A new decision by the Federal Labour Court (BAG) includes an important change in the law: On 13 September 2022, Germany’s highest labor court ruled that employers – regardless of the size of the company and the existence of a works council – must record the working hours of their employees (Ref.: 1 ABR 22/21). Here is a summary of the consequences of the judgment for employers.
- What was the legal situation prior to the judgment?
- What has the court decided?
- What are the implications for employers?
- What are the consequences of a breach of the obligation to record working time?
- What do we expect next?
What was the legal situation prior to the judgment?
Until 13 September 2022, German law only provided for an obligation to record working time for any working time exceeding the standard working time of eight hours on working days and working time on Sundays and public holidays in accordance with Section 16 para. 2 of the Working Time Act (ArbZG). The standard working time on workdays pursuant to Section 3 sen. 1 ArbZG did not have to be recorded.
In its so-called “time clock decision” (14.5.2019, C-55/19), the European Court of Justice (ECJ) ruled that member states have an obligation to implement a regulation that employers have to introduce an objective, reliable and accessible work time recording system in order to ensure the practical effectiveness of the EU Working Time Directive (2003/88).
However, the German legislator did not implement this decision yet. In its coalition agreement, the German government stated that it would take on the task of adapting working time law to take into account the ECJ’s ruling. However, there is still no draft law on the subject. The Federal Labour Court has now pre-empted any decision by the legislator by affirming a general obligation for employers to record the working hours of their employees.
What has the court decided?
The BAG’s decision – on which only a press release is available so far – was based on a case from North Rhine-Westphalia in which the works council and the employer argued whether the works council has a right of initiative to introduce an electronic time recording system for employees in accordance with Section 87 of the Works Council Constitution Act.
The works council only has a right of co-determination if there is no statutory regulation. The BAG denied a right of initiative of the works council and pointed out that employers are already obliged by law to introduce a system with which the working hours worked of employees can be recorded.
The 1st Senate in Erfurt based its decision on the interpretation of Section 3 para. 2 No. 1 of the German Occupational Health and Safety Act (ArbSchG) in accordance with EU law. The ArbSchG obliges employers to take the necessary occupational safety measures and to strive for improvements in safety and health protection. According to Section 3 para. 2 No. 1 ArbSchG, employers must “ensure suitable organization and provide the necessary resources […]”.
The BAG thus obviously follows the time clock decision of the ECJ and counts a working time recording system that records the entire working time of the employee as a necessary resource. According to the ECJ decision, this is the only way to verify and ensure that the provisions of the EU Working Time Directive (in particular rest periods and breaks) are complied with and that the practical effectiveness of the Working Time Directive is ensured.
What are the implications for employers?
From now on, employers are obliged under Section 3 para. 2 No. 1 of the ArbSchG to introduce a suitable (electronic) system for recording working time. There are no precise requirements for the system to be implemented yet, but according to the ECJ, it must be an “objective, reliable and accessible” system that is intended to ensure the practical effectiveness of the Working Time Directive. The system must, therefore, at least enable verification of compliance with rest breaks and rest periods. Verification requires the recording of the beginning and end of working time (including overtime) and rest breaks.
The BAG has not yet issued any written statements on the question of how working time must be recorded. In addition to electronic time recording, recording using a classic time clock or manual recording using time sheets are possible options. Ultimately, it is up to the legislator to specify the requirements for the working hours recording system in more detail.
However, the mere provision of a working time recording system by the employer is not sufficient. The employer must ensure the actual participation of the employees in order to meet the control obligation according to Section 3 para. 1 ArbSchG. In line with Section 16 para. 2 ArbZG, this could be done, for example, by random checks.
Flexible working time models such as trust-based working time (Vertrauensarbeitszeit) should continue to be possible in the future. This was already provided for in the coalition agreement, irrespective of the ruling on 13 September 2022. Employees who perform their work within the framework of trust-based working time may therefore continue to organize their working time independently in compliance with the applicable laws. However, they are now required to record the times they worked.
What are the consequences of a breach of the obligation to record working time?
Employees and the works council are now likely to have a claim against the employer for the introduction of a working time recording system, which they can enforce in court. However, the ruling will not change the fundamental burden of presentation and proof in overtime compensation proceedings.
As the BAG already stated in May 2022, the provisions of EU law on working time have no effect on the principles developed under German substantive law and procedural law on the allocation of the burden of presentation and proof in overtime compensation proceedings. Nevertheless, due to the obligation to record working time, disputes about the hours worked by the employee could now occur less frequently.
It is currently unclear how the competent authorities will react to the BAG’s ruling. In any case, without a change in the national regulations, sanctions by the authorities are unlikely at this point. There is no specific legal obligation to record all working hours, meaning that there is currently no regulation that imposes a fine. An analogous application of existing regulations would violate the statutory requirement under Article 103 para. 2 of the German Constitution (nulla poena sine lege).
What do we expect next?
In the opinion of the BAG, there is already a general obligation in German law to record working time on the basis of the ArbSchG. If the legislator wishes to define the scope of the application and the requirements for a working time recording system in more detail and possibly also provide for sanctions, the legislator must create a corresponding statutory regulation, e.g., in line with Section 16 para. 2 ArbZG.
We find a regulation in the Working Hours Act and a regulation similar to Section 22 para. 1 no. 9 in connection with Section 16 para. 2 ArbZG on fines to be possible. The first politicians are already calling for the decision to be implemented in law. The effects on flexible working, which has been in demand and practiced in particular in the wake of the COVID-19 pandemic, cannot yet be foreseen.
First of all, however, the reasons for the ruling have to be published. It also remains to be seen whether and how the German legislature will react to the BAG’s decision.
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