After the conclusion of coalition talks between the CDU/CSU and SPD, the following changes to labour law will be pursued by the upcoming coalition government.

On 7 February 2018, the Union parties (CDU and CSU) and the SPD successfully concluded negotiations for a new grand coalition. In addition to general platform statements, the 177-page coalition agreement contains specific proposals for change. The following is an overview of the most significant labour law projects contained in the coalition agreement.

Maximum duration of successive fixed-term employment contracts

The parties have agreed that it should no longer be permissible to conclude fixed-term contracts with an objective reason if the employee has previously had an employment relationship without a fixed term, or a fixed-term employment relationship with the same employer of five or more years. Temporary work, also through temporary work agencies, should be included in the calculation of the maximum employment duration. A new fixed-term employment relationship with the same employer, after the fixed-term employment duration has been reached, will be possible only after a waiting period of three years. No waiting period for fixed-term employment based on an objective reason exists under the current law.

The German Act on Part-Time Work and Fixed-Term Contracts (Teilzeit- und Befristungsgesetz, TzBfG) currently does not provide for a maximum duration for fixed-term employment. Based on principles of the institutional abuse of rights, however, the Federal Labour Court assumes that a fixed-term contract is invalid if the limits specified under § 14 (2) German Act on Part-Time Work and Fixed-Term Contracts of two years and three extensions are exceeded alternatively, or cumulatively to a major degree, such as 13 fixed-term employment contracts over 11 years. According to the Federal Labour Court, on the other hand, there is no abuse of rights when four fixed-term contracts were concluded within seven years.

Restrictions for fixed-term contracts for major undertakings

Drastic measures will be taken for fixed-term contracts without an objective reason for the fixed term. Although no provisions for this were included in the results of the exploratory talks, according to the coalition agreement, employers with more than 75 employees may only have fixed-term contracts for no objective reason with 2.5 per cent of their staff at most. Each fixed-term contract for no objective reason exceeding this percentage will be deemed a contract of indefinite duration. For example, an employer with 200 employees would be permitted to have only five employees with fixed-term contracts without objective reasons. Because the term "employers" is used in the coalition agreement, the threshold of 75 employees is not likely to be determined on the basis of a single business unit.

Should this regulation be adopted during the next legislative period (which is probable), this would de facto eliminate fixed-term contracts without objective reasons for larger undertakings. Fixed-term contracts without objective reasons are often used for newly hired first-time employees. Almost one out of two newly hired employees subject to social security payments initially have fixed-term contracts, and half of them have fixed-term contracts without an objective reason. Business undertakings also like to use fixed-term employment for no objective reason to cope with seasonal work, and temporary-order peaks. In the future, only undertakings with up to 75 employees will profit from the flexibility of fixed-term contracts without objective reasons.

Against this background, the change in the maximum duration for fixed-term contracts without objective reasons can be considered a marginal note. In the future, fixed-term contracts without objective reasons will be permissible for only 18 months with only one extension. Under the current law, a fixed-term contract without an objective reason can be extended three times, and is permissible for a total duration of two years (§ 14 (2) German Act on Part-Time Work and Fixed-Term Contracts). Furthermore, there is an exception for start-up undertakings, which may extend such contracts several times up to four years (§ 14 (2a) German Act on Part-Time Work and Fixed-Term Contracts). The coalition will probably not eliminate this exception.

As a result of these changes, employees may lose a good deal of flexibility when filling positions. Larger employers may refrain from hiring new employees after they have reached their quota for fixed-term contracts without objective reasons, and may allocate additional work to permanent employees accumulating overtime. Alternatively, employees could fall back on the second instrument for increasing flexibility: temporary agency work. Employers may decide to risk in-court actions to control fixed-term contracts, and continue fixed-term contracts without objective reasons. What the regulation will ultimately look like remains to be seen.

Entitlement to part-time work for a limited period

As already set out in exploratory talks between the Union parties and the SPD, the coalition agreement also refers to the bill on enhancing entitlement to part-time work that failed passage in May 2017. Regarding this policy, the coalition agreement does not differ significantly from the exploratory talks.

According to the bill, employees may demand a reduction in working hours for a period stipulated in advance in their contracts if they have been employed for longer than six months. Different from the bill, the coalition agreement states that the employer in this case must have more than 45 employees (the bill states 15) in total on a regular basis.

According to the coalition agreement, employers with 46 to 200 employees can have only one employee in 15 working part-time for a limited period. Applications for part-time work exceeding this quota can be refused as not reasonably acceptable (limit of reasonableness). It is not explained in the coalition agreement how the entitled employee per 15 employees is to be determined. It stands to reason, however, that this will be based on a first-come first-served principle. The employer may also refuse if the request is for less than one year or for more than five years. According to the coalition agreement, there should not be any entitlement to increase or to reduce working hours during the fixed-term part-time employment (§ 8 German Act on Part-Time Work and Fixed-Term Contracts). After the end of fixed-term part-time employment, the employee may request another reduction of working hours after one year, at the earliest.

According to the currently applicable law, § 8 German Act on Part-Time Work and Fixed-Term Contracts, employees are only entitled to a long-term reduction of working hours. The right to return to the previous working hours is not provided for. Section 9 German Act on Part-Time Work and Fixed-Term Contracts provides only that employers give an equally qualified part-time employee preferential consideration when filling a vacant full-time position. If, however, there is no vacant position, the employee cannot demand that his working hours be increased.

Strengthening works councils

The parties intend to strengthen works councils' general right of initiative regarding continued education and advanced training. Employers and works councils should confer on vocational training measures. If the parties to an employment contract cannot agree on an arrangement, a moderator can be used to reach an agreement, but there is no obligation to reach an agreement. This is apparently not an area where the works council can enforce a co-determination right, and a conciliation committee can decide instead of the employer and the works council.

The coalition partners also intend to simplify the procedure for the election of works council members. This will be mandatory for all companies with between five and 100 employees. Companies with between 101 and 200 employees with voting rights can choose between the simplified and general election procedure. What this simplified procedure should specifically look like is not disclosed in the coalition agreement. In particular, the question arises as to whether voting for works council members can be conducted online, which has not been possible to date.

In regard to cross-border relocation of company domiciles, the grand coalition also wants to ensure that national regulations regarding co-determination are heeded.

More flexible working hours and mobile work

The parties want an opening clause (Tariföffnungsklausel) in the German Working Hours Act (Arbeitszeitgesetz) that would make working hours more flexible. The intention is (i) to make it possible for employees to have more self-determined working hours and (ii) to test whether there is more flexibility for this in business given the digital working environment.

In the area of mobile work, the parties intend to give employees the right to demand reasons from employers for refusing a request for mobile work. This makes it impossible for an employer to arbitrarily refuse a request for mobile work. This will not establish a general statutory entitlement for mobile work. Instead, the statute to be enacted will specify what the coalition agreement means by mobile work. It thus remains to be seen how lawmakers want to regulate the entitlement to information, and whether they will create any legal means for employees to appeal against a decision in the event of an arbitrary refusal by an employer.

On-call work

In view of the increase in on-call work, the parties hope to enhance the planning and income security for this form of work. In doing this, the goal is that employees may not work in excess of 20 per cent less and 25 per cent more than the agreed-upon minimum working hours. If the parties to an employment contract do not stipulate weekly minimum working hours for their employees, a weekly working time of 20 hours shall apply. This deviates from the current legal situation, which stipulates a weekly working time of ten hours if nothing is stated in the working contract (§ 12 (1) German Act on Part-Time Work and Fixed-Term Contracts). In addition, the coalition parties want to clarify the rules for the continued payment of remuneration during illness. The basis for this is supposed to be average earnings over the previous three months. Employees currently receive remuneration during illness pursuant to § 3 (1) German Continued Payment of Wages and Salary Act (EFZG) without problems if the employer had already requested the work from the employee. Until now, it has been unclear how remuneration during illness is supposed to be calculated if the employer had not yet assigned work to an employee. A revision will create more clarity for the continued payment of remuneration in on-call employment relationships.

Facilitation of termination for financial institutions

In order to make Germany more attractive for financial institutions after BREXIT, the parties intend to place special employees (risk carriers in terms of § 2 (8) German regulation Concerning Regulatory Requirements for Remuneration Systems of Banks and Financial Services Institutions, InstitutsVergV) – with a base remuneration more than three times the income limit for the assessment of contributions to federal pension insurance (approximately EUR 234,000 in western Germany, EUR 208,800 in eastern Germany) – in the same position as executive employees under the Act on Protection Against Unfair Dismissal (Kündigungsgesetz). According to § 14 (2) German Act on Protection Against Unfair Dismissal, the employer's request to dissolve the employment relationship in litigation regarding unfair dismissal does not require justification. The purpose of the request for dissolution pursuant to § 9 (1) German Act on Protection Against Unfair Dismissal is to enable the employer to terminate the employment relationship even when the court considers the notice of termination invalid.

No amendments to the German Temporary Employment Act

The coalition agreement does not provide for any changes to the German Temporary Employment Act (Arbeitnehmerüberlassungsgesetz). Although the exploratory talks yielded a different intention, theevaluation will not take place until 2020.

Simplification of the status determination procedure for freelancers

According to the coalition agreement, the parties want to simplify the status determination procedure and make it consistent among the various social security branches. The purpose of the status determination procedure pursuant to § 7a German Social Security Code IV (SGB IV) is to have the German Federal Pension Insurance (Deutsche Rentenversicherung Bund) clarify whether a person working for an undertaking is a freelancer, or an employee subject to social security payments.

Adjustment of non-wage labour costs

As discussed during exploratory talks, parity of health insurance payments will be restored during the next legislative period. In addition, unemployment insurance payments will be reduced from 3 % to 2.7 %. Moreover, according to the coalition agreement, the parties intend to eliminate "solidarity payments" step by step as of 2021.

Outlook: wait for the result of the SPD party vote

The approximately 460,000 party members of the SPD will now make the next move by voting to decide whether the SPD will join a new grand coalition. The executive committee of the CSU has already approved the coalition agreement. The CDU membership will vote on the coalition agreement at a party convention.