2015 The German Minimum Wage Act "Mindestlohngesetz – MiLoG"
Aansprakelijkheid voor niet toepassen minimum loon in Duitsland
De introductie en de definitie van het wettelijk minimumloon heeft in Duitsland tot zeer veel discussie geleid. Op 1 januari 2015 is de Duitse Wet Minimumloon ("Mindestlohngesetz – MiLoG") eindelijk in werking getreden. Alle werknemers in Duitsland hebben nu recht op een minimumloon van €8,50 bruto per uur.
De wet bevat boetes in geval werkgevers hun eigen werknemers minder loon toekennen dan het wettelijk minimumloon, maar ondernemingen kunnen ook aansprakelijk zijn wanneer zij gebruik maken van onderaannemers, die hun personeel minder dan het minimumloon betalen.
Hogan Lovells heeft een brochure over deze nieuwe wetgeving (in het Engels) voor u beschikbaar.
The German Minimum Wage Act 1 Few topics in German employment law have been as contentious as the introduction and scope of a statutory minimum wage. On 1st January 2015 the German Mini-mum Wage Act ("Mindestlohngesetz – MiLoG") finally came into effect. This law creates penalties not only for employers who compensate their own direct employees less than the statutory minimum wage. A liability exists too where subcontractors are used and the latter fail to pay their staff the statutory minimum wage. 1 Legal status quo prior to the new law Before 1st January 2015 German employment law had not acknowledged a statutory minimum wage that cov-ered all branches of German industry and commerce. In principle it remained (and will remain) a matter for the parties to collective bargaining agreements to agree the minimum remuneration for employees in that particular branch of industry. Under certain conditions such a col-lective bargaining agreement can be made binding all across the relevant branch of industry by the German Federal Ministry for Employment and Social Matters. In fact the 1952 German Basic Working Conditions Law (Mindestarbeitsbedingungengesetz) had already pro-vided a statutory basis for the establishment of mini-mum levels of remuneration alt-hough it had never been made use of in this way. Finally, the German Law on the Posting of Workers (Arbeitnehmerentsendegesetz) – itself designed to regulate the setting up and imple-mentation of specific basic working conditions – had always provided for the setting of minimum wage tariffs. The applicability of this law had however always been restricted to certain branches of industry, for example the construction industry. 2 Summary of the German Minimum Wage Act As of 1st January 2015 all employees in Germany are entitled as a minimum remuneration in return for their labour to the statutory minimum amount of € 8.50 per hour. With effect from 1st January 2017 and thereafter every two years a Minimum Wage Commission, itself established under the new Minimum Wage Act, will de-cide on the level of the minimum wage. German customs authorities will monitor compliance. 2.1 The current statutory minimum wage The current statutory minimum wage set by the new law as of 1st January 2015 amounts to “€ 8.50 per hour“. Nevertheless, contractual agreements providing for monthly remuneration continue to be allowed under the new law. As long as the monthly gross remuneration comes to the equivalent of € 8.50 an hour or more such that the statutory minimum wage is being applied, it is irrelevant that the hourly wage varies from calendar month to calendar month (given the difference in monthly days) on the basis of work performed. In the low wage economy however coming to an agreement on gross monthly wages is fraught with dan-ger. For example, in a five day week with an average work day of eight hours a gross monthly remuneration of € 1,360 in February 2015 (with 20 working days) just manages to com-ply with the statutory minimum wage requirement. But the same gross monthly wage paid under the same conditions (five day week; eight hour The German Minimum Wage Act 2 The German Minimum Wage Act working day) in March 2015 (with 22 working days) will fall below the statutory minimum. The new law continues to allow for piece work as well. But here too it must be guaranteed that the minimum wage has been awarded for the hours worked. The end result must be that gross remuneration per calendar month is no less than the number of hours worked mul-tiplied by the statutory minimum rate of € 8.50. 2.2 Which benefits may the employer include as part of the statutory minimum wage? Alongside the fixed salary there are many benefits of-fered by an employer that can form part of the remu-neration package. Going forward it may be asked if the-se benefits may legitimately count when calculating the statutory minimum wage. In principle only those benefits paid by the employer for the employee's “standard performance” may be includ-ed in the calculation. In addition, such benefits must be provided irrevocably and continuously during the entire period of the employment relationship. Whether this is indeed the case must be verified on a case by case basis. Such additional payments that may not be included in any calculation of the statutory minimum wage include those for working out of hours (Sundays, public holi-days), for night and shift work, for hazardous or espe-cially dirty work, piece work or quality bonus payments. Equally unallowable for such a calculation are so-called "capital-forming payments" (vermögenswirksame Leis-tungen) as their purpose is one of formation of wealth rather than remuneration for the employee's perfor-mance. Example: An employee whose hourly wage is € 8.00 with an addition to the hourly rate of 25% for working the night shift works 160 hours in a month of which 80 hours qualify for the night shift bonus. The employee therefore receives € 1,440.00 gross as his remunera-tion for this month’s work. Were the night shift pay-ments included in the calculation then the hourly rate for the month in question would average out at € 9.00, ostensibly satisfying the minimum wage requirement. Given that the night shift premium is compensation for work provided by the employee under non-standard circumstances it cannot however be included in the minimum wage calculation. In this example therefore the statutory minimum wage has not been paid. 2.3 Who is entitled to the statutory minimum wage? In principle every employee working in Germany is enti-tled to the statutory minimum wage. It is still unclear whether any time limits will apply or whether even em-ployees passing through Germany, e.g. on a business trip for a few hours or days, will be entitled to the mini-mum wage. The Minimum Wage Act also applies to trainees (Prak-tikanten), i.e. to persons who – independently of their actual legal relationship – in line with the actual scope and practice of their contractual relationship undertake a particular operational role for a limited period of time as a preparation for a professional activity, without such a role forming part of any apprenticeship or vocational training as understood by statute. At the same time the law itself excludes an entire range of trainees, namely those completing „internships for orientation purposes“ of up to three months for a voca-tional training or commencement of studies; trainees undertaking a mandatory internship which is due to school, vocational training or university regulations; The German Minimum Wage Act 3 trainees completing internships of up to three months accompanying a vocational or uni-versity education, insofar as there has not been an existing trainee relationship with the same trainee before; trainees participating in an entry-level vocation-al qualification (Einstiegsqualifizierung) pursu-ant to the German Social Security Code III (Sozialgesetzbuch III) or a vocational training preparation (Berufsausbildungsvorbereitung) pursuant to the German Vocational Training Act (Berufsbildungsgesetz). These trainees are not entitled to the statutory minimum wage. Furthermore the Minimum Wage Act does not cover apprendices (Auszubildende), volunteer workers, chil-dren and juveniles under the age of eighteen without a professional qualification nor does it cover previously long-term unemployed workers in the first six months of their new job. However it is worth noting that opinions differ regarding the special treatment of children and juveniles on the basis of potential age discrimination. There is a special ruling for newspaper delivery staff by way of a transitional arrangement. Their entitlement to the statutory minimum wage is set from 1st January 2015 initially at € 6.38 (gross) an hour, from 1st January 2016 at € 7.23 (gross) an hour and only from 1st Janu-ary 2017 at € 8.50 (gross) an hour. 2.4 When is it mandatory to pay the statutory minimum wage? Employers and employees may as a matter of principle come to an agreement as to when the statutory mini-mum wage is to be paid. Where there is no agreement it remains the case that the remuneration must be paid upon provision of the work in question and after the rel-evant time interval where the remuneration is measured by such intervals. For example if a wage agreed is a monthly one then it must be paid upon completion of the relevant month. The statutory minimum wage must however be paid no later than the last bank working day (Frankfurt am Main) of the month immediately after that in which the work has been provided. An exception is permitted only where the parties agree in writing to the opening of a working time account where hours worked over and above the contractually agreed amount will be recorded and made up in the form of either paid leave or the minimum wage no later than twelve calendar months after being logged. Month-ly hours worked and recorded in the working time ac-count may not however exceed fifty per cent of the con-tractually agreed monthly working time. Example: An employee working 80 hours a month to earn a monthly gross income of € 680.00 receives precisely the statutory minimum wage of € 8.50 (gross) an hour. Should the employee work 100 hours in one month he would be entitled to a gross income of € 850.00. Alternatively the twenty additional hours worked may be entered in his working time account subject to this having been agreed by all parties beforehand. A maximum of forty hours a month may be credited to a working time account. 2.5 What may still be agreed upon in an employ-ment contract? Any additional agreement that seeks to reduce the enti-tlement to the statutory minimum wage or restrict or exclude the payment thereof is as such unenforceable. This means for example that a clause stipulating com-pensation of € 7.50 (gross) an hour is just as unen-forceable as a clause stipulating a monthly gross salary of € 1,500.00 for 180 hours worked. The rest of the em-ployment contract however remains unaffected. Up until 31st December 2017 collective bargaining agreements are permitted under certain circumstances 4 The German Minimum Wage Act to provide for remuneration lower than the minimum wage tariff. Furthermore there is the question as to whether any employer who has until now paid his employees less than the € 8.50 an hour gross statutory minimum may in future use this to hold down wage costs by adjusting the “monthly hours worked” metric rather than matching the statutory gross minimum level of € 8.50. For example employers could get the idea of unilaterally influencing the number of hours to be paid, whether it be by not recognizing time needed by the employee both before and after actual work begins (changing clothes, time taken to move around the workplace, the switching on and off of computers, etc.) as official hours worked or else to instigate breaks in the official work schedule at short notice when there happens to be less work to do. Case law as determined by the German labour courts up until now suggests that specific pre- and post-work activities need not under certain circumstances be compensated. In such cases there would therefore be no entitlement to the statutory minimum wage for the time so spent. It becomes problematic, however, when employees are put on unpaid leave for reasons of ca-pacity utilization. The employer then runs the risk of being in default of acceptance and thus being obliged at a later date to compensate employees for these inter-ruptions in the work schedule. 2.6 A risk of liability – not only for one’s own em-ployees! Employers that already pay their employees a minimum of € 8.50 (gross) per hour should not assume that they will be unaffected by the new legislation. This is be-cause the German Minimum Wage Act renders a prin-cipal liable where an order for work or services has been placed with a subcontractor and where the sub-contractor fails to pay his staff the statutory minimum wage. In other words where a sub-contractor fails to pay his employees the statutory minimum wage the German Minimum Wage Act entitles them to make a claim against the principal for payment of the statutory mini-mum. Most importantly, the principal cannot object that these employees should first direct their remuneration claim against their own employer and immediate con-tractual partner and redress through the labour court. Example: Company „R“, a business in the industrial cleaning sector, is given the job by a property company “I“ of cleaning premises that company “I” lets commercial-ly and for whose cleaning company “I” is liable under the terms of the rental agreement. Company „R“ then con-tracts company „F“ as a sub-contractor for the window cleaning. Should company „F“ become insolvent and end up owing its window cleaners the statutory minimum wage for the work performed then the window cleaners would be within their rights to turn to either company „R“ or company „I“. Furthermore the principal cannot offer as a defence the argument that he knew nothing of the sub-contractor’s failure to comply with the minimum wage legislation. Any business giving out contracts therefore has a clear self-interest in ensuring that its sub-contractors are in full compliance with the German Minimum Wage Act. It is therefore to be recommended that a company plac-ing an order for work or services requires all potential sub-contractors to provide full details of their remuneration policies; requires the sub-contractor to pay his staff the statutory minimum wage; demands contractual guarantees (such as bank guarantees, securities, indemnification clauses) from the sub-contractor; demands to be provided with documentary evi-dence showing that all entitlements to the statu-tory minimum wage have been satisfied; The German Minimum Wage Act 5 requires the sub-contractor always to inform and where necessary gain the approval of the principal in advance of any use by the sub-contractor of further sub-contractors or agency workers, submitting the framework for all wage calculations in each case; insists that a right of termination for good cause on the part of the principal be included in all relevant contracts in the event of non-compliance; requires the sub-contractor to oblige all subse-quent sub-contractors and/or agencies to pay their staff the statutory minimum wage as well. Nevertheless such precautionary measures will make little difference in the case of an insolvency. In essence, the more sub-contractors involved in a given job, the harder it will be to manage compliance with the statuto-ry minimum wage legislation. Dr. Kerstin Neighbour Partner, Frankfurt T +49 (69) 96236 358 firstname.lastname@example.org Moritz Langemann Associate, Munich T +49 (89) 290 12 141 email@example.com 6 The German Minimum Wage Act Dr. Kerstin Neighbour Partner, Frankfurt T +49 (69) 96236 358 firstname.lastname@example.org Dr. Eckard Schwarz Partner, Hamburg T +49 (40) 41993 224 email@example.com Dr. Ingrid Ohmann-Sauer Partner, Munich T +49 (89) 29012 141 firstname.lastname@example.org Bernd Klemm Partner, Munich T +49 (89) 29012 171 email@example.com Dr. Tim Gero Joppich Counsel, Dusseldorf T +49 (211) 1368 494 firstname.lastname@example.org Tim Wybitul Partner, Frankfurt T +49 (69) 96236 331 email@example.com Matthes Schröder Partner, Hamburg T +49 (40) 41993 261 firstname.lastname@example.org Dr. Hendrik Kornbichler Partner, Munich T +49 (89) 29012 372 email@example.com Dr. Lars Mohnke Counsel, Munich T +49 (89) 29012 151 firstname.lastname@example.org Dr. Leif Hansen Counsel, Hamburg T +49 (40) 41993 239 email@example.com Your contacts with our German Employment team www.hoganlovells.com Hogan Lovells has offices in: Alicante Amsterdam Baltimore Beijing Brussels Budapest* Caracas Colorado Springs Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston Jakarta* Jeddah* Johannesburg London Los Angeles Luxembourg Madrid Mexico City Miami Milan Monterrey Moscow Munich New York Northern Virginia Paris Philadelphia Rio de Janeiro Riyadh* Rome San Francisco São Paulo Shanghai Silicon Valley Singapore Tokyo Ulaanbaatar Warsaw Washington DC Zagreb* "Hogan Lovells" or the "firm" is an international legal practice that includes Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses. 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