The new coalition agreement in Germany – overview from labour law perspective

After the recent German parliamentary election, the members of the Federal Government in Germany, the Christian Democratic Union and the Social Democratic Party have agreed on a coalition agreement. It is likely that this agreement will form the basis for the federal political agenda in Germany over the next four years.

The Coalition Government has made some important labour law decisions, which will affect many private companies in Germany. The implementation of a statutory minimum wage of €8,50 per hour, a statutory quota of 30% women on supervisory boards in private companies and new regulations for the employment of third party personnel (e.g. a work contractor (an entity providing services to the principal company) and temporary workers) have now been agreed upon under the coalition agreement.

  1. Statutory minimum wage

The implementation of a statutory minimum wage of €8,50 per hour will take effect from 2015. Collective bargaining agreements with lower minimum wages will only be possible for a transitional period of two years. A commission will meet on a regular basis to decide about future changes to the statutory minimum wage in Germany.

  1. Quota of women on supervisory boards in private companies

From 2016, there will be a fixed quota of at least 30% women on supervisory boards of stock market listed private companies and on supervisory boards of private companies, which are subject to full board level co-determination.

This statutory quota will apply to stock-market listed companies in Germany such as joint stock companies (AG), European joint stock companies (SE) and limited joint-stock partnerships (KGaA). The quota will also apply to companies, which are subject to mandatory board level co-determination under the German Co-determination Act, which includes joint stock companies, limited joint-stock partnerships, limited liability companies (GmbH) or co-operatives (Genossenschaften) with more than 2, 000 employees. The statutory quota is unlikely to apply to companies under the German One-Third Co-determination Act unless they are stock market listed. However, the final wording of the new law will be subject to additional changes in the legislative process.

  1. Work contractors and temporary workers

The Coalition Government also agreed to regulate the employment of third party personnel e.g. work contractors or temporary workers.

The engagement of work contractors will be restricted by new legislation. Sanctions for so called “sham service contracts” will be strengthened in order to prevent circumvention of employment relationships and mandatory employee rights. In cases of sham service contracts, the new legislation assumes that the work contractor’s employees have a direct employment relationship with the principal.

The assignment of temporary workers under the German Temporary Workers Act will be limited to a maximum period of 18 months, unless otherwise regulated by a collective bargaining agreement or works council agreement. Temporary workers shall also receive equal payment compared to the regular workforce of the principal employer if the assignment of the temporary worker exceeds 9 months.