As of January 2015, a statutory minimum wage has been implemented in Germany. According to the new German legislation, companies can also be liable for violations of the minimum wage by subcontractors and service providers.

If the subcontractors or service providers do not pay the minimum wage to their employees, the company receiving the services can be made liable for the payment of the minimum wages. Such liability exists even if the company receiving the services has no knowledge/indication of any violation on the part of the subcontractor/service provider. The affected employees of the subcontractors or service providers can claim for the minimum wages directly against the company receiving the services.

Additionally, financial sanctions (a maximum fine of EUR 500,000.00) can be imposed on the company receiving the services by public authorities. Furthermore, the company can be excluded from public projects and orders.

Actions for employers

Companies should review and amend their general terms and conditions with subcontractors and service providers to ensure there is a contractual obligation to comply with minimum wage law and an indemnity covering the consequences of any failure to do so.