Dr Hagen Köckeritz Dr. Sören E. Hennies August 24 2022 New working conditions act: criticisms and analysis Mayer Brown | Employment & Immigration - Germany Dr Hagen Köckeritz, Dr. Sören E. Hennies Employment & Immigration IntroductionPhysical documentationAdministrative burdenPenaltiesCommentIntroductionThe government has been publishing new legislation on a regular basis in order to fulfil its promise to modernise labour law. The Federal Ministry of Labour and Social Affairs' draft bill, dated 8 April 2022, came into force in Germany on 1 August 2022 and implemented EU Directive 2019/1152 of 31 July 2019. This amended the Act on the Notification of Conditions Governing the Employment Relationship (the Act) in order to align with the Directive's aims to make working conditions more transparent and predictable for employees.The Directive stipulates that employment contracts and the most important working conditions must be recorded in a written document that is handed to the employee. Working conditions are also changing significantly as a result of its implementation.The draft bill aims to ensure greater legal certainty in employment relationship. The expansion of legal certainty is achieved by extending the employers' existing obligations to provide information on essential terms and conditions of the employment relationship.This article is the second in a two-part series and provides an overview of the advantages and disadvantages of the draft bill (for part one please see "New obligations for working conditions now in effect – what do employers need to know?").Physical documentationCriticism of the planned amendment to the Act comes primarily from companies and is aimed almost exclusively at the lack of practicality. For example, documentation for essential working conditions requires wet-ink signatures. These are not new to the legal industry and do not align with the government's sustainability targets. Considering widespread carbon neutrality targets, which have been spurred by strong public support, the lack of foresight here is surprising; the fact that documentation must remain physical is explained neither in the draft bill nor the related explanatory memorandum.The legislator's antiquated approach to digitalisation here is especially striking since the Directive itself considers information in electronic form (eg, email) sufficient if it is accessible to all employees. Section 2 paragraph 1 sentence 3 of the Act, on the other hand, expressly excludes electronic forms as a means of proof. The draft bill does not envisage any change or addition to this. Therefore, the requirements of section 126 of the Civil Code still apply.The above amendment to the notification of the dismissal procedure including formal requirements threatens to become boundless in view of the complex possibilities. Regarding previous hearings of bodies and authorities,(1) the reference in the information letter to those procedures would have to be very specific, which may only be achieved in practice by copying the respective legal textsThe explanatory memorandum provides no additional clarity here because it only contains minimum requirements for the obligation to provide evidence. The memorandum, therefore, regulates the "what" of the information obligations in terms of content but not the "how". On that basis, every employer risks that their information and notification records will not be comprehensive enough until labour courts establish a precedent.One positive drawback here is that the legislator has made it clear in the memorandum that even if this obligation is not complied with, dismissals will not be invalidated.Administrative burdenThe administrative burden on employers is immense. To make matters worse, employers are expected to comply with the information obligations to provide proof of employment. In some cases, such obligations will need to be met more quickly than within the previous one-month period that follows the employee's contract start date.Employers could try to get ahead and draft appropriate information so that they can inform their employees immediately after the law enters into force. It would also be helpful if this were not limited to employers bound by collective agreements. The same limitation applies to existing works council agreements.Further, it would be easier in practice if employers could refer to the applicable laws as part of their notifications. The narrow timeframe poses the biggest practical problem, along with the new threat of fines; for employers with three- or four-figure workforces, it is apparent that the new draft is too short-sighted. Employer criticism is, therefore, directed in particular at the expected burden, as the government's calculation of the compliance burden for businesses is remarkably narrow. It is assumed that when a written employment contract is concluded, all essential terms and conditions of employment are already included in it. It is questionable whether this assumption can also be confirmed according to the standard of the amended Act. The government has calculated that it takes three minutes to prepare documentation for a single case; other sources claim that it is ten times that. A human resources employee, for example, with average qualification might not be able to handle the expected workload in order to meet the new information requirements and deadlines. Rather, a better-qualified, and thus more expensive, employee would be necessary to draft the individual information letters. In the likely case that all employees need a new certificate, the cost estimate to the industry in question would likely exceed that of the government by 250.PenaltiesThe penalties for non-compliance with the Act include only fines. Non-compliance with the Act (eg, insufficient references to the termination procedure) does not result in the legal invalidity of legal acts, such as the dismissal of an employee.On the other hand, there have been criticisms that there would generally not have been any need for proof or fines. Prior to the draft bill, section 2 of the Act did not explicitly shift the burden of proof in favour of employees. However, the labour courts assume in favour of the employees that a failure to provide notification of the terms and conditions of employment is to be regarded as a circumvention of the burden of proof.According to section 2 of the Act, newly concluded employment contracts in the future must be provided with corresponding notifications on the essential working conditions. Old contracts do not have to be amended, but the information requirements apply in the same way. Possible ways are the adjustment of the contract or the handing out of an information sheet to the employee in order to comply with the information obligations as an employer. This includes all employment relationships that already existed prior to 1 August 2022. The notices must then be delivered to employees within seven days, if requested.It remains to be seen how consistently the supervising authorities, who are generally not experts in labour law, will proceed in the event of violations of the Act. However, the fact that fines can be imposed, the potential number of erroneous, omitted or delayed notifications to employees of larger companies is likely to pose significant cost risks.CommentCompanies and employers should be proactive in view of the envisaged amendments and update existing sample employment contracts or at least prepare a separate document that can be issued either together with the employment contract or at the time the employee starts working. It is preferable not to cover all the new categories of information in the employment contracts in order to maintain the flexibility to adjust the information later without having to amend the contract itself. For existing employment relationships, it is particularly worthwhile to prepare sample letters that can be used to respond to employees' requests for documentation in accordance with the Act. In this way, it will be easier to accommodate requests for information on working conditions within the shorter seven-day period.For further information on this topic please contact Hagen Köckeritz or Sören E Hennies at Mayer Brown by telephone (+49 69 7941 0) or email ([email protected] or [email protected]). The Mayer Brown website can be accessed at www.mayerbrown.com.Endnotes(1) For example, in the case of:dismissals on suspicion, or the existence of a works council according to section 102 of the Works Constitution Act;the consent of representatives of the severely disabled and integration bodies according to section 168 of the German Social Code IX; orthe submission of a mass redundancy notification according to section 17 of the Dismissal Protection Act.