on drafts of the previous government, whose so-called Whistleblower Protection Act could no longer be discussed at the end of the legislative period. Surprises are not to be expected in this respect.

  1. Worker secondments and the EU Posting Directive

The issue of the legal organisation of cross-border services and contracts for work and services with the help of own workers is addressed by the parties to the coalition agreement with regard to posted workers as well as with regard to European cooperation. For workers posted to Germany, social protection is to be improved in a way that is not explained in detail, and for seasonal workers (who, strictly speaking, are not posted), the local (German) health insurance protection is to apply from the first day of work. The coalition agreement speaks of better information about the different labour and social systems, better enforcement and control and at the same time a low-bureaucracy implementation of the German law implementing the Posting of Workers Directive. The coalition also wants to ensure the implementation of the Posting of Workers Directive in other EU countries, beyond its existing competences.

  1. Labour leasing agencies and contracting work?

Labour leasing Act (AÜG): The coalition agreement explicitly states that hiring out workers and contracts for work and services are necessary instruments, but in the following sentence promises effective legal enforcement in the event of violations of labour law and occupational health and safety. This aptly reflects the coalition's range of attitudes towards labour leasing in particular. There are no concrete announcements about future arrangements; in this respect, it should be remembered that the last but one government had already enacted a new regulation of the Temporary Employment Act in 2017, which bore the signature of the SPD government partner and in this respect is still sufficient today.

The authors of the coalition agreement correctly point out that the European Court of Justice is expected to issue further requirements for the existing German AÜG. It therefore makes sense to plan any plans for the further development of temporary employment and also contracts for work only in the knowledge of the forthcoming decisions.

  1. Old age pension and occupational pension issues

In the area of social security systems, old-age provision in Germany is basically structured as a system with the three pillars of statutory pension insurance, occupational pension provision and private pension provision. The new government plans to introduce regulations in all three pillars in order to enable an income in old age that is considered sufficient.

In the statutory pension system, a minimum pension level of 48 per cent is promised on a permanent basis, and the pension contribution rate is not to rise above 20 per cent during the legislative period until 2025. Pension cuts and an increase in the statutory retirement age are ruled out. The planned partial capitalisation of the statutory pension insurance is to be professionally managed as a permanent fund by an independent body under public law and to be invested globally; it is to be provided with start-up financing of €10 billion. Since the SPD and the Greens consider a public-law administration of the fund necessary, but the FDP attaches importance to the independence of the administrative body, another formulaic compromise in the form of addition can be seen here. This does not yet allow any conclusions to be drawn about the future structure and regulatory authority of the administrative body. It is known that the parties' ideas are far apart here.

In the area of occupational pensions, on the other hand, the coalition agreement builds on the work of the previous government. The Occupational Pensions Act (BetrAVG) was last supplemented very extensively in 2017 by the Occupational Pensions Strengthening Act (Betriebsrentenstärkungs-Gesetz). Among other things, the social partner model introduced the pure defined contribution model, which is largely free of guarantees. However, the social partners have not yet been able to achieve a breakthrough in the agreement of such models, and employers who are not bound by collective agreements do not have the option of setting up a social partner model for the agreement of pure defined contribution schemes. Without deviating from the social partner model, the permission of investment options with higher returns should also be introduced in other implementation channels. Details are not presented.

In the case of private old-age provision, which has so far been characterised by free choice (opt-in) and private savings decisions, the entire system is to be fundamentally reformed and a publicly accountable fund with an effective and low-cost offer with the option of opting out is to be examined. Details of the future design are still largely unclear. The unpopular Riester contracts that have been in force for many years will be protected. The lump sum for savers is to be increased to 1,000 euros.

Self-employed persons who are not subject to a compulsory old-age provision system (such as a professional pension scheme) will be obliged to build up an old-age provision with freedom of choice. This is done by compulsorily insuring the self-employed in the statutory pension insurance, unless a private pension product is chosen within the framework of a simple and unbureaucratic opt-out, which meets certain criteria: in particular, it should be insolvency and seizure-proof and lead to a level of protection above the basic security level. For founders of companies, a waiting period of two years applies in each case.

  1. Occupational learning and professional qualification

The new coalition sees one focus of its programme in enabling individual life plans and also promoting later professional developments through education and further training. To this end, a so-called "Lebenschancen-BAföG" (allowance for industrial training at any time of a professional live) is to be introduced, whereby those entitled can save up an educational credit in a "Freiraumkonto" (free space account) in order to use it for self-determined further education. The entitlement to part-time education is intended to make it possible to catch up on a vocational qualification or otherwise further qualify oneself professionally. This part-time education is to be largely structured by contract between employer and employee. Such model is already in force in Austria and shall be developed accordingly in Germany.

With an additional qualification allowance based on the short-time allowance, the Federal Employment Agency should also enable employers in structural change to keep their employees in the company through qualification and to secure skilled workers. Prerequisite for this are company agreements. In line with efforts to strengthen trade union influence, incentives are to be created for transformation collective agreements, which can then also be used to access the qualification allowance from the Federal Agency.

In view of the imminent upheavals in many sectors, it is also to be welcomed that the instrument of transfer companies is to be further developed and the entitlement to transfer short-time working allowance extended.

  1. Health and safety at the workplace

Occupational health and safety has received increased attention in the past two years of the pandemic. At present, much is unclear and further developments, especially with regard to the discussion of compulsory vaccination for certain institutions or entire sectors, are determined by the politics of the day.

Programmatically, the new government has decided to stick to the proven standards, which are to be adapted to the changing world of work and the new challenges. Increased attention is being paid to mental health, and in particular a report on mobbing is to be compiled. Small and medium-sized enterprises in particular are to be given special support in the prevention and implementation of occupational health and safety. Workplace integration management (BEM) is to be strengthened, but the coalition agreement does not provide details on this and what significance this should have with regard to possible developments in the current employment relationship.

We hope to give you a good overview of the current developments with these explanations. If you have any questions on the above-mentioned topic and on concrete effects and questions of organisation, please do not hesitate to contact our colleagues in our offices in Berlin, Düsseldorf, Munich and Cologne by telephone or e-mail.

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