Act on the implementation of the directive on transparent and predictable working conditions in the EU - what should employers do now?

On 23 June 2022, the German Bundestag debated the draft of the act on the implementation of the directive on transparent and predictable working conditions in the EU (EU Directive 2019/1152), which entered into force on 31 July 2019, and approved it as slightly amended by the Committee on Employment and Social Affairs (Bundestag printed papers 20/1636, 20/2392). The act is planned to enter into force in time for the implementation deadline on 1 August 2022.

The directive aims to improve working conditions by supporting transparent and more predictable employment. It is implemented in particular by extending the employer's information obligations already regulated in the German Act on the Proof of Substantial Conditions Applicable to the Employment Relationship (Nachweisgesetz - NachwG).

In detail, this means:

I. Amendments in the NachwG

Under current law, employers are already obliged to record the essential terms of the employment contract in writing, to sign them and to hand them over to the employee. These obligations to provide information are now being significantly extended. In addition, differently than before, an incorrect or incomplete information of the employee will constitute an administrative offence, which can be punished with fines of up to EUR 2,000.00. 

The legislative draft essentially provides for the following amendments to the NachwG:

1. Extension of the scope of application

The personal scope of the NachwG will be extended in accordance with European requirements. Accordingly, the NachwG will apply to all employees. The previous exception for temporary staff employed for a maximum of one month will be deleted - in accordance with the directive. 

2. Written form when recording the essential terms of the employment relationship

The employer must continue to record the essential contractual terms of the employment relationship in writing, sign the record and hand it over to the employee. Thus, there is still a strict written form requirement (paper form with original signature) for the record of the essential contractual conditions. Electronic form is explicitly excluded, although the directive on transparent and predictable working conditions in the EU expressly permits electronic form.

This means that employment contracts could still be concluded in electronic form (e.g. via DocuSign) (with the exception of fixed-term contracts). However, the employer would then have to record the essential contractual conditions in writing, i.e. in paper form and with original signature, and hand them over to the employee in addition. This would result in a considerable additional effort for employers and would nullify the advantage of signing an employment contract electronically. However, employers could also comply with the obligation to inform by handing over to the employee an employment contract signed in original and containing all the information that is subject to record. An original signature of the employee is not required.

3. Deadlines for the written record of the essential contractual terms of the employment relationship

The deadline within which the essential contractual terms of the employment relationship must be record and handed over to the employee depends on the individual subjects of information. In order to minimize the workload for employers in connection with the information obligations, it is generally advisable to use the shortest deadlines in each case as a guide. These are as follows:

• Conclusion of new employment contracts as of 1 August 2022
  
  For employment contracts concluded on or after 1 August 2022, employees must be provided with the record no later than on the first day of work. As described above (I. 2.), this can also be done by concluding a written employment contract.
   
• Employment contracts already concluded
  
  In this case, the employer is only obliged to provide the record of the essential contractual conditions in accordance with the new NachwG, if the employee requests. In this case, the employer must provide the record no later than on the seventh day after the employee's request. Due to the fact that 99 % of the employment contracts already concluded will not contain all of the information required to be recorded in accordance with the new NachwG, this may result in a considerable amount of processing work that must be done quickly. In this respect, it is to be hoped that employees who are already employed will refrain from requesting the record.
   
• Amendment of essential terms of contract
  
  The employer must inform the employee no later than the day on which the amendment take effect. This is only unnecessary if the amendment is based on a amendment in statutory provisions, collective agreements, works or service agreements or church labour law regulations.

4. Extension of the catalogue of contractual conditions to be verified

The catalogue of the contractual conditions to be recorded, which was previously provided for in the NachwG, has been extended. An overview of the amendments is provided in the synopsis attached as appendix.

The amendments in detail:

a) Information in the case of fixed-term contracts

In the case of fixed-term employment contracts, the end date or the foreseeable duration of the employment contract must be stated. This can be done in the form of a specific period of time or a specific end date or - if the employment contract is for a specific purpose - by stating the purpose.

b) Information on the place of work in the case of mobile work

If mobile working has been agreed, the record or the employment contract must contain a reference to the fact that the employee is free to choose his place of work.

In this context, it will be necessary to clarify under which conditions employees - for example in the case of a lockdown - can be permitted to work in the so-called home office or whether this results in an obligation to provide a record within the meaning of the NachwG.

c) Components of remuneration

The remuneration must be stated separately according to components - such as basic remuneration, remuneration for overtime, bonuses, premiums and special payments - with the due date and way of payment. 

In this context, it will be necessary to clarify in particular what´s considered remuneration within the meaning of the NachwG. In particular, it is unclear to what extent it will be possible, for example, to regulate bonus payments in a separate bonus plan and to what extent benefits under company pension schemes are to be considered.

d) Breaks, shift systems and overtime

In future, information must be provided not only on the agreed working time but also on breaks and daily and weekly rest periods and, in the case of agreed shift work, also on the shift system (e.g. three-shift system), the shift rhythm (e.g. weekly rotation of early, late and night shifts) and, if applicable, the conditions for shift changes. If the shift system is regulated in a works agreement, reference can be made to the works agreement. It is unclear whether the company working time system must be stated or the regulations of the Working Time Act (Arbeitszeitgesetz – ArbZG) must be repeated and specifically explained.

Furthermore, the possibility of ordering overtime and its conditions must be included in the record or the employment contract.

e) Extension of the information in the case of on-call work (Arbeit auf Abruf)

Even under the current law, the weekly and daily working time must be stated in the employment contract in the case of on-call work - otherwise a working time of 20 hours per week is deemed to have been agreed. 

In the future, the employer must state a time frame - determined by reference days and reference hours - beyond which the employer may not call for work as well as the minimum announcement period. This means that it has to be specified on which days and at which times the work can be called off by the employer.

However, it remains unclear how extensive the frame of reference may be. In this respect, it will depend on the circumstances of the individual case. However, it will probably not be possible to define a particularly extensive frame of reference.

The employer must also provide record on the minimum number of hours to be remunerated.

f) Advanced training provided by the employer

In the future, employees must be informed of any entitlements to advanced training provided by the employer, if such entitlements exist. Entitlements may arise from individual or collective agreements or from law.

g) Company pension scheme

If the employer grants the employee a company pension via an external pension provider, the employer must inform the employee on the name and address of the external provider. This obligation to provide information will be particularly relevant in the case of a company pension scheme via provident funds (Unterstützungskassen). This is because there is no obligation to provide information if the pension provider itself is obliged to provide this information. Under the German Insurance Supervision Act (Versicherungsaufsichtsgesetz - VAG) in connection with the VAG Information Obligations Ordinance (VAG-Informationspflichtenverordnung – VAG-InfoV), pensions funds (Pensionsfonds and Pensionskassen) and life insurance companies (Lebensversicherungsunternehmen) must, among other things, also provide the members with the name and address of the pension institution at the beginning of the pension scheme. 

h) Procedure in the event of termination

In the past, employees only had to be informed about the notice periods. In future, the employer must inform "about the procedure to be followed by the employer and the employee when terminating the employment relationship, but at least about the requirement that the termination of the employment relationship must be in writing, as well as the period for bringing an action for protection against unfair dismissal" in accordance with section 4 of the German Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz - KSchG).

It is unclear what is meant by the "procedure to be followed". These can be consultation and assent procedures under collective law, special regulations under special dismissal protection law (for example, in the case of severely disabled persons, the hearing of the representative of severely disabled persons and the consent requirement of the Integration Office), but also the protection against mass dismissals. Or, in the case of dismissal for conduct-related reasons, the prior warning letter of the employee or, in the case of dismissal on suspicion, the prior hearing of the employee. The potential procedures to be complied with are so numerous that a sufficiently concrete "reference" to this in the employment contract appear to be practically unmanageable. Therefore, it is advisable to limit the information to the statutory minimum, i.e. the reference to the notice period and the period for bringing an action for protection against unfair dismissal.

If the statutory period of notice is applicable, reference can be made to this. However, if a notice period that is different from the statutory regulation is to be agreed and the statutory notice period, which is graded according to length of service, only applies later, information on the specific calculation terms must be provided.

The legislative draft expressly clarifies that the three-week period of Section 7 KSchG also applies if the record was not properly provided. This means that a termination is deemed legally effective even if the action for protection against unfair dismissal is not brought within three weeks after receipt of the termination, although the information has not been provided.

i) Information on employment abroad and posting

If the employee has to work outside the Federal Republic of Germany for more than four consecutive weeks, the employer must provide information not only on the duration, currency, any additional remuneration benefits and return conditions, but also on the country of deployment.

If there is a posting within the meaning of the Posting of Workers Directive Entsenderichtlinie), the employer must also provide information on the remuneration to which the worker is entitled in the country of posting and the link to the official national website operated by the Member State.

II. Legal Sanctions: Missing or incorrect information may result in a fine

In the future, a violation of the obligation to provide information can be punished as an administrative offence with a fine of up to EUR 2,000.00. 

Employers commit an administrative offence if the record of the essential terms of the contract is (i) not provided, (ii) not provided correctly, (iii) not provided in full, (iv) not provided in the prescribed manner or (v) not provided on time. The factual and local jurisdiction for the prosecution of administrative offences results from Sections 36, 37 of the German Act on Regulatory Offences (Gesetz über Ordnungswidrigkeiten - OWiG) and is a matter for the federal states. The highest regional authority with subject-matter jurisdiction is responsible; there is also the possibility of transfer to another authority or agency (section 36 (1) no. 2 letter a, (2) OWiG). 

In addition, the burden of proof that has been assumed in case law will continue to apply in the absence of information.

III. Further legislative amendments

In addition to the amendment of the NachwG, the act on the implementation of the directive on transparent and predictable working conditions in the EU contains further provisions on the terms and conditions of employment. However, these are not subject to fines. The main amendments are as follows:

1. Amendment to the Part-Time Work and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz – TzBfG)

a) Duration of the probationary period in the case of fixed-term employment contracts

The duration of the probationary period must be in relation to the duration of the employment contract and the type of activity (Section 15 (3) TzBfG, new version). For fixed-term employment contracts, the legislative draft therefore provides for an examination of the appropriateness of the probationary period, whereby the directive focusing in particular fixed-term employment contracts of less than 12 months duration. What this actually means for fixed-term employment contracts, however, remains unclear and will probably have to be clarified by the courts.

If the duration of the probationary period is disproportionate, it is invalid with the consequence that the shortened notice period of at least two weeks does not apply. It is currently still open, whether the statutory minimum notice period of four weeks to the 15th or to the end of a month applies instead or whether a period contractually agreed for the time after the probationary period comes into force immediately.

However, the legislative draft does not affect the six-month waiting period pursuant to Section 1 (1) KSchG. Whether this be valid under European law remains to be seen.

b) Employer's information obligations in the case of (fixed-term) employment contracts

Employees whose employment contract has lasted longer than six months and who notify their employer in text form of their wish to change the duration and condition of their contractually working time are entitled to a reasoned response within one month of receipt of the notification (Section 7 (3) TzBfG, new version). The answer can be sent in text form (e.g. by e-mail). What exactly the employer has to answer, is not regulated. It seems to be adequate either agree to a change in the duration and/or conditions of the working hours or to state the reasons why such a change is not possible. The same entitlement is granted to fixed-term employees who have been employed for longer than six months and who have indicated their wish for an unlimited employment contract (Section 18 (2) TzBfG, new version).

In addition, the employer must inform (fixed-term) employees about jobs to be filled in the company when discussing a change in the duration or conditions of working hours.

2. Amendment to the Act on Temporary Agency Act (Arbeitnehmerüberlassungsgesetz –AÜG) - employer's information obligation in the event of temporary agency work

The temporary work agency must inform the temporary agency worker of the name and address of the user undertaking in text form (e.g. by e-mail) before each assignment. In practice, this should already be done anyway by corresponding assignment notices. In this context, the planned amendment of the act is likely to bring only marginal changes.

The new information obligations of the user undertaking, which are intended to facilitate the transfer of temporary workers to the permanent workforce, are of greater importance. These largely correspond to the employer's information obligations already described above (III. 2.) in the event of a notified change in the duration or conditions of working hours. Thus, if a temporary worker indicates to the user undertaking that he wishes to conclude an employment contract, the user undertaking must give him a reasoned reply in text form within one month. 

IV. What should employers do now?

The task now is to be prepared in the best possible way when the Act is expected to come into force on 1 August 2022:

• Employment contract templates should be checked for the mandatory information required under the NachwG and adapted accordingly. As of the new NachwG coming into force, only employment contract templates that have been adapted accordingly should be used.
• If employers do not wish to provide all the information required by the NachwG in the employment contract or do not wish to conclude the employment contract in writing, the employee must be provided with a separate original signed record of these contractual terms.
• The employer must keep at least one (electronic) copy of the original signed employment contract or record handed over to the employee for evidence purposes. If possible, the copy should contain an confirmation of receipt by the employee, according to which the employee confirms having received the original document.

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