Digital change and globalization know no borders. It is no wonder then that they also affect the employment relationship. The desire to send contracts or other agreements worldwide in a matter of seconds and, above all, to sign them is continuing to grow. In this environment, the long postal route – especially in international business transactions – appears to be a real waste of time. There are also good reasons against using paper: it consumes a lot of storage space, is bad for the environment, and, at worst, may even get lost. The use of digital signatures seems to be a simple solution to this problem. It allows the signing of the relevant documents almost simultaneously on the PC so that all parties have the legally binding agreement in their virtual hands within a few minutes.

Especially when it comes to establishing and carrying out employment relationships, the use of digital signatures, however, requires a certain amount of awareness. In some cases, the law stipulates the written form, which may only partly be replaced by so-called qualified electronic signatures. In some cases, the electronic form is even entirely excluded.

Types of electronic signatures

Generally, there are three types of digital signature:

  • (simple) electronic signature,
  • advanced electronic signature,
  • qualified electronic signature.

Each of these three signatures is linked to different requirements that correspond to different security levels. The requirements placed on the respective signature arise from the European eIDAS Regulation, which, due to its character as a regulation, is directly applicable in Germany without an implementation by the legislator being necessary.

According to the legal definition, (simple) electronic signatures are data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign (Article 3 (10) eIDAS Regulation). This may even be the case for an email signature or a scanned signature.

The requirements for advanced electronic signatures are already significantly higher. The core characteristics to be met by this signature are for it to be uniquely linked to the signatory and being capable of identifying the signatory (Articles 3 (11), 26 eIDAS Regulation). It must also be ensured that any subsequent changes are detectable.

Finally, the qualified electronic signature is governed by Articles 3 (12), (15), (23) eIDAS Regulation. In order to meet the requirements for a qualified electronic signature, a signature must meet all the characteristics of an advanced signature. In addition, it must be created by a qualified electronic signature creation device and based on a qualified certificate for electronic signatures. Qualified certificates can only be issued by trust service providers which identify the applicant by suitable means. In addition, they can only be issued to natural persons, not to legal entities such as a German limited liability company or a stock corporation. A list of German trust service providers is available on the website of the Federal Network Agency.

Where the law stipulates the written form - thus a handwritten signature - it may, if at all, be replaced by the qualified electronic signature since only the qualified electronic signature meets the requirements of the electronic form in accordance with Section 126a Civil Code. Unless stipulated otherwise by the statutory provision, the electronic form is the only legally permissible alternative to the written form.

Effects on employment contract practice

In principle, employment agreements and amendment agreements may be concluded without adherence to a specific form, meaning, the parties are free to decide how they want to sign (electronically). This makes it conceivable, for example, to conclude employment contracts using advanced electronic signatures.

In employment law overall, however, there is a large number of declarations and agreements which legally require the written form. Some key examples include:

  • rejection of an application for part-time work,
  • post-contractual non-compete clauses,
  • contracts between lessor and lessee in the case of labor leasing (Arbeitnehmerüberlassung).

This means that - besides handwritten signatures - these declarations and agreements may only be signed effectively and digitally by means of qualified electronic signatures. If these declarations or agreements fail to comply with the necessary form, the respective declaration or agreement will be null and void.

In addition, in some cases the replacement of the written form by the electronic form is even entirely excluded. The most important examples include:

  • notices of termination,
  • cancelation agreements,
  • information according to the German Nachweisgesetz.

This means that in these cases handwritten signatures are mandatory and may not even be replaced by qualified electronic signatures. According to the statutory provisions (Section 2 (1) sentence 1 Nachweisgesetz), employers are obligated to set down the material contractual terms in writing, sign the appropriate records, and hand them over to employees no later than one month after the agreed commencement of the employment relationship. In the event of infringements of the Nachweisgesetz, employees are entitled to receive the documentation at a later time and, if applicable, to compensation for any damage arising from the infringement. The likelihood for these claims to be asserted and the consequences resulting from an infringement will be limited, however, particularly in ongoing employment relationships.

For notices of termination or termination agreements, breaches of form entail a much more serious effect. If these agreements are only signed electronically, they will be ineffective in terms of form and thus null and void. This will initially lead to the continued existence of the employment relationship including the claim for remuneration. In the context of extraordinary dismissals, however, this may even lead to the two-week period stipulated for these cases elapsing when remaining unaware of the invalidity. In addition to the continued employment relationship, the extraordinary termination for this breach of duty can no longer even be made up for.

Special case of fixed-term contracts

Finally, there is a special case associated with fixed-term employment relationships. Effective time limits require compliance with the written form in accordance with Section 126 Civil Code. Whether substitution by means of qualified electronic signatures is permissible is being discussed controversially in the literature and has not yet been decided by the Federal Labor Court. Although the probably predominant opinion convincingly argues for the applicability of electronic form, considerable legal uncertainty exists for business practice in terms of formal compliance until the Federal Labor Court has issued an appropriate decision.

The legal consequence of fixed-term employment contracts concluded without formal compliance would be for the provisions on the fixed term to be null and void, but not the entire contract. This would lead to an unlimited employment relationship with the respective employee. In view of these possible serious consequences, cautious employers will therefore refrain from using electronic signatures for fixed-term contracts.

Practical application cases are, on the one hand, the classic cases of fixed-term employment, such as the replacement of employees on parental leave or the limiting of fixed-term contracts not based on objective reasons for a period of up to two years. Frequently, however, supposedly unlimited employment contracts also contain a clause according to which the employment relationship is to end automatically when the employee reaches the standard retirement age. According to a recent Federal Labor Court decision, this is also considered a fixed term of the employment contract which must meet formal requirements. Although it is currently not foreseeable to what extent this individual decision will develop into consolidated jurisdiction, cautious employers will adhere to the classic written form. The risk of using electronic signatures becomes apparent in practice when the agreed age limit is reached only after many years and then a dispute arises as to whether a time limit exists and, if so, whether the required form has been complied with.

Conclusion

Electronic signatures have become an indispensable part of everyday business and found their way into the work of HR departments. Electronic signatures represent a practicable alternative to paper-based signatures, in particular for entirely form-free agreements. In the case of agreements that are subject to a formal requirement, however, it must be meticulously ensured that the correct type of signature is adhered to. This applies in particular to notices of termination and termination agreements, which are always subject to the written form. For fixed-term contracts, the use of electronic signatures requires a certain willingness of employers to take risks. Cautious employers will continue to use the tried and tested handwritten signatures for fixed-term contracts.