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Country snapshot

Key considerations

Which issues would you most highlight to someone new to your country?

In general, German employment laws offer a high level of protection for employees. These provisions are not codified in one act, but are spread out over several statutes, including:

  • the Protection Against Dismissal Act (which provides for strong dismissal protection after six months of employment and in operations of more than 10 employees);
  • the Working Time Act (which limits daily/weekly working hours and provides for rest breaks and public holidays);
  • the Part-Time and Limited-Term Act (which provides for part-time entitlements and restricts fixed-term contracts); and
  • the Minimum Wage Act.

In addition, many collective labour laws set out the rights of employee representatives (works councils) and unions.

There is also a lot of case law to observe.

What do you consider unique to those doing business in your country?

While German law includes many employee-friendly provisions, these are often amended by case law in a way that balances the interests of employer and employee. As Germany is an EU member state, such case law is established not only by the German labour courts, but also by the European Court of Justice. A good knowledge of this case law is therefore necessary to avoid traps.

Another unique point is the key role that works councils and unions play in Germany.

Is there any general advice you would give in the employment area?

Despite the employee-friendly provisions of German law, there is still sufficient room to manoeuvre in order to meet the needs of employers. Careful preparation and a well-drafted set of employment documents are crucial to do business in Germany successfully from the employment law perspective.

Emerging issues/hot topics/proposals for reform

Are there any noteworthy proposals for reform in your jurisdiction?

The German legal system has not undergone any major reforms or substantial changes recently, and none are expected.

One of the most fundamental changes in recent years was the introduction of the minimum wage on January 1 2015. In April 2017 the reformed and modernised law on temporary work will enter into force.

What are the emerging trends in employment law in your jurisdiction?

Hot topics in German employment law include:

  • the digitalisation of work and the related labour law consequences, in particular with regard to employee data protection and privacy;
  • equal participation of men and women in managerial positions; and
  • the debate and corresponding legislative proposals on tariff unity in shops.

The employment relationship

Country specific laws

What laws and regulations govern the employment relationship?

Employment law in Germany is comprised of a significant number of statutes, such as:

  • the Civil Code;
  • the Protection Against Dismissal Act;
  • the Minimum Wage Act;
  • the Part-Time and Limited Term Employment Act;
  • the Federal Vacation Entitlement Act; and
  • the Working Time Act.

Where applicable, employment relationships are also governed by:

  • collective bargaining agreements, which are written agreements between a trade union and an employers’ association or individual employer providing for various terms and conditions of employment; and
  • shop agreements, through which the employer and the (local) works council participate in organising working conditions. 

Who do these cover, including categories of worker?

There are different categories of employee, such as executive employees, white collar workers and blue collar workers. With a few exceptions, the employment laws cover all categories of employee.

Managing directors and board members of companies are not covered by employment laws in general (with a few exceptions), as they are not deemed employees.

Misclassification

Are there specific rules regarding employee/contractor classification?

An employee is an individual who is obliged through a private law contract to perform services in a dependent working situation. The work performed by the employee is bound by instructions as to working time, place of work and details of work which are issued by the employer, and the employee is integrated into the working environment (eg, work space and work devices provided, use of company premises/facilities).

By contrast, a contractor or freelancer works independently and is not integrated into the principal’s working environment or bound by its instructions. The extent of being bound by instructions is indicative of whether a freelance worker is really self-employed or is in fact an employee.

Contracts

Must an employment contract be in writing?

An employment contract can be concluded orally or implicitly by taking up employment. However, a written contract is recommended for evidentiary purposes. The employee also has a right for the essential terms of employment to be set out in writing.

Are any terms implied into employment contracts?

Implied terms are:

  • those already provided for by the laws governing the employment relationship, such as those relating to the minimum wage, minimum vacation (four weeks per year), sick pay and working time; and
  • some fiduciary duties of employees, such as the duty of confidentiality, the duty not to compete and a variety of other accessory obligations (eg, handover obligation, disclosure obligation and rights in work products).

Are mandatory arbitration/dispute resolution agreements enforceable?

The function of an arbitration body is generally limited to achieving a settlement of interests between the parties through its attempts at mediation. In certain cases, however, the arbitration body can issue a decision on a regulation that is binding on the parties and is thus enforceable.

However, arbitration is permissible only in certain areas of collective labour law. In respect of disputes with employees, arbitration is possible only as an agreed additional means of dispute resolution and must not exclude recourse to the labour courts (except for artists, who can participate in arbitration).

How can employers make changes to existing employment agreements?

An employment agreement can be revised through a mutual amendment agreement between employer and employee. Under certain strict conditions, an employment agreement can also be changed unilaterally by the employer by way of a so-called ‘dismissal with the option of altered conditions of employment’ (this is predominantly used for changes to the job/position), or by using agreed fixed terms or revocation rights for certain conditions.

Foreign workers

Is a distinction drawn between local and foreign workers?

No. Local and foreign workers must be treated equally.

However, non-EU residents require a residence permit to be employed. 

Recruitment

Advertising

What are the requirements relating to advertising positions?

The General Equal Treatment Act prohibits adverse treatment of employees on the grounds of race or ethnic origin, sex, religion or ideology, disability, age or sexual orientation. The advertisement of vacancies and the entire recruitment process must thus avoid any possible adverse treatment. Hence, job advertisements may list only criteria that are necessary for the position in question.

Background checks

What can employers do with regard to background checks and inquiries in relation to the following:

(a) Criminal records?

Applicants may be asked to produce a criminal record only if the information is relevant to the position in question. For example, if it were seeking to fill the position of bank teller, an employer could request a criminal record with regard to white-collar crimes. 

(b) Medical history?

Applicants may be asked to disclose medical conditions only if the information is relevant to the position in question. For example, a healthcare facility may ask for a certificate of health.

(c) Drug screening?

Drug screening is permitted only if the employer has a legitimate interest in a medical examination. Moreover, as a matter of principle, drug screening requires the candidate or employee’s consent. 

(d) Credit checks?

Credit checks are legitimate only if the employer has a legitimate interest in knowing the candidate’s financial circumstances. This will be the case if the position qualifies as a position of special trust (eg, broker or fund manager). 

(e) Immigration status?

For non-EU residents, the employer must check whether the candidate has a valid residence permit allowing him or her to work in Germany. 

(f) Social media?

Researching candidates via social media is not prohibited by law, provided that the information is retrieved from freely accessible public sources. 

(g) Other?

Background checks are permissible only in exceptional cases. As a general rule, the employer is required to obtain any information relevant to the selection process directly from the candidate.

Moreover, inquiries made by an employer are legitimate and permissible only if the answers are necessary for the employer to assess whether the candidate is capable of properly performing his or her duties with regard to the position in question. 

Wages and working time

Pay

Is there a national minimum wage and, if so, what is it?

The Minimum Wage Act currently provides for a minimum hourly wage of €8.50 gross, which is the lowest limit for the compensation of employees in Germany. The Minimum hourly-wage will increase to € 8.84 gross in 2017 (effective January 1 2017).

Wages are primarily governed by:

  • statutes (eg, on the minimum wage);
  • collective bargaining agreements (where applicable or generally binding); and
  • where a works council exists, shop agreements.

Are there restrictions on working hours?

Working hours are primarily governed by:

  • the Working Time Act;
  • the Youth Labour Law;
  • collective bargaining agreements; and
  • specific working time provisions in some industries (eg, airlines, logistics and railways).

The Working Time Act provides that the regular working hours in a working day may not exceed eight hours. ‘Working days’ are defined as Monday to Saturday; thus, a maximum of 48 hours a week is possible. The hours in a working day may be extended to a maximum of 10 hours if, over six calendar months or within 24 weeks, an average of eight hours per working day is not exceeded.

Further increases are possible under certain conditions (eg, under a collective labour agreement or shop agreement, or with permission from the relevant authority).

Hours and overtime

What are the requirements for meal and rest breaks?

Employees must be given rest breaks of at least 30 minutes for working days of six to nine hours and of at least 45 minutes for working days in excess of nine hours. These breaks can be split up into several 15-minute breaks. The employer can decide when to allow the breaks; but if there is a works council, the distribution and timing of breaks must be agreed with the works council.

There is no general obligation to provide meals to employees (except in certain sectors such as aviation and shipping).

How should overtime be calculated?

Any hours worked upon the instruction of the employer in excess of the agreed regular daily, weekly or monthly working time (depending on what calculation basis has been agreed in the employment contract) constitute overtime. However, there is no general legal principle that every hour of overtime or every attendance at the workplace above the agreed working hours must be remunerated.

If there is no tariff agreement and no other express agreements on the remuneration of overtime, Section 612 of the Civil Code applies. As a result, the usual hourly wage can be taken as a basis for calculating overtime. Employees earning above a certain (dynamic) annual salary need not be remunerated separately for overtime.

What exemptions are there from overtime?

Under the Maternity Protection Act, pregnant women and breastfeeding mothers cannot be instructed to work overtime; restrictions also apply to employees who are minors. Severely disabled persons can submit an application requesting an exemption from overtime.

Is there a minimum paid holiday entitlement?

Employees’ right to paid vacation is governed by the Federal Vacation Entitlement Act. Since Saturday is counted as a working day, the minimum vacation entitlement of 24 working days relates to a six-day working week. If the employee works a five-day week only, the minimum vacation entitlement is 20 days per year (equivalent to four weeks).

In the event of regular distribution of work over fewer than five days a week, the number of vacation days is reduced accordingly.

What are the rules applicable to final pay and deductions from wages?

German employment law assumes that the employee is obliged to perform his or her services in advance of payment. If remuneration is calculated over certain periods of time, it is payable upon the expiration of each period. In Germany, it is common to agree on monthly remuneration, which thus falls due at the end of each month.

German employees receive a net salary, from which tax and social security contributions have already been deducted by the employer. The level of deduction depends on the amount of income and consists of taxes and social insurance (health, nursing, pension and unemployment insurance). The employer must register its employees with the tax authority, withhold the taxes to be paid by them and transfer the money directly to the tax authority.

Social security contributions must also be withheld by the employer after calculating the gross salary and – along with the additional social security contributions required of the employer – must be transferred to the employee’s health insurer, which then distributes all of the contributions (except accident insurance) to all relevant institutions. Employees’ social security contributions currently amount to between 19.275% and 19.575% of their gross monthly salary, up to a ceiling of €6,200 (West) or €5,400 (East) in 2016. The employer’s additional contribution amounts to between 19.025% and 19.325%.

Contributions for accident insurance must be paid separately to the Employers’ Liability Insurance Association by the employer.

Record keeping

What payroll and payment records must be maintained?

The various computerised payroll accounting systems available generate standardised payslips. The payslip must at least state the relevant payment period and the composition of the remuneration.

Payslips, social insurance accounting and statements of contributions paid must be kept until the end of the year following the last audited calendar year. Payroll and related documents must be kept for six years, starting from the end of the respective payroll period.

Discrimination, harassment & family leave

Protected categories

What is the position in relation to:

(a) Age?

The General Equal Treatment Act prohibits unequal treatment on the grounds of race, ethnic origin, sex, religion, ideology, disability, age or sexual orientation. The protection it extends applies not only to existing employment contracts, but also to the job application and recruitment process.

Both direct and indirect discrimination is prohibited. Employees affected by prohibited unequal treatment under the act can bring claims for damages and compensation, which are considered for each breach of the prohibition.

The aforementioned eight discriminative characteristics are exhaustive. Hence, discrimination is possible only if one of the characteristics listed in the act is affected. 

(b) Race

The General Equal Treatment Act prohibits unequal treatment relating to race or ethnic origin.      

(c) Disability?

The General Equal Treatment Act prohibits unequal treatment relating to disability.

(d) Gender?

The General Equal Treatment Act prohibits unequal treatment relating to sex.

(e) Sexual orientation?

The General Equal Treatment Act prohibits unequal treatment relating to sexual orientation

(f) Religion?

The General Equal Treatment Act prohibits unequal treatment relating to religion or ideology.

(g) Medical?

The General Equal Treatment Act prohibits unequal treatment relating to disability only.

(h) Other?

N/A.

Family and medical leave

What is the position in relation to family and medical leave?

Family leave
Maternity leave
Under the Maternity Protection Act, an absolute prohibition from employment applies in the six weeks before the expected due date and for the first eight weeks after childbirth. During pregnancy, an individual prohibition of employment may apply if the life and health of the mother and child are endangered by the continuation of employment.

Parental leave
Under the Federal Parental Benefit and Parental Leave Act, parents have the right to parental leave until the child reaches the age of three. Up to 24 months of parental leave may be deferred until any time before the child reaches the age of eight.

During parental leave, parents may take a break from employment or work part time (to a maximum of 30 hours/week) without losing their jobs. Both parents can claim parental leave for the same child.

Care time
The Care Time Act provides for up to six months’ unpaid leave to care for a close relative whose need for care is documented by a medical certificate.

Medical leave
If an employee is unable to work because of sickness, he or she can stay away from work. If the employee is incapacitated for more than three working days, he or she must present a medical certificate to the employer.

Under the Continuation of Remuneration Act, an employee is entitled to sick pay of his or her full salary for up to six weeks. The claim for continued remuneration cannot be waived or restricted by contractual agreement.

The act further provides that employees have the right to take leave of absence for rehabilitation or therapy. The specific measures that trigger this claim are determined by social insurance law.

Harassment

What is the position in relation to harassment?

Harassment, including sexual harassment, is considered an act of discrimination under the General Equal Treatment Act. ‘Harassment’ is defined as any objectionable behaviour connected to a protected characteristic (race, ethnic origin, sex, religion, ideology, disability, age or sexual orientation) that aims to cause or causes injury to the dignity of the person concerned, and that creates an environment of intimidation, hostility, humiliation, debasement or indignity.

Employees who are harassed have the right to withdraw their services with continued pay if the employer does not take suitable and necessary measures to prevent the harassment. They may also claim for damages and compensation.

Whistleblowing

What is the position in relation to whistleblowing?

Pursuant to established case law, employees must inform the employer about any apparent imminent and substantial damages, malfunctions or breakdowns.

A formal whistleblowing system may be implemented, but typically requires the consent of the works council, if any.

Privacy in the workplace

Privacy and monitoring

What are employees’ rights with regard to privacy and monitoring?

The main source of law governing employee data privacy is the Federal Data Protection Act. It applies to the collection, processing, storage and use of personal data in the workplace. Personal data may be collected, processed or used only if it is permitted under the act or other legal provisions, or if the individual has freely consented to such processing or use. The act imposes specific restrictions on video surveillance of employees in the workplace.

The storage of individual-related data is permitted insofar as this is necessary for the performance of the employment contract.

In companies where at least five employees are involved in the automated processing of data, a company data protection officer must be appointed. The company data protection officer is responsible for ensuring compliance with data protection laws.

If the employer (expressly or impliedly) permits private use of telephone, email and internet access provided by the company, regulations on communication privacy should also be considered.

In workplaces where a works council has been established, the works council will have a co-determination right if the employer introduces technical means that facilitate the monitoring of employees’ conduct and performance in the workplace.

To what extent can employers regulate off-duty conduct?

As a general rule, the employer has no right to regulate off-duty conduct of employees, as this is seen as an intrusion into the privacy of individual employees.

On the other hand, employees have a duty to protect the interests of the employer. Therefore, even without explicit agreement, an employee should refrain from any conduct that might have a detrimental effect on the employment relationship or the employer itself.

Are there rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

There are no specific rules on the protection of social media passwords. Employees are not obliged to make social media passwords or accounts available to the employer, unless the account is set up and used for business purposes only.

If used for business purposes upon the employer’s instigation, social media accounts of employees may be monitored. However, the employer must consider the restrictions of the Federal Data Protection Act – in particular, the obligation to restrict any monitoring to data that is necessary to process and administer the employment relationship. Co-determination rights must also be observed if the employer intends to monitor social media accounts of staff members. In any case, it is advisable to restrict monitoring to the absolute minimum. In addition, the employee’s consent should be obtained before monitoring, storing, using or processing data retrieved from social media accounts. 

Trade secrets and restrictive covenants

Intellectual Property

Who owns IP rights created by employees during the course of their employment?

As a matter of principle, inventions made by employees in the course of their employment, as a result of their tasks and duties or based on the experience and know-how gained through their employment, belong to the employer. Upon completing an invention, the employee must immediately inform the employer of its creation. The employer may claim and use the invention or release the invention to the employee. If the employer does not release the invention within four months of being informed of its creation, the invention automatically belongs to the employer. As a quid pro quo, the employee is entitled to compensation for his or her invention if the employer does not release the invention.

Copyrightable works created in the course of employment are attributable to the employee as the originator of the work. The employer can require the employee to grant user rights that it needs for business purposes. 

Restrictive covenants

What types of restrictive covenants are recognised and enforceable?

During an ongoing employment relationship, an employee cannot act as or work for a competitor of the employer.

Post-contractual non-compete obligations can be agreed for up to two years following termination of employment. For each year of the post-contractual non-compete obligation, the former employee must be paid compensation in the amount of at least 50% of the last payment of remuneration made under the employment contract.

Non-solicitation clauses are also commonly used to prevent employees from being enticed away from the company. However, agreements between employers not to hire each other’s employees are not enforceable. 

Non-compete

Are there any special rules on non-competes for particular classes of employee?

There are no specific rules on non-competes for particular classes of employee.

Different rules on post-contractual non-compete obligations apply to managing directors or board members (neither of whom are considered employees) from those applicable to employees, however.

Discipline and grievance procedures

Procedures

Are there specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

Formal procedures do not exist. 

Industrial relations

Unions and layoffs

Is your country (or a particular area) known to be heavily unionised?

Yes, Germany is heavily unionised. This is the result of the concept of co-determination, which grants employee representatives up to half of the votes on the supervisory boards of employers.

What are the rules on trade union recognition?

There is no institutionalised process for trade union recognition. The freedom of association protects the right to establish a union. However, if a union lacks the actual ability to negotiate collective bargaining agreements, this fact may be determined by a labour court.

What are the rules on collective bargaining?

Collective bargaining agreements are subject to the freedom of contract. A collective bargaining agreement does not apply to workers who are not members of the union that has negotiated the agreement.

Termination

Notice

Are employers required to give notice of termination?

Yes, the employer must give notice of termination. Any notice of termination must be in writing. Otherwise, the termination is null and void. Notification by email, fax or text message will not suffice.

Depending on the employee’s years of service, notice of termination must be given well in advance. The basic notice period, applicable for the first two years of employment, is four weeks either to the 15th of a calendar month or to the end of a calendar month. Thereafter, the notice period increases from one month to the end of a calendar month to a maximum of seven months to the end of a calendar month for employees with 20 or more years of service. 

Redundancies

What are the rules that govern redundancy procedures?

Employees with more than six months’ service enjoy protection from dismissal under the Protection Against Dismissal Act, provided that they work in a business with regularly more than 10 employees.

Under the Protection Against Dismissal Act, any notice of termination is void unless it is justified under the act. A redundancy situation (ie, a loss of job opportunity) may qualify as a reason for terminating the employment. However, even in a redundancy situation, notice of termination will nevertheless be unjustified under the act if the employee is dismissed despite other vacancies in the company or if the employer does not sufficiently consider exactly whom to lay off (proper social selection). 

Are there particular rules for collective redundancies/mass layoffs?

In companies which regularly have more than 20 employees, the employer must inform and consult with the works council, if any, in the event of a planned operational change such as:

  • a (substantial) cutback in staff;
  • closure or relocation of the business (or significant parts thereof); or
  • a spin-off or merger.

In any of these cases the employer must seek to agree on a balance of interests with the works council and conclude a social plan with the work council.

The employer must also notify the employment agency prior to any dismissal in the event of a mass layoff. What qualifies as a mass layoff is determined under the Protection Against Dismissal Act, as follows:

  • in businesses with more than 20 but less than 60 employees, the planned dismissal of more than five employees within a period of 30 calendar days;
  • in businesses with at least 60 but less than 500 employees, the planned dismissal of 10% of staff or more than 25 employees within 30 calendar days; and
  • in businesses with 500 or more employees, the planned dismissal of at least 30 employees within a period of 30 calendar days.

Dismissals are null and void if the employer fails to inform the employment agency in time or does not properly inform the employment agency.

Protections

What protections do employees have on dismissal?

Employees may institute legal proceedings against a notice of termination before the local labour court. If an employee wants to invoke his or her rights under the Protection Against Dismissal Act, the claim must be filed within three weeks of service of the notice of termination. The motion can be for reinstatement only. A dismissal claim will succeed if the employer fails to show that the notice of termination is justified under the Protection Against Dismissal Act.

In general, the employee is not entitled to a severance payment instead of reinstatement; equally, the employer cannot terminate the employment relationship against a severance payment in case of unjustified notice. If the employee is reinstated, he or she may claim back pay from the date following the termination of employment under the (invalid) notice of termination.

Courts/tribunals

Jurisdiction and procedure

Which tribunals or courts have jurisdiction to hear complaints?

The labour courts have exclusive jurisdiction over all individual and collective labour law matters.

Disputes arising from the employment relationship may relate to dismissal, remuneration, annual leave or sick pay. The labour courts also hear disputes involving the existence or otherwise of an employment contract, including those relating to unfair dismissal, and disputes involving inadmissible actions in the employment relationship or employment papers. Additionally, the labour courts hear all civil proceedings relating to disputes between the parties to a collective agreement.

The labour courts also handle co-determination issues and hear related disputes between employers and employee representatives. According to law, works councils – which are not trade union bodies – have certain participation and co-determination rights in companies.

Finally, the labour courts are responsible for disputes relating to employee co-determination at supervisory board level and matters relating to the capacity to conclude collective agreements and collective bargaining of trade unions and employers’ organisations.

What is the procedure and typical timescale?

Labour court proceedings follow the same principles as other civil proceedings. All proceedings are public. Following the basic principle of an oral hearing, the parties will be heard in court before the court decides on the case. The parties may at any time settle the dispute by withdrawing the claim or reaching a settlement agreement. However, there are special proceedings in which the court itself must examine the facts of the case ex officio.

Various special principles also apply to labour law proceedings, such as:

  • compulsory conciliation;
  • the procedural equality of the parties;
  • the minimisation of legal costs; and
  • the jurisdiction of the courts of the place where the employee’s normal workplace is located.

The parties need not be represented by a lawyer before the labour courts.

According to statistics for 2012 published by the Federal Labour Court, more than 85% of labour law proceedings were completed within six months. Just 4% of all first-instance judgments were appealed; 62% of those appeals were completed within a further six months. Out of 211,640 dismissal cases, 31.5% (66,732) were completed within the first month and a further 39.7% (83,990) took between one and three months. Within a year, 98.5% of dismissal cases were completed.

Appeals

What is the route for appeals?

The labour court system consists of three levels, a structure which allows for the review of judgments by a higher court. Appeals against local labour court decisions can be filed with the relevant regional labour court. Appeals on points of law can be filed against regional labour court decisions before the Federal Labour Court.

In general (with a few exceptions, such as cases worth less than €600), the losing party may appeal a local labour court decision. The appeal must be filed with the relevant regional labour court within one month of service of the judgment. It must be substantiated within two months of service of the judgment. The regional labour court will rule on the appeal following an oral hearing of the parties in court.