On May 15, 2019, the European Court of Justice (ECJ) issued a groundbreaking judgment in a court case between a Spanish trade union and the Spanish subsidiary of Deutsche Bank. The judges held that, to effectuate health and safety protections of employees as based both on the EU Working Time Directive and the Charter of Fundamental Rights, employers in the European Union (EU) must be obligated to record any time worked by an employee, each day.

The court specifically ruled that, in order to guarantee employees’ rights, EU Member States "must require employers to set up an objective, reliable and accessible system enabling the duration of time worked each day by each worker to be measured." In the past, Member States such as Germany and Spain have only required employers to keep track of overtime, but not of regular working time. This approach will now most likely no longer be sufficient.

The decision has caused a remarkable public uproar, even including – amongst others – claims of the “return of the punch clock.” These reactions may seem exaggerated, though employers rightfully wonder what consequences lay ahead for their businesses and operations in the aftermath of the ECJ’s decision.

The significance of the ECJ’s involvement and ruling

By way of background, the ECJ ended up reviewing Spanish working time regulations because the European Working Time Directive forms the basis of all EU Member States’ national working time laws. In this case, the trade union asserted that Spanish law required the employer to implement a time-keeping system to verify compliance with wage and hour laws. The bank argued to the contrary, based on prior interpretations of Spanish law. The National High Court of Spain (Audiencia Nacional) “had doubts” about whether existing precedent “complie[d] with EU law and referred questions on that matter to the” ECJ. The ECJ thus was asked to determine whether the Spanish national law conflicted with EU law.

The EJC concluded that the Spanish law, as previously interpreted, was “not able to ensure the effective compliance with the obligations paid down by the Working Time Directive or the Directive on the health and safety of workers at work.” It held that those Directives supersede any “national law . . . that does not require employers to set up a system enabling the duration of time worked each day by each worker to be measured.” The holding directs Member States to impose more detailed time-keeping requirements in some appropriate form.

The ECJ’s decision will apply to and affect the working time laws of all Member States and will presumably require them to adjust their national provisions in accordance with the ECJ judgment.

The end of flexible working hours?

The ECJ judgment leaves it up to the Member States to determine specific measures for implementing an "effective" time-recording system. Bottom line is, however, that any working time will need to be recorded, which gives rise to a multitude of questions, the most pressing of which is whether flexible and trust-based working time arrangements remain permissible. The ECJ judgment leaves a considerable amount of flexibility to the national legislators by pointing at the particularities of different industry sectors and other relevant factors, such as company size, that may be taken into account.

How should employers react?

Even though the decision does not bind employers directly, employers should not simply wait for its implementation in the various national jurisdictions. Rather, companies with sites within the European Union are encouraged to take the ECJ’s decision as an opportunity to think ahead and review internal processes on working time recording. Employers may wish to explore digital time-recording options that can be accessed from employees’ smartphones, tablets or laptops – anywhere, anytime. Technology can provide excellent means for allowing for flexible working hours whilst keeping track of the statutory requirements regarding working hours, overtime and breaks.

At the same time, employers should be prepared for the ECJ holding to become a talking point in consultations with employee representatives and/or labor unions whenever questions on working time arise. Collective working time arrangements are subject to employee consultation and participation rights in many Member States (e.g., in Germany).

As with all tech-based monitoring of employee data, employers should also bear in mind the requirements of the General Data Protection Regulation (GDPR) before implementing a new system.

In general, employers should treat the ECJ’s decision as an opportunity to revise their internal time-recording systems. A forward-looking early approach may prove helpful in terms of smoothly adopting a system compliant with future regulations following the ECJ’s decision, while at the same time navigating employee participation as well as data protection issues.