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Digitalisation in Employment Law: Bureaucracy Reduction Act IV on its way

02 July 2024

On June 19, 2024, the federal government passed a drafting aid to supplement the government's draft of the Bureaucracy Reduction Act IV ("BEG IV").

Background and Summary:

On 13 March 2024, the German government adopted the government draft for the BEG IV, which also includes amendments to the Evidence Act (NachwG). Originally, these amendments were only intended to enable the introduction of the qualified electronic form. However, these plans met with intense criticism, as they did not provide any reduction for the usual practice of recording essential working conditions in a separate document. In particular, it was criticised that the qualified electronic signature is hardly used in practice, which would make it more difficult to implement the new regulations.

In response to this criticism, the German government agreed on 21 March 2024 to amend the Evidence Act so that in future employment contracts can be concluded in text form in accordance with Section 126b German Civil Code (BGB) in addition to the traditional written form.

On 19 June 2024, the Federal Government adopted a drafting aid presented by Federal Minister Dr Marco Buschmann to supplement the government draft. According to the drafting aid, employers will in future also be able to provide information in text form, i.e. by email, about the key terms and conditions of their employment contracts and make age limit agreements. The changes adopted in the BEG IV include the following in the context of labour law:

1. Essential Contractual Conditions:

The amendment of the Evidence Act (NachwG) is one of the most important and most discussed changes. The Evidence Act, which was last amended in 2022, is to be amended again to reverse the stricter written form.

According to the BEG IV, Section 2 NachwG is to be modified to the effect that proof of the essential contractual conditions can be provided either by the employment contract itself or by a separate letter in text form in accordance with Section 126b BGB, provided that the document is accessible, storable and printable for the employee. The employer must further request a proof of receipt upon submission of the document to ensure receipt.

It will therefore be possible to fulfil the proof requirement by either sending a separate proof document signed in text form or by concluding an employment contract with a scanned signature on a PDF document or via DocuSign for example as well as by giving consent via e-mail.

If the employer sends the proof by e-mail and requests the employee to confirm receipt and the employee does not respond, it is advisable to provide the proof in written form, otherwise the employer would have to prove receipt of the e-mail.

Despite these changes, the employee retains the right to demand the essential contractual conditions in written form at any time.

However, the new regulation does not apply to employees in economic sectors pursuant to Section 2a (1) of the Act to Combat Clandestine Employment (e.g. construction, catering, freight forwarding).

2. Employee Leasing Law:

Currently, the temporary employee leasing contract between the lender and hirer requires the written form or at least a qualified electronic signature in accordance with Section 12 (1) sentence 1 Temporary Employment Act (AÜG).

In future, however, text form will be sufficient to conclude temporary employee leasing contracts, for example by email. This represents a considerable simplification in practice.

3. Reference Letters:

In view of the ongoing digitalisation of the application process, written reference letters are becoming increasingly outdated.

In future, the employer can also issue the reference letter in electronic form with the employee's consent in accordance with Section 630 sentence 3 BGB. It should be noted that this requires a qualified electronic signature in accordance with Section 126a BGB.

4. Working Hours Act:

The Working Hours Act (ArbZG) requires extensive notices to be displayed in the company, which must include a copy of the ArbZG, relevant legal ordinances and applicable collective agreements and works agreements (Section 16 ArbZG).

In future, this should also be possible electronically, for example by publishing on the intranet, provided that all employees have unrestricted access to this information.

5. Parental Leave and Part-Time Parental Leave:

In the Federal Parental Allowance and Parental Leave Act (BEEG), the previous written form requirement has been replaced by text form. This applies to applications for a reduction in working hours and their rejection as well as the assertion of parental leave entitlements. In future, employees will be able to assert their entitlement to parental leave (Section 16 Para. 1 Sentence 1 BEEG) and part-time work during parental leave (Section 15 Para. 7 BEEG) in text form vis-à-vis the employer. The employer can also reject the reduction in working hours during parental leave or their distribution in text form, whereby a justification is required (§ 15 Para. 7 S. 4 BEEG).

For employers who rely on email communication in these cases, it is crucial to prove receipt of the emails. If it is not possible to prove receipt of the email, the fiction of consent applies and the reduction in working hours is deemed to have been authorised (Section 15 (7) sentence 5 BEEG).

6. Age Limited Employment Agreement:

According to the new regulation, Section 14 of the Part-Time and Fixed-Term Employment Act (TzBfG) is supplemented by a new paragraph 2, which declares that the text form pursuant to Section 126b BGB is sufficient for fixed-term employment agreements that regulate the end of the employment relationship upon reaching the standard retirement age pursuant to Sections 35 sentence 2, 235 SGB VI. Age limited employment agreements are widespread and can be found in both individual employment agreements and collective bargaining agreements. The Federal Labour Court classifies these agreements as indefinite employment relationships with a time limitation upon reaching the usual pension age.

The previous formal requirement serves to provide security and avoid legal disputes. As employees are regularly covered by pension benefits when they reach the standard retirement age, the warning function becomes less important.

The new regulation on text form should not cause any additional compliance costs and, depending on how it is used, could provide relief for the contracting parties. It is very important to prove receipt of the email if the text form is used.

7. Aspects Unaffected by the BEG IV:

Despite digitalisation, the written form requirement continues to apply to fixed-term employment agreements (other than the ones mentioned in Sec. 6), notices of termination and termination agreements in accordance with Section 623 of the German Civil Code (BGB) and employment agreements that contain a post-contractual non-competition prohibition.

However, the prevailing opinion in the literature assumes that a qualified electronic signature is sufficient for fixed-term employment agreements. There are also initial court rulings that confirm this (Gera Labour Court of 7 March 2024 (2 Ca 936/239); Berlin- Brandenburg Federal Labour Court of 16 March 2022 (23 Sa 1133/21)).

Outlook for Employers:

The planned changes in the Bureaucracy Reduction Act IV mark a significant step towards digitalisation. In future, companies will be able to keep fully digital personnel files and will no longer be reliant on the traditional written form to fulfil the requirements of the Evidence Act. While the law is still in the legislative process and has to make its way through the Bundestag and Bundesrat, further adjustments are possible.

These measures are welcomed as a decisive step forward in reducing bureaucracy and have met with broad approval. The legislator expects the simplified formal requirements to provide considerable financial relief for the economy. We hope that the law will be passed soon so that companies can benefit from these modernisations as quickly as possible.

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For more information, please get in touch with Thorsten Kühnel and Nathalie Würth.

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