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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. 

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