AR 1 - Arbeitsrecht 1 (Englische Version)

1.1 The Subject Matter Regulated by Labor Law

Labor law does not encompass all types of human work; for example, it does not regulate the work of self-employed professionals such as lawyers. Instead, labor law primarily governs the situation in which the majority of economically active individuals (approximately 90%) in our society earn their livelihood: by working as employees in the service of another, the employer. An employer can be a natural person (business owner), but more commonly, it is a legal entity under private law (such as a corporation or limited liability company), public law (federal, state, or municipal government), or a partnership (general or limited). Two fundamental aspects characterize this situation:

The employer retains the authority to define, within certain limits, the content, purpose, nature, manner of work, and working hours, and can issue instructions for these purposes. This is due, in part, to the fact that in a normally organized, specialized economic enterprise, an individual’s work is meaningful only in the context of other contributions, and thus someone must coordinate the integration of individual work into the overall work process through directives.

The immediate results of the work benefit the employer. Therefore, the work performed by the employee is for the benefit of another; it is service to someone else. The employer bears the responsibility and the economic risk for production and sales, ensuring that the work is economically effective. Since the employee cannot control the work process in which they are integrated and does not have a direct influence on the economic success of their work, it is not justifiable for the employee to bear the economic risk directly. This situation is prevalent in all countries with industrial modes of production, regardless of their economic and social order. It is not created by the legal system but is rather a pre-existing condition shaped by it.

In the Federal Republic of Germany, labor law also encounters living conditions influenced by the legal and social system. Therefore, the subject matter to be regulated by labor law is not entirely independent of the legal order; it is partially “legally generated.” The integration of labor law in the new federal states of Germany was possible only with concurrent adaptation of other legal and economic conditions.

The legal and economic system of the Federal Republic is characterized by the principles of a market economy and private ownership of the means of production.

Under the principle of a market economy, economic processes (the nature and quantity of production and prices) are determined by market rules, particularly by supply and demand. The contrast to this is a planned economy (central economic planning), in which the state sets the decisive parameters, particularly the nature and quantity of production, as well as the prices, either directly or significantly influences them through approval requirements.

In a market economy, the wages and salaries of employees are also considered costs (“human as a cost factor”). Who works under what conditions and for whom is subject to the private decisions of the parties involved (freedom to contract and structure). Demand for and supply of labor thus determine the compensation that can be paid or obtained. On the other hand, the state has no direct influence over who works in a specific company and what they earn there. To assess this situation fairly, it must be taken into account that it is essential for an individual employee to find a job to make a living, and for this purpose, there are typically only a few employers in the immediate vicinity. In contrast, the employer can decide not to employ individual employees, but usually has a much wider selection of potential candidates.

The individual employee is economically and socially weaker; therefore, when establishing the employment relationship, the employer typically has a bargaining advantage. If left solely to the play of supply and demand, it would be difficult for the individual employee to achieve reasonable working conditions, as the employer, for various reasons, is interested in keeping labor costs as low as possible, particularly for competitive reasons.

Private ownership of the means of production results in the situation where individuals who want to work but require physical tools (spaces, machinery, materials, vehicles) depend on another, who has control over these means and makes them available. Consequently, the employer, as the owner of the means of production, has the power to calculate the employee’s wages and salaries in a way that enables them to earn a profit from the value creation contributed by the employees. Since the means of production require capital investment—partially with their own funds, but to a large extent, with borrowed funds provided by banks—and since a portion of the profit is reinvested in capital, this forms the essential characteristic of the capitalist economic system.

The conflicting interests that need to be balanced are the focus of labor law:

The employer aims to produce as cheaply as possible, preferring lower wages, while employees seek higher wages.
Employers do not wish to pay wages without work, whereas employees expect compensation even when they cannot work.
Employers desire the flexibility to reduce or replace personnel, while employees seek job security.
Employees are concerned with safe equipment and facilities to prevent accidents, whereas employers may resist safety regulations that increase production costs or complexities.
Employers seek broad authority to issue directives, especially on the company’s economic aspects, while employees are interested in limiting directive powers and participating in crucial decisions or making them themselves.

However, the principles of a market economy and private ownership of means of production do not solely determine our legal and social system. The fundamental constitutional decisions for democracy and a welfare state (Art. 20 Abs. 1 GG) also play a significant role in shaping this framework. They mandate a balance of the described conflicting interests.

The welfare state principle prevents unrestrained capitalism and free utilization of production capital because it would adversely affect the socially weaker individuals. It requires essential social safeguards, and the majority of the population demands further social protections, even beyond what is strictly necessary under the welfare state principle. Consequently, labor law is tasked with providing extensive protection to employees.

While the democracy principle initially applies only to the state sphere, it has political implications for the economy. It justifies demands for employee participation in companies, which restricts the owners’ control over the means of production (Art. 14 Abs. 1 S. 2 and Abs. 2 GG).

To summarize, the life situation that labor law regulates can be described as follows: in an industrial society, most gainfully employed individuals are employees working for others (employers). They are subject to instructions and work for someone else’s benefit, without bearing the direct economic risks of their labor. In the Federal Republic of Germany, the integration of labor into the production process and compensation are generally subject to market-based rules, and ownership of the means of production is in the hands of business owners. These factors give rise to the conflicting interests that labor law addresses.

The principles of the welfare state, democracy, and resulting political movements, leading to the social market economy as the Federal Republic’s economic model, demand a balance of interests that particularly considers employees. Therefore, the purpose of labor law is to compensate for or alleviate the disadvantages faced by economically and socially disadvantaged employees in contractual negotiations and performance resulting from the market economy.

1.2 Scope of Labor Law Employees and Employers, Employment Contracts, and Employment Relationships

German labor law governs the legal relationships between individual employees and employers (individual labor law), as well as the relationships between employee and employer coalitions and the representation bodies of employees and the employer (collective labor law). Labor law originated as a means of protecting employees, and it continues to primarily serve the purpose of employee protection. Despite efforts and provisions outlined in the Unification Treaty to establish a labor code, there is still no comprehensive codification of labor law in place.

Regulations can be found in the following legal sources:

European law
Statutes
Collective bargaining agreements for sectors and individual companies
Works agreements and service agreements (public service)
Individual employment contracts

It is important to note that judicial decisions, often referred to as “judge-made law,” do not constitute a legal source as they are not legally binding. However, in practice, judge-made law plays a significant role in labor law, especially in areas that lack statutory regulation, such as labor dispute law.

1.3 The Concept of an Employee in the Legal Sense of Labor Law

The concept of an employee is fundamental to the scope of labor law. Labor law protections are only applicable to employees, and these protections for employees are quite extensive. Additionally, liability for causing damage in labor law is significantly limited compared to other contractual agreements. However, not every individual who provides labor or services to others through a private contractual relationship is considered an employee in the legal sense. The law does not provide a universally applicable definition of the term “employee,” even though this term is used in various laws. According to the Federal Labor Court, the basic criteria are that the individual provides dependent and externally directed services to others under a private law contract in exchange for remuneration (Federal Labor Court ruling of August 20, 2003 – 5 AZR 610/02, NZA 2004, 39).

The first requirement for qualifying as an employee is that there must be a private contractual agreement between the employer and the employee. Therefore, the following individuals are not considered employees:

Civil servants, judges, and soldiers. Their public law service relationships are established by administrative acts and regulated by specific laws. However, workers and employees in the public sector are considered employees.
Inmates, individuals in security detention, and others working in an institution under a public law power relationship.
Spouses and children who provide labor in the household or business of their spouse or parents. An exception applies when the extent of their involvement goes beyond family law obligations, in which case an implied employment contract may exist in individual cases.
Individuals who act as members of an association and have sufficient protection through their membership rights.
The legal relationship between employable individuals receiving assistance and the service provider based on § 16(3) sentence 2 of the Social Security Code II (so-called “one-euro job”) is not an employment relationship but rather a public law relationship. Therefore, the assistance recipient is not entitled to remuneration (Federal Labor Court judgment of September 26, 2007 – 5 AZR 857/06).

For a long time, the employment contract between the employer and the employee was considered a subset of the service contract under § 611 of the German Civil Code (BGB), even though it was not explicitly mentioned there. It was only in 2017 that the legislator introduced the employment contract as a distinct type of contract, specified under § 611a BGB.

In a service contract, the service provider commits to providing the promised services in exchange for remuneration. This allows the employment contract to be distinguished from contracts for specific work and agency contracts:

Unlike an employment contract between an employee and employer, in a contract for specific work (§ 631 BGB), the contractor owes a specific result. How the contractor achieves this result can be self-determined. In contrast, the employee only needs to provide their labor, and the employer determines the time, method, and place of work.
In an agency contract (§ 662 BGB), the agent works without remuneration, while the service provider can request remuneration.

Distinguishing between an employment contract and an independent service contract is not always straightforward. § 84(1) sentence 2 of the Commercial Code (HGB) provides a guideline for differentiating self-employed commercial agents from employees. According to this provision, an individual is considered self-employed if they can largely determine the organization of their work and their working hours freely. In contrast, an employee is someone who is personally dependent.

The employment relationship differs from that of an independent contractor based on the degree of personal dependence the service provider has. Economic dependence is neither required nor sufficient to establish an employment relationship. Employees are integrated into the employer’s work organization, primarily through their subordination to the employer’s instructions. In particular, a work relationship exists for employees who are unable to freely shape their work activities or determine their working hours.

Examples of individuals considered employees include:

Field sales representatives who have relative freedom in choosing their work locations, usually within specific geographic areas.
Employees with flexible working hours who can determine their individual working hours to some extent.
Telecommuting employees who can perform their work from home using a computer.
Chief physicians, who, while mainly free in their profession, are integrated into the organization of hospital operations.

Examples of individuals not considered employees include:

Partners in partnerships, who are not employees and provide services to promote the partnership’s goals based on the partnership agreement. They are generally not personally dependent, as they possess partnership shares and are involved in decision-making within the partnership.
Legal entities that act through their officers (managing directors of a GmbH or board members of a stock corporation). The officers or members of governing bodies perform employer functions for the company. As such, they are generally not considered employees but rather engage in an independent service relationship with the company. If an employee is appointed as a managing director, they may lose their employee status in case of doubt.

In determining whether an individual is an employee or a self-employed contractor, various criteria may need to be considered. In some cases, employers may refer to employees as freelancers to circumvent labor law protections and social insurance obligations. This misclassification can lead to individuals being deemed “bogus” self-employed. However, the designation used in the contract is not decisive. Rather, the actual implementation of the contract is more important.

For example, if a law firm owner assigns cases to a lawyer who must work in external law firm offices during specified working hours, the lawyer may be classified as an employee due to their significant dependence, despite being labeled as a freelancer in the contract.

In some cases, it may be necessary to consider additional criteria to differentiate between an employment contract and an independent service contract. Some factors that support the classification of an individual as an employee include:

The absence of personal capital investment
Lack of an independent work organization
No utilization of their own auxiliary personnel

1.4 Concept of the Employer

The question of who constitutes an employer can be answered swiftly and straightforwardly. There is no statutory definition of the term. An employer is any person or institution that employs at least one employee. The status of an employer is primarily shaped by the right of direction, through which the employer can more precisely determine the concrete obligations of the employee regarding the nature, place, and time of work.

An employer can be:

A natural person (e.g., sole proprietor, private individual).
A legal entity under private law (e.g., a stock corporation, limited liability company, incorporated association).
A legal entity under public law (e.g., federal, state, municipality, religious community).
An unincorporated association (non-incorporated association, civil law partnership).
A partnership (general or limited partnership).

In the Works Constitution Act, the concept of the employer is used in two ways: on one hand, the employer is the contractual partner of the employee, and on the other hand, the employer is an organ of works constitution. In this context, the terms “entrepreneur” and “employer” are interchangeable and merely refer to different legal relationships, functions, and activities of the same person.

1.5 Applicability of Labor Law to Specific Groups of Individuals

1.5.1 Persons Similar to Employees

A person similar to an employee is someone who, like an employee, is economically dependent on a client but is not personally dependent like an employee due to the lack of integration into a company’s organization and the essentially free determination of their time. A person similar to an employee is a self-employed entrepreneur. The distinction from employees is thus based on the degree of personal dependence. Persons similar to employees are not as personally dependent as employees because of their lack of integration into a company’s organization and their essentially free determination of time. The feature of economic dependence replaces personal dependence and being bound by instructions. Additionally, the economically dependent individual must, in terms of their overall social position, be similarly in need of social protection as an employee. The aforementioned features primarily apply to homeworkers and sales representatives who can only work for one employer due to contractual agreements or the scope of their activities. Someone who, in a service or work contract or a similar legal relationship, is economically dependent and provides services or works personally and primarily without the involvement of employees is thus similarly in need of social protection as an employee.

Additional examples of persons similar to employees include:

Artists
Writers
Employees of audio and television broadcasting, as well as
Sales representatives, especially single-company representatives with low income. However, they are considered employees if, on average, they have not earned more than 1,000.00 euros per month based on the employment relationship, including commissions and compensation for expenses incurred in the regular course of business, during the last six months of the employment relationship (Federal Labor Court, decision of October 24, 2002 — 6 AZR 632/00, NZA 2003, 668).

Certain provisions of labor law are applicable to the contractual relationships between an entrepreneur and a person similar to an employee due to their need for social protection. However, the applicability of individual labor laws or legal regulations to other types of relationships apart from employment relationships must be expressly specified on a case-by-case basis (Federal Labor Court, decision of May 8, 2007 — 9 AZR 777/06, BB 2007, 2298).

Examples of corresponding legal regulations include:

According to § 5 (1) of the Labor Court Act (Arbeitsgerichtsgesetz), persons similar to employees have access to labor courts.
They are also entitled to the legal minimum vacation of 24 working days, as stated in § 2, sentence 2 of the Federal Vacation Act (Bundesurlaubsgesetz).
Based on various state laws, persons similar to employees may also be entitled to educational leave.
According to § 12a of the Collective Agreement Act (Tarifvertragsgesetz), the employment conditions of persons similar to employees can be regulated by collective agreement. Such collective agreements primarily exist for freelance employees in the journalism sector at broadcasting companies.
The contractual relationships of sales representatives who work exclusively for one employer can also be subject to minimum working conditions as per § 92a of the Commercial Code (Handelsgesetzbuch).

However, the extended notice periods in accordance with § 622 of the Civil Code (Bürgerliches Gesetzbuch, BGB) also apply to so-called “persons similar to employees” (Regional Labor Court of Cologne, decision of May 29, 2006 — 14 (5) Sa 1343/05).

The Employee Protection Act and the special termination provisions in § 9 of the Maternity Protection Act and the Ninth Book of the Social Code (Sozialgesetzbuch, SGB IX) do not apply. The Continued Remuneration Act (Entgeltfortzahlungsgesetz, EFZG), which regulates the right to payment in cases of illness-related incapacity to work and on public holidays, is also not applicable to persons similar to self-employed workers. Since persons similar to employees are not covered by the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG), the works council does not need to be consulted in the case of corresponding terminations. However, the employer is obliged to regularly inform the works council about the use of other individuals working in the company but not in an employment relationship (§ 80 Abs. 2 Satz 1 BetrVG), such as freelance workers and persons similar to employees.

1.5.2 Individuals Engaged in Homework

A homeworker is someone who works in a self-selected place of work on behalf of others for remuneration. An implicit characteristic is that the work is of a straightforward nature. This can also include simple clerical work as homework. A defining feature of homework is that the homeworker is economically dependent on their client but remains personally independent. They can freely determine their working hours and the extent of their work. Therefore, in the legal context of labor, they are not considered employees. Labor law does not, therefore, generally apply to homework arrangements. Nevertheless, it is always necessary to examine the specific labor laws or collective agreements to determine whether and to what extent they also apply to homework arrangements.

Examples of regulations that equate homeworkers with employees:

Homeworkers are included in the definition of employees under the Works Constitution Act (Betriebsverfassungsgesetz) in accordance with § 5 (1) sentence 2 BetrVG.
For disputes between the client and individuals engaged in homework, the labor court is competent, as per §§ 2, 5 (1) sentence 2 ArbGG.
They are entitled to leave and holiday pay as per § 12 BUrlG.
Homeworkers are subject to maternity protection laws according to § 1, 9 MuSchG.
There is a right to homeworker supplements under § 10 EFZG.
On holidays, remuneration must be continued according to § 11 EFZG.
Job security for severely disabled homeworkers is covered by § 127 (2) SGB IX.

Individuals engaged in homework are additionally protected by the Home Work Act (Heimarbeitsgesetz, HAG) due to their economic dependence. This includes provisions related to:

Occupational safety, §§ 10, 11 HAG.
Hazard protection, §§ 12 – 16a HAG.
Wage regulations and wage protection, §§ 17 – 27 HAG.
Job security according to §§ 29, 29a HAG.

To make a termination of a homeworker arrangement effective, proper consultation with the works council is mandatory under § 102 BetrVG, as homeworkers are part of the group protected by the Works Constitution Act.

1.6 The Employment Contract

The employment contract is a mutual agreement through which the employee commits to providing the promised work, and the employer commits to providing the agreed-upon compensation (wage) for that work. The initial stages of forming the contract create a special relationship between the parties, which leads to specific obligations such as obligations to provide information, care, and confidentiality.

The principle of contract freedom generally applies to the conclusion of employment contracts. This means that parties are free to decide whether, with whom, with what content, and in what form they want to enter into the contract. Employment contracts can typically be concluded informally. However, since the enactment of the Employment Proof Act (Nachweisgesetz), employees have the right to written documentation of the essential terms and conditions applicable to them. Nevertheless, a formal requirement can be established, for example, through a works agreement or a collective agreement.

1.7 Concept of the Employment Relationship

An employment relationship is a legal relationship that arises from a legally effective employment contract between an employee and an employer, essentially focusing on the exchange of work performance and remuneration. An employment relationship exists from the moment when there is a legal obligation for the complete or partial execution of the employment contract.

Case Study “Commencement of the Employment Relationship”:

Employer T and caregiver A enter into a contract on 02/01/2022, in which A is to begin work on 04/01/2022. A falls ill on 03/30/2022 and is unable to work for 4 weeks. Is she entitled to continued wage payment during her illness?

Solution:

A is not entitled to continued wage payment during illness. Although there is an effective employment contract, an employment relationship only exists starting on 04/01/2022. Additionally, the performance of the employment relationship through work commencement is a prerequisite for wage continuation during illness.

1.8 Manual Workers and Salaried Employees

Distinguishing between manual workers and salaried employees varies between social security law and labor law. In social security law, there is no longer a clear separation between manual workers and salaried employees. In labor law, although the division of employees into the categories of manual workers and salaried employees is partly still defined in the law and especially in collective bargaining agreements, there are no longer any legal distinctions between these two groups in labor law, except for the legal concept of executive employees. Unequal treatment of manual workers and salaried employees without a justifiable reason is considered a violation of the principle of equality.

A manual worker is an employee who primarily earns their livelihood through physical labor. They provide their physical labor to an employer in exchange for compensation, which is typically referred to as wages. Manual workers are generally skilled laborers or other employees engaged in physically demanding work.

Salaried employees are employees who primarily perform intellectual (office-related, administrative, higher technical, predominantly managerial, or otherwise elevated) tasks. The remuneration for salaried employees is provided in the form of a salary, usually as a fixed monthly amount, in contrast to the hourly wages typically agreed upon for manual workers.

1.9 Executive Employees and Their Legal Status

In the legal definition according to § 5 (3) of the Works Constitution Act (BetrVG), the identity of executive employees is explicitly determined. According to this definition, an executive employee is someone who, based on their employment contract and their position in the company or establishment:

Is authorized to independently hire and dismiss employees who work in the company or department (§ 5 (3) sentence 2 No. 1 BetrVG), or
Holds general power of attorney or procuration, and the procuration is not insignificant in relation to the employer (§ 5 (3) sentence 2 No. 2 BetrVG), or
Routinely performs other tasks that are essential for the existence and development of the company or establishment and require special experience and knowledge, either making decisions essentially free from instructions or significantly influencing decisions (§ 5 (3) sentence 2 No. 3 BetrVG).

Most commonly, these are referred to as senior non-union employees. A senior non-union employee is someone employed in a company where a collective bargaining agreement is in effect. However, the senior non-union employee enters into an individual employment contract with the employer. Their compensation exceeds the highest pay group of the relevant collective bargaining agreement. The defining characteristic of this group of salaried employees is that they have responsibilities and qualifications exceeding those required for the highest salary group under an applicable collective bargaining agreement. However, senior non-union employees are not automatically considered executive employees.

Executive employees have a unique legal status in several respects:

The Works Constitution Act (BetrVG) does not apply to executive employees unless the BetrVG expressly provides otherwise. They have neither active nor passive voting rights in works council elections.
The law regarding speaker committees (SprAuG) includes participation rights for executive employees.
Although the Protection Against Unfair Dismissal Act (KSchG) applies, the criteria for justifying a termination are significantly more lenient. The employment relationship can be terminated upon the employer’s request with a severance payment during the protection against unfair dismissal process.
Executive employees are exempt from the Working Hours Act (Arbeitszeitgesetz), but they are entitled to overtime pay if paid according to a collective bargaining agreement or slightly above it.
For the effectiveness of a fixed-term employment contract, it is generally sufficient for executive employees to receive financial compensation upon termination.
Executive employees are not subject to collective bargaining agreements.
When terminating an executive employee, the works council is only required to be informed, and a failure to meet this obligation does not affect the termination.

2 Legal Structure of Labor Law

Labor law is typically divided into individual labor law and collective labor law, according to its areas of regulation.

2.1 Individual Labor Law

Individual labor law pertains to the part of labor law that regulates the legal relationships between the employer and individual employees. It encompasses aspects such as the creation, content, disruptions, transfer, and termination of employment relationships.

Firstly, there are various laws that apply to all employees within their respective subject matter:

Employment Protection Act (Kündigungsschutzgesetz or KSchG)
General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz or AGG)
Working Time Act (Arbeitszeitgesetz)
Continued Payment of Remuneration Act (Entgeltfortzahlungsgesetz or EFZG)
Federal Vacation Act (Bundesurlaubsgesetz or BUrlG)
Employment Confirmation Act (Nachweisgesetz or NachwG)
Part-Time and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz or TzBfG)
Commercial Code (Gewerbeordnung) — §§ 105 to 110 apply.
Occupational Safety Act (Arbeitssicherheitsgesetz or ASiG)
Workplace Protection Act (Arbeitsschutzgesetz or ArbSchG)
Maternity Protection Act (Mutterschutzgesetz or MuSchG)
Federal Parental Allowance and Parental Leave Act (Bundeselterngeld- und Elternzeitgesetz or BEEG)
Youth Employment Protection Act (Jugendarbeitsschutzgesetz or JArbSchG)
Social Code IX (Law for the Severely Disabled)
Workplace Protection Act (Arbeitsplatzschutzgesetz or ArbPlSchG)
Temporary Employment Act (Arbeitnehmerüberlassungsgesetz or AÜG)
Civil Code (Bürgerliches Gesetzbuch or BGB)
Nursing Time Act (Pflegezeitgesetz)
Employee Invention Act (Arbeitnehmererfindungsgesetz or ArbNErfG)

Additionally, there are special laws that apply to specific groups of employees depending on the legal characteristics of the employer:

Those who provide commercial services in commercial enterprises (the employer must be a merchant as defined by the German Commercial Code or HGB) are classified as commercial employees, and §§ 59 ff. HGB apply.
Miners and mining employees are subject to special provisions under the Federal Mining Act (Bundesberggesetz), §§ 51 ff.
Seafaring crew members are governed by the Seamen’s Act (Seemannsgesetz).

2.2 Collective Labor Law

Collective labor law relates to the law governing labor organizations (unions and employer associations) and workforce representation (works councils and staff councils). This includes labor disputes, collective agreements, the Works Constitution Act, and co-determination rights.

Collective labor law deals with legal relationships in which a group (hence the term “collective”) of employees is affected, rather than an individual employee. The term “collective” can encompass various groups of people, including all employees in a company or establishment, or specific groups like all severely disabled employees. Well-known examples include labor dispute law, where labor unions and employer associations face each other, as well as legal relationships arising from collective agreements or works council elections. This field can be further divided into two major areas: “Collective Agreement Law” and “Works Constitution Law.”

2.2.1 Collective Agreement Law

Collective autonomy is a constitutionally protected right of labor unions and employer associations, enabling them to independently negotiate collective agreements. Collective agreements are a significant source of employment conditions for many workers in Germany. A collective agreement is typically negotiated between labor unions and employer associations, and occasionally between labor unions and a single employer.

An agreed-upon collective agreement can also apply even if it has been declared generally binding in accordance with § 5 TVG (Collective Agreement Act). This is particularly important because a generally binding collective agreement applies even if an employer or employee is not affiliated with a labor union or an employer association, meaning all employers and employees within the agreement’s scope are bound by its terms. The Federal Ministry of Labor and Social Affairs maintains a list of generally binding collective agreements on its website.

2.2.2 Works Constitution Law

Works constitution law governs the collaboration between the employer and the workforce of a company, represented by the elected works council. Works constitution law essentially regulates the intra-company relationship between the employer and the workforce.

A fundamental principle of the Works Constitution Act is the cooperative collaboration between the employer and the works council. This collaboration occurs in concert with labor unions and employer associations present in the company. The objective is to work for the benefit of the employees and the company.

Section 2 of the Works Constitution Act states:

“Employers and works councils must work together in a spirit of mutual trust and in cooperation with the labor unions and employer associations represented in the company in accordance with the applicable collective agreements.”

The works council plays a crucial role in this context. According to § 1 of the Works Constitution Act, companies with a usual minimum of five eligible voters, of whom three are eligible for election, must elect works councils. The works council is elected by the employees and is responsible for ensuring that the laws, regulations, collective agreements, and company agreements that benefit the employees are observed and implemented. It is also involved in social, personnel, and economic matters. These participation rights are divided into co-determination rights and participation rights.

The most important laws related to works constitution law include:

§ 9Abs. 3 of the Basic Law (Grundgesetz)
Speaker Committee Act (Sprecherausschussgesetz or SprAuG)
Codetermination Act (Mitbestimmungsgesetz or MitbestG)
Montan Codetermination Act (Montan-Mitbestimmungsgesetz or MontanMitbestG)
Codetermination Supplementary Act (Mitbestimmungsergänzungsgesetz or MitbestErgG)

3 Sources of Labor Law and Design Factors, and Their Hierarchy

Despite some efforts and the provision in the Unification Treaty to create a unified labor code, there is still no uniform codification of labor law. As a result, the content of employment relationships can depend on various legal sources and design factors. Therefore, it is necessary to establish their hierarchy, which is as follows, from the highest to the lowest design factor:

European Primary Law and Secondary Law
German Constitutional Law
Mandatory Labor Law Acts
Collective Agreements
Collective Agreements with Discretionary Labor Laws
Works Agreements
Employment Contracts (including general employment conditions, company practices, and the principle of equal treatment under labor law)
Discretionary Labor Laws
Employer’s Right of Direction

In principle, the higher-ranked regulation takes precedence over lower-ranked ones, a concept known as the hierarchy principle. However, the hierarchy principle does not apply when a lower-ranked basis of entitlement is more favorable to the employee, known as the principle of favorability. According to the principle of favorability, the lower-ranked regulation is applied when its content is more favorable to the employee. While the principle of favorability is legally stipulated only in § 4 (3) TVG, it is widely considered to be applicable throughout labor law.

Example:

According to a collective agreement, all employees are entitled to 30 days of annual leave. However, Employee A’s employment contract specifies 32 days of leave. Although the collective agreement is of higher rank, in this case, the provision in Employee A’s employment contract applies due to the principle of favorability.

Within the same rank, there is no room for the hierarchy or favorability principles. In cases of competition among sources of the same rank, the specialty principle applies, meaning the more specific norm takes precedence over the more general norm, regardless of the chronological order. When no regulation is more specific, the displacement principle or order principle is applied, in which the newer regulation replaces the older one.

Example:

The employment contract grants Employee A 27 days of annual leave, the in-house collective agreement specifies 26 days, and the industry-wide collective agreement specifies 28 days. However, the works agreement prescribes 30 days of leave. The hierarchy of design factors is as follows:

I. Statute: § 3 (1) BUrlG — at least 24 working days, Collective Agreement: 26 or 28 working days Works Agreement: 30 working days Employment Contract: 27 working days II. In resolving competition issues considering the hierarchy and favorability principles alone, Employee A would be entitled to 30 working days of paid leave according to the works agreement. However, the works agreement is invalid due to a violation of § 77 (3) BetrVG.

III. Between the in-house collective agreement and the industry-wide collective agreement, there is competition at the same rank. Consequently, the in-house collective agreement prevails over the industry-wide collective agreement under the specialty principle. There is no room for the application of the principle of favorability. Thus, the collective agreement provides a legal entitlement to 26 working days of leave. Nevertheless, the individual contractual agreement in the employment contract is more favorable, entitling Employee A to 27 working days of paid leave based on the principle of favorability.

4 Individual Labor Law Factors

4.1 European Law

European law is gaining increasing practical significance in labor law, with a distinction between primary and secondary community law.

4.1.1 Primary EU Law

Primary law constitutes the central legal source of European law in the narrower sense. It consists of treaties concluded between the member states. The most important primary legal treaties today are the Treaty on European Union (EU Treaty) and the Treaty on the Functioning of the European Union (TFEU). The Treaty establishing the European Atomic Energy Community (Euratom Treaty) is still valid. Also included in primary law are the protocols attached to these treaties, which regulate specific issues but are legally equivalent to the treaties.

Examples of primary European law provisions with relevance to labor law:

Article 157 TFEU prohibits not only direct but also indirect discrimination on grounds of sex concerning pay, unless such discrimination is objectively justified and unrelated to sex discrimination. Indirect sex discrimination occurs when a gender-neutral rule results in a considerably larger number of women being affected compared to men, which is primarily the case when part-time employees are treated less favorably in comparison to full-time employees (see also § 4 (1) Part-Time and Fixed-Term Employment Act). In case of a violation of Article 157 (1) TFEU, there is a right to obtain the withheld benefits. According to consistent case law of the ECJ and BAG, there is no claim for overtime supplements due to lack of discrimination against women as defined in Article 157 TFEU if the regular working hours of a full-time employee are not exceeded.
Article 45 et seq. TFEU guarantee the freedom of movement for workers of the member states. They caused a sensation, especially through the “Bosman” ruling, which declared invalid the foreign player clauses and transfer rules of football associations. The right to invoke freedom of movement under Article 45 TFEU is excluded in purely “internal” circumstances because in such cases, it is not EU law but the internal legal system of the member state that is decisive.
Article 49 et seq. TFEU guarantee the freedom of establishment, while Article 56 et seq. TFEU ensure the freedom to provide services. These provisions have gained practical importance in recent times, particularly due to cross-border employee deployment, the Posted Workers Act, and so-called “wage loyalty” regulations (awarding contracts only to companies paying the locally agreed wage) in cross-border service provision.

4.1.2 Secondary EU Law

Secondary law (law derived from primary law) comprises legal acts adopted by the institutions of the European Union or the European Atomic Energy Community on the basis of primary law. Secondary law must not conflict with primary law. In the event of a breach of primary law, the European Court of Justice can declare secondary law invalid.

Article 288 TFEU provides for the following legal acts:

Regulations
Directives
Decisions (binding provisions in individual cases)
Recommendations and opinions (non-legally binding)

EU Regulations, as per Article 288 (2) TFEU, constitute directly applicable law in every member state without the need for national transformation. However, the Council may only adopt EU Regulations based on a specific authorization basis in the TFEU (e.g., Article 46).

EU Directives, according to Article 288 (3) TFEU, are addressed to individual member states and impose an obligation to achieve specific regulatory objectives within a certain period by enacting appropriate legal norms. EU Directives generally only become effective within national law through national legislative action.

Examples of the implementation of EU Directives in national law include:

The General Equal Treatment Act (AGG), which came into force on August 18, 2006
§ 613a of the German Civil Code (BGB)
The Proof of Employment Act (NachwG)
The Occupational Health and Safety Act (Arbeitsschutzgesetz)
Amendments to the Working Time Act (ArbZG)

The practical importance of anti-discrimination directives is evident, particularly in cases related to the prohibition of discrimination under § 7 (1) AGG, which has replaced the sex-specific discrimination prohibition of § 611a BGB a.F. (former version), women’s quota regulations, access for women to service involving the use of firearms, and the prohibition of discrimination against severely disabled employees under § 81 (2) SGB IX, which refers to the AGG due to the specifics involved.

4.2 Constitutional Law

Labor law, as a protective right for employees, is particularly committed to the social welfare principle of the Basic Law (Grundgesetz), so constitutional law plays a significant practical role in labor law as a legal source subordinate only to EU law. All state or collective legal norms are null and void if they violate the primary constitutional law, especially fundamental rights. Fundamental rights are primarily defensive rights against state power. Therefore, they do not have direct applicability among private law subjects. Nevertheless, fundamental rights indirectly affect private law, particularly in labor law, through their significance in interpreting laws and specifying general clauses and general principles (so-called “indirect third-party effect” of fundamental rights). However, according to prevailing doctrine, Article 9 (right to form trade unions) constitutes a directly effective fundamental right.

The following fundamental rights are indirectly significant in labor law:

Article 1 (Human Dignity)
Article 2 (Freedom of Individual Development)
Article 2 (Right to Life and Physical Integrity)
Article 2 (Freedom of the Person)
Article 3 (Equality Principle)
Article 3 (Equality of Men and Women)
Article 4 (Freedom of Belief, Conscience, and Religion)
Article 5 (Freedom of Expression)
Article 6 (Protection of Marriage and Family)
Article 12 (Freedom to Choose Occupation, Workplace, and Vocational Training)
Article 9 (Freedom of Association)

Example: Right to Personal Integrity

Through the right to personal integrity, labor law protects employees against intrusions into their personal privacy. An employee must, in exceptional cases, accept measures that infringe upon their personal rights when justified by overriding operational interests. Generally, an applicant does not have to disclose prior convictions, especially if they have already been expunged from the Federal Central Register. However, if an employee applies for a position of trust, they must provide information about non-expunged prior convictions that raise doubts about their suitability for the intended position (e.g., prior convictions related to financial or property offenses).

Example: Equality Principle of Article 3 of the Basic Law

In labor law, the general principle of equality of Article 3 (1) of the Basic Law has led to the customary legal concept known as the “equal treatment principle” or “principle of equal treatment” (Gleichbehandlungsgrundsatz). The general principle of equality applies directly between the parties to an employment contract. It obligates employers not to treat individuals or groups of employees unfairly. Unequal notice periods for workers and salaried employees are in violation of Article 3 (1) of the Basic Law and are therefore invalid. An employer who provides a Christmas bonus to all employees cannot exclude an individual employee from this benefit. However, an employer may provide lesser benefits to non-union employees who do not fall under a collective agreement due to the absence of union membership. The lower compensation for non-union employees is based on a legitimate reason, as these employees have not submitted to the collective power of the concluding unions.

In labor law, the specific principle of equality of Article 3 (2) of the Basic Law is of particular importance and is also found in other regulatory levels (e.g., General Act on Equal Treatment, AGG). The equality principle of men and women is especially relevant in terms of access to employment. However, a violation of the equal treatment requirement does not grant a disadvantaged employee the right to employment but only an entitlement to compensation for damages.

Example: Freedom of Belief, Conscience, and Religion

If an employee refuses to perform a job duty due to religious reasons, this can justify termination by the employer. However, no other reasonable job alternatives must be available. An employee hired as a “sales assistant” in a retail store must anticipate receiving work tasks that involve handling alcoholic beverages. If they claim to be religiously hindered from performing tasks contractually required of them, they must inform the employer about the specific religious reasons and indicate which tasks they are unable to perform. If the employer, within the scope of its operational organization, has the opportunity to provide the employee with work that complies with the religious limitations, it must assign this work to the employee (BAG, decision of February 24, 2011, — 2 AZR 636/09).

4.3 Labor Laws

Labor laws are generally federal laws in most cases. Regional variations affecting labor law are mainly found in public holiday regulations and regulations related to educational leave. Deviating from labor law regulations is generally permissible to the advantage of the employee (the so-called principle of favorability). However, laws can only be deviated from to the detriment of the individual employee if the law is dispositiv, i.e., subject to individual agreement. Whether a law is mandatory or dispositiv can usually be determined from the law itself (e.g., § 619 of the German Civil Code, BGB) or must be determined through interpretation, where the protective purpose of the norm is decisive (e.g., the provisions of the Maternity Protection Act and the Protection Against Unfair Dismissal Act are mandatory, as the protection of the persons involved is paramount). Regarding dispositiv norms, a distinction is made between collective bargaining dispositiv norms and party dispositiv norms. Collective bargaining dispositiv norms can be deviated from in collective bargaining agreements, even to the detriment of the employees (e.g., shorter notice periods than the statutory ones can be agreed upon, § 622 (4) BGB). Party dispositiv norms, which can also be deviated from in individual employment contracts to the detriment of the employee, are rare (e.g., § 613, § 616 BGB).

However, if a collective bargaining agreement uses collective bargaining dispositiv norms, in most cases, the less favorable collective agreement can also be adopted in individual employment contracts. By including the collective agreement in the individual contract, the legislative purpose of the law is met because the regulation was negotiated by the collective bargaining parties (e.g., § 622 (4) sentence 2 BGB). This ensures the balance of power between the negotiating parties.

Example: The Collective Agreement for the Hotel and Restaurant Industry in State X prescribes a notice period of three days during a one-month probationary period. This regulation deviates from the statutory notice period during the probationary period stipulated in § 622 (3) BGB, to the detriment of the employee, and can only be agreed upon by the parties to the collective bargaining agreement, as per § 622 (4) sentence 1 BGB. In the scope of the collective agreement, non-union employers can also adopt this regulation in individual employment contracts, as stipulated in § 622 (4) sentence 2 BGB. However, they must adopt the entire regulations and not just parts of it.

4.4 The Collective Bargaining Agreement

A collective bargaining agreement is a contract between a trade union and, on the other side, an employers’ association or an individual employer. This contract regulates the working conditions of the employment contracts covered by it. According to § 1 (1) of the Collective Bargaining Agreement Act (Tarifvertragsgesetz, TVG), it states:

§ 1 Content and Form of the Collective Agreement

(1) The collective agreement regulates the rights and obligations of the collective agreement parties and contains legal provisions that can regulate the content, conclusion, and termination of employment relationships, as well as operational and works constitution law matters.

While collective agreements on the employer side can be concluded by both an employers’ association and an individual employer, on the employee side, only trade unions can conclude collective agreements. For example, a works council or a group of employees cannot conclude collective agreements. They are not “tariffähig.”

Depending on who has concluded a collective agreement on the employer side, a distinction is made between a mandatory collective agreement (= sector-wide collective agreement) and a voluntary collective agreement (= company-specific collective agreement). The sector-wide collective agreement is concluded by the employers’ association. It covers all businesses whose owners are members of the employers’ association. The company-specific collective agreement, on the other hand, is concluded by an individual employer. It is only valid for the operations of this employer.

There are three different reasons why a collective agreement applies to an employment relationship:

The collective agreement applies because the employee is a member of the trade union that has concluded the collective agreement, and at the same time, the employer is bound by the collective agreement because they are either a member of the employers’ association that concluded the collective agreement (in the case of a sector-wide collective agreement) or themselves a party to the collective agreement (in the case of a company-specific collective agreement). This is called the “collective agreement effect.”
The collective agreement applies because the employee and the employer have agreed in the employment contract that a specific collective agreement should apply to the employment relationship. This is known as the application of the collective agreement through individual contractual agreement. In this case, it does not matter whether the employee is a member of a trade union or whether the employer is bound by the collective agreement, i.e., whether they are a member of an employers’ association or have concluded a collective agreement.
The collective agreement is declared universally binding by the Federal Minister of Labor and Social Affairs. This is known as the application of the collective agreement through universal binding. Under certain conditions, the Federal Minister can take this measure when the “normal” application of the collective agreement (the first possibility) is insufficient to ensure uniform working conditions in a specific industry and adequate protection for employees. In this case as well, it does not matter whether the employee is a member of a trade union or whether the employer is bound by the collective agreement.

When considering whether the norms of a collective agreement can be deviated from in an individual employment contract, it depends on which of the above-mentioned three reasons the collective agreement is applicable to the employment contract in the first place.

In the first scenario (collective agreement effect), deviation from a collective agreement through the employment contract is generally not possible because the collective agreement directly and mandatorily applies to the employment relationship. A deviation is permissible in exceptional cases if the collective agreement allows for such deviation (the so-called opening clause), or if the deviation is provided in a regulation that is more favorable to the employee than the collective agreement.

These principles also apply when the collective agreement is universally binding (third possibility). Employees can only deviate from a collectively agreed upon universally binding collective agreement if such deviation is allowed in the collective agreement, or if the deviation is more favorable to the affected employee than the collective agreement from which they are deviating.

However, things are different when the collective agreement applies through an individual contractual agreement (second possibility). In this case, your employer cannot easily deviate from the collective agreement because that would violate the employment contract. Nevertheless, the employer can modify the employment contract in agreement with the employee to deviate from the collective agreement. The employer also has the option to free themselves from the collective agreement by issuing a change notice. The change notice first terminates the existing employment relationship (and thus the application of the collective agreement). If, in the next step, there is an agreement on the continuation of the employment relationship under changed conditions — without the collective agreement — then the collective agreement has effectively been excluded through the change notice or change agreement.

As mentioned earlier, the exclusion of the collective agreement by the employer must be in compliance with the law. Employees who enjoy protection against dismissal can accept the offer associated with the change notice with a reservation and have the legality of the contract change reviewed by the labor court.

4.5 The Works Agreement (Betriebsvereinbarung)

Another peculiarity in German labor law is the works agreement (Betriebsvereinbarung). A works agreement is an agreement between an employer and a works council (Betriebsrat) that regulates and shapes the company’s organization, co-determination rights, and individual relationships between the employer and employees. Works agreements have direct and mandatory legal effect (§ 77 Abs. 4 S. 1 BetrVG), making them the “laws of the company.”

Works agreements can be categorized as either mandatory or voluntary, depending on the matters they address. Mandatory works agreements are those that deal with issues where the works council has “genuine” co-determination rights. This occurs when disputes between the employer and the works council about co-determination rights require a decision by the conciliation board (Einigungsstelle). On the other hand, voluntary works agreements allow for comprehensive regulation since the boundaries between social, personal, and economic co-determination are often fluid (Federal Labor Court (BAG) ruling of 07.11.1989, DB 90, 1724).

The scope of works agreements is limited by the primacy of the law and collective agreements, as set forth in §§ 77 Abs. 3 and 87 Abs. 1 BetrVG. According to the provision lock (Regelungssperre) in § 77 Abs. 3 S. 1 BetrVG, issues such as wages and other working conditions that are typically regulated by collective agreements cannot be the subject of a works agreement. However, this does not apply when § 77 Abs. 3 S. 2 BetrVG permits the conclusion of supplementary works agreements if a collective agreement explicitly allows it (known as an opening clause or Öffnungsklausel).

Works agreements should be distinguished from an informal agreement, known as a “regelungsabrede,” between an employer and an employee concerning company issues. Unlike works agreements, a regelungsabrede does not have the same regulatory effect (BAG from 14.02.1991, DB 91, 1990).

4.6 The Employment Contract

An employment contract (Arbeitsvertrag) under German law is an agreement establishing a private-law contractual relationship for remunerated and personal service provision. Originally, the employment contract was not explicitly defined in the German Civil Code (BGB). It was always considered a subcategory of the service contract under § 611 BGB, without being explicitly mentioned there.

However, the formulation “In the case of an employment relationship that is not an employment contract” in § 621 BGB (notice periods in service contracts) and the regulation in § 622 BGB (notice periods in employment contracts) made it clear that the legislator distinguishes between the (free and general) service contract and the (specific) employment contract.

With the inclusion of § 611a BGB, the legislator has now clarified that the service contract continues to be regulated under § 611 BGB, while the specific provision of § 611a BGB applies to employment contracts.

Nevertheless, the following still holds:

Every employment contract is a service contract, but not every service contract is an employment contract.

The distinction between an employment relationship and a general service contract is important because the rights and obligations of the parties differ based on the legal classification.

The most significant difference between an employment contract and a service contract is that the service contract is based on a relationship between two equal partners, whereas an employment contract establishes an employer-employee relationship.

An employer-employee relationship is characterized by the employer having a position of power over the employee. This position of power includes the right to issue instructions (§ 106 GewO, § 611a BGB), demand specific work results, and control the work process.

In contrast to a free service relationship, the employment relationship established by the employment contract is marked by the employee’s personal dependence on the employer. The employee is essentially unable to determine their own activities and working hours, as a self-employed individual can (§ 84 Abs. 1 sentence 2 HGB). The employee is instead integrated into the employer’s work organization and is typically subject to the employer’s instructions regarding the content, execution, time, duration, and location of the work.

Due to this dependency, special protection is required. Therefore, labor law is often referred to as the special law or protective law for employees.

Employees are subject to the special protective regulations of labor law, which do not apply to the self-employed, who “can essentially determine their activities and working hours freely.”

The employment contract is, therefore, a special form of the service contract, which is why specific provisions of the employment contract, in addition to the general service contract regulations, apply. The provisions of the employment contract take precedence over the general service contract provisions.

Based on the employment contract, the employee is obliged to provide the contractual work performance. In return, the employer must provide compensation. The amount of compensation is determined by the agreement in the employment contract or an applicable collective agreement. If no compensation is agreed upon, the usual compensation for comparable work must be paid, as per § 612 BGB. Additionally, other obligations can be specified in the employment contract. When the content, time, and place of the work are not explicitly defined in the employment contract, their determination falls under the employer’s right of direction, which they can exercise reasonably.

As a whole, the employment relationship is flanked by labor law regulations (protection against dismissal, limitation of fixed-term contracts, labor protection, working time laws, works constitution laws, etc.). These regulations partially limit the discretion of the contracting parties. This is the result of the structural power imbalance between the contracting parties and the social-state intention that is based on the fact that the majority of the population earns their livelihood through dependent work.

Employment contracts, in general, do not require a specific form. They can be formed both in writing and orally, through a handshake, or even by simply commencing the work. Nevertheless, in terms of evidence, entering into a written employment contract is generally recommended. There is a mandatory legal requirement for written form when concluding a fixed-term employment contract. A violation of this requirement has far-reaching consequences. To protect the employee, and often to the dismay of the employer, the employment contract is not null and void but is considered concluded for an indefinite period under the law (as explained in relation to fixed-term employment contracts). Similarly, valid collective agreements may require the written conclusion of an employment contract. However, violations of this requirement typically do not lead to the invalidity of the employment contract, as they are usually of a declaratory nature.

If employment contract terms are pre-formulated for a large number of contracts, they generally fall under the law of general terms and conditions as per §§ 305 et seq. BGB.

4.6.1 The Proof of Employment Law (Nachweisgesetz)

Even when no written employment contract is established, particular attention should be paid to the Proof of Employment Law (Nachweisgesetz).

The Proof of Employment Law itself is not new. However, in practice, it wasn’t given much importance because a violation of the employer’s obligation to record the actual contractual conditions was previously without sanctions.

This has now changed abruptly.

In order to implement the Directive on Transparent and Predictable Working Conditions in the European Union (EU 2019/1152, “EU Transparency Directive”), the German legislature amended the Proof of Employment Law (NachwG) as of August 1, 2022.

The goal is to make employment contracts more transparent, which is why far more details must now be put in writing than before.

Additionally, for the first time, there is now a possibility of sanctions for a violation, specifically a fine of up to €2,000. A violation is now treated as an administrative offense.

In the case of a violation of the Proof of Employment Law, the employment contract remains valid, but it can be costly for the employer. As a result, it can be expected that employers will increasingly strive to comply with the Proof of Employment Law’s requirements in the future.

The previous obligations of the employer included:

The employer had to put the most important contractual conditions in writing and hand them to the employee in writing within one month after the start of the employment relationship. This included the following points:

Names and addresses of the contracting parties
- Commencement of the employment relationship
- Duration of the employment relationship in the case of fixed-term contracts
- Place of work
- Description of the job or activity
- Composition and amount of the remuneration
- Working hours
- Duration of annual leave
- Notice periods
- A general reference to collective agreements, works agreements, and service agreements applicable to the employment relationship.

From August 1, 2022, the following additional points must also be documented in writing:

End date of the employment relationship
If applicable, the employee’s choice of workplace
If agreed upon, the duration of the probationary period
Composition and amount of the remuneration, including compensation for overtime, surcharges, allowances, bonuses, and special payments, each to be stated separately along with the due dates and method of payment
The agreed-upon working hours, rest breaks, and rest periods, and, in the case of shift work, the shift system, shift rotation, and requirements for shift changes
If agreed upon, the possibility of ordering overtime and its conditions
Any entitlement to employer-provided further training
If the employer promises the employee a company pension through a pension provider, the name and address of this pension provider; the obligation to provide proof is waived if the pension provider is obliged to provide this information.
The procedure to be followed when terminating the employment relationship by the employer and employee, at the very least the requirement for written notice and the deadlines for giving notice, as well as the deadline for bringing a legal action challenging the termination; § 7 of the Protection Against Unfair Dismissal Act is also applicable to the deadline for bringing a legal action challenging the termination in the event of an incomplete proof of notice.

These new obligations only apply to new hires from August 1, 2022. Unlike the previous regulation, the written record containing the information about the names and addresses of the contracting parties, the remuneration and its composition, and working hours must be available to the employee on the first day of work. The remaining records must be provided within seven calendar days at the latest.

Employees hired before August 1, 2022, only need to be informed in writing about their essential employment conditions if they request it from the employer. Then, a deadline of seven days applies. Information about vacation, company pensions, mandatory further training, the termination procedure, and applicable collective agreements must be made available within one month at the latest.

4.6.2 General Terms of Employment

General terms of employment refer to the standard employment contracts unilaterally established by the employer and used as the basis for individual employment contracts. They also include so-called general promises or commitments made by the employer to the workforce. With these commitments, employees acquire individual contractual rights to the promised benefits, which they can either accept or reject. An explicit acceptance by each employee is not necessary according to § 151 of the German Civil Code (BGB).

In the context of labor law, it is understood that general promises can only relate to provisions that favor the employee. In the relationship between a general promise and a (deviating) works agreement, the principle of favorability applies. A general promise results in the creation of genuine contractual rights for employees regarding the promised benefits, which are to be treated in the same way as claims that are documented in a written contract. Without a voluntary or revocation clause, the employer can no longer unilaterally withdraw the obligation to provide these benefits.

If an employer wishes to revoke employees’ entitlement under a general promise, they can generally only do so by entering into corresponding modification agreements with the employees or by issuing effective amendment notices (Änderungskündigungen).

4.6.3 Company Practice

Company practice is not governed by statute; it was developed by labor courts. Company practice refers to the regular repetition of specific employer behaviors from which employees can conclude that they will be granted a benefit or concession over the long term. Company practice thus leads to an improvement in the employee’s contractual rights and therefore to a substantive change in the employment contract. Company practice can give rise to various claims, often involving payment claims.

For example:

An employer pays its employees a Christmas bonus equal to one month’s salary in 2018, 2019, and 2020, even though there is no obligation to do so. In 2021, due to poor economic conditions, the employer decides not to pay the Christmas bonus. Meanwhile, employees have gained a legally enforceable claim to an annual Christmas bonus equal to one month’s salary due to company practice.

A requirement for company practice is that the entitlement is neither regulated by collective nor individual law (BAG 24.11.2004 — 10 AZR 202/04). In addition, company practice must apply to a significant number of employees or at least to a distinct group of employees. The concept of company practice contains a collective element. The mere provision of benefits to individual employees does not, on the principles of company practice, imply a binding intent by the employer to extend the benefits to all employees or at least to all employees in a distinguishable group (BAG 11.04.2006 — 9 AZR 500/05). If an employee’s entitlement is contingent on this requirement, an individual employment contract may result in an implied agreement (BAG 21.04.2010 — 10 AZR 163/09).

There is no universally applicable rule specifying at what point an employee can expect that they will receive a benefit once they fulfill the criteria. The three-time repetition principle, where an obligation becomes binding after being granted three times without reservation, was developed for bonuses paid annually to the entire workforce. For other benefits, the assessment should be based on the type, duration, and frequency of the benefits. The evaluation of the relationship between the number of repetitions and the duration of the practice should consider the nature and content of the benefits. Higher requirements are imposed on the number of repetitions for less significant benefits than for more important ones (BAG 28.05.2008 — 10 AZR 274/07).

An entitlement from company practice can also arise when payments made to a group of employees are not disclosed to other employees and are not generally communicated within the company (BAG 17.11.2009 — 9 AZR 765/08). The establishment of company practice is not precluded if the employment contract contains a (simple) written form clause requiring any changes to the contract to be in writing. According to a decision by the Federal Labor Court, even a double written form clause (“Changes to the employment contract must be in writing. This also applies to this written form clause”) cannot avoid company practice (BAG 20.05.2008 — 9 AZR 382/07, NJW 2009, 316).

However, if the employer made the payment as “voluntary,” with varying amounts, or with the disclaimer “without acknowledging any legal obligation,” the employee could not expect it to continue.

Nevertheless, high standards are set for the voluntary reservation clause.

For example:

An employer paid a Christmas bonus equal to one month’s gross earnings each year from 2002 to 2007, without explicitly stating a reservation at the time of payment. In 2008, the company refused to make the special payment due to the economic crisis. It relied on the following clause in the employment contract: “To the extent that the employer grants benefits not required by law or collective bargaining agreement, such as bonuses, allowances, vacation pay, gratuities, and Christmas bonuses, they are provided voluntarily and without any legal obligation. They are, therefore, revocable at any time without special notice.” The Federal Labor Court found the contract clause to be unclear and ambiguous. It could also be understood to mean that the employer wanted to voluntarily commit to providing the benefit. Furthermore, revoking the benefit as reserved would require that a claim had been established in the first place. The uncertainties in the provision were detrimental to the employer. Since the employer had not explicitly referred to the voluntary nature of the payment in previous Christmas bonus payments, the practice of company practice remained in effect in the following years, despite the unclear contractual provision (BAG 08.12.2010 — 10 AZR 671/09).

Under the previous jurisprudence of the Federal Labor Court, company practice that had already arisen could also be changed by a so-called “negative company practice.” Negative company practice occurs when the employer indicates over a period of three years that it intends to treat company practice differently from before. In this case, the old company practice was mutually changed to reflect the new approach if employees did not object to the new practice during this three-year period. However, the Federal Labor Court has now ruled, in a departure from its previous case law, that three-time unopposed acceptance of a bonus paid by the employer under a reservation of voluntariness can no longer lead to the loss of a contractual entitlement established through company practice due to the three-year limitation clause under § 308 No. 5 of the German Civil Code (BGB) (BAG, March 18, 2009 — 10 AZR 281/08).

If an entitlement has arisen from company practice, it exists alongside other conditions in the employment contract. It can no longer be unilaterally withdrawn or changed. Only through an amendment notice (Änderungskündigung) can the established company practice be eliminated, following the principles of § 2 of the German Protection Against Unfair Dismissal Act (KSchG). The termination of the practice of company practice, like any other termination, must be justified on social grounds.

4.6.4 The Principle of Equal Treatment in Labor Law

The principle of equal treatment in labor law is a principle developed by case law and is not generally governed by statutory law. The general principle of equal treatment in labor law is derived from the constitutional principle of equal treatment in Article 3 of the Basic Law (Grundgesetz, GG) in Germany. Specific forms of the equal treatment principle are, however, often found in the law, such as in Sections 7, 11, 12 of the General Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz, AGG), § 612a of the German Civil Code (Bürgerliches Gesetzbuch, BGB), § 75 of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG), and § 4(1) of the Part-Time and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz, TzBfG).

The principle of equal treatment requires the employer to treat employees or groups of employees who are in a comparable situation equally when applying a self-imposed rule. It prohibits arbitrary discrimination against individual employees within the groups and creating groups for reasons unrelated to work (BAG 13.09.2006 — 4 AZR 236/05). When the principle of equal treatment applies, it has a claim-establishing effect, meaning that, like with company practice, it becomes part of the employment relationship.

The reasons for differential treatment must be disclosed by the employer, especially when the employee requests better treatment. If these reasons are only presented during a lawsuit, they will not be taken into account.

However, the principle of equal treatment does not oblige the employer to treat all employees the same. Employers are not prevented from differentially compensating employees for the same work based on individual employment agreements (BAG 13.09.2006 — 4 AZR 236/05). This means that the preferential treatment or financial benefit of one employee cannot be extended to others through the principle of equal treatment. There is, in fact, contractual freedom in terms of compensation, which is only limited by legal obligations such as anti-discrimination laws and collective agreements.

Examples of violating the principle of equal treatment:

The employer differentiates in Christmas bonus payments based on the state of the job market. Employees in professions with an oversupply do not receive a Christmas bonus.
Married female employees are excluded from certain bonuses or salary increases, citing their husband’s income.

4.6.5 Clauses in Employment Contracts and Their Significance

Not only in general business dealings, with banks and insurance companies, or when buying a car, fine print can often be found in contracts. It is increasingly present in employment contracts as well. This can be in the form of standard employment contracts that employers regularly use, or the fine print may be added to supplement the contract.

4.6.5.1 Forfeiture Clauses

Forfeiture clauses, also known as exclusion clauses, ensure that the claims of both the employer and the employee automatically expire if they are not asserted within a certain time frame. These clauses can prevent disputes over matters (e.g., overtime worked) that date back several years from arising after the termination of the employment relationship. The Federal Labor Court (Bundesarbeitsgericht, BAG) accepts forfeiture clauses only under strict conditions.

As early as March 2, 2004 (1 AZR 271/03), the BAG ruled that forfeiture clauses are only effective if they not only affect the employee but can also lead to the forfeiture of the employer’s claims. In a judgment on May 25, 2005 (5 AZR 572/04), the BAG commented on forfeiture periods in standard employment contracts. The BAG found it permissible to structure forfeiture clauses in two stages. This means that in the first stage, all claims expire if they are not asserted within a specific period against the other party. In the second stage, claims expire if they are not filed in court within a specific period after being rejected by the other party. According to the BAG, the second-stage period must be at least 3 months. However, the BAG did not specify the maximum duration of the forfeiture period for the first stage of the forfeiture clause. According to the jurisprudence of the Regional Labor Courts, it is also assumed here that a duration of less than three months would render the forfeiture clause ineffective (Regional Labor Court of Hamm — 10 Sa 1113/08).

Example wording for a two-stage forfeiture clause:

Claims arising from an employment relationship will expire if they are not asserted in writing within three months of becoming due. If the other party rejects the claim or does not respond within two weeks of the claim being asserted, the claim will expire if it is not asserted in court within three months of the rejection or the expiration of the deadline.

4.6.5.2 Repayment Clauses

Repayment clauses are contractual agreements in which employees are obligated to repay specific financial benefits to the employer if the employment relationship ceases at a particular time or if it is terminated by the employee.

Repayment clauses can generally be found in employer-formulated employment contracts, provided:

They are not concealed (otherwise, they are not incorporated into the contract as “surprising clauses” under § 305c(1) of the German Civil Code (Bürgerliches Gesetzbuch, BGB).
They are formulated clearly and understandably (otherwise, they are invalid due to their lack of clarity under § 307(1), Sentence 2 of the BGB).
They do not impose an unreasonably long commitment on the employee in relation to the benefit received, as this would violate the employee’s freedom to choose a profession (Art. 12 of the Basic Law, GG) and constitute “unreasonable disadvantage” under § 307(1), Sentence 1, § 307(2) of the BGB, making the clause invalid.

4.6.5.3 Repayment Clauses for Training Costs

When employers sponsor an employee’s training with the aim of furthering their skills or qualifications, they often want to ensure that the employee does not resign shortly after completing the training, especially if the employee moves to a competitor. To prevent this, employers typically include contractual clauses requiring the employee to repay the training costs if the employee voluntarily terminates the employment before the end of a specified binding period or provides a cause for termination by the employer. This is generally permissible.

Practical Example:

A regional savings bank association allowed an employee to participate in a program to become a certified savings bank specialist. According to the agreement, the employer covered the course and examination fees and granted the employee paid time off to participate in the program. In return, the employee committed to reimbursing the employer for these expenses if they left the employment at their own request before completing the training. The Federal Labor Court did not find any legal objections to the repayment clause. This did not conflict with the fact that the further education, initiated by the employer, was not continuous but consisted of several training phases separated by time. This arrangement was not arbitrary and did not constitute an unreasonable disadvantage for the employee. As a result, after discontinuing the studies after eight months, the employee had to repay the pro-rated costs (BAG, January 19, 2011 – 3 AZR 621/08).

Apart from training costs, gratuities are often subject to repayment clauses in practice. For instance, the employee agrees to repay a special payment, such as a Christmas bonus, if they terminate the employment by resignation before March 31 or June 30 of the following year. In this case as well, the repayment clause aims to motivate the employee to remain with the employer and not terminate the employment too quickly.

In the context of a training program, the agreed-upon repayment clauses typically detail the specific costs borne by the employer, making it clear to both parties what is meant by “training costs.” The costs subject to repayment usually include the total costs for the employer, such as course fees and/or the salary paid to the employee during their leave, travel and accommodation costs, or other expenses, such as teaching materials.

A binding period is then agreed upon, obliging the employee not to terminate the employment relationship for a certain number of years after completing the training, depending on the specific terms. Sometimes, a longer binding period may be agreed upon, although, in practice, binding periods exceeding five years are rare.

The employee’s repayment obligation is generally structured incrementally. At the beginning of the binding period, the full amount is required to be repaid, but as time passes and the binding period progresses, the repayment obligation decreases gradually. For example, if the agreement specifies a total cost of €20,000 and a 24-month binding period, the amount to be repaid one year into the binding period may be reduced to €10,000, and after 18 months, it may be reduced to €5,000.

In past decisions, labor court jurisprudence has generally limited the duration of the binding period in favor of the employee. That is, it has often determined that the required binding period imposed on the employee is too long. The decision is substantially based on how long the training program financed by the employer, which includes paid leave from work, lasted (i.e., the duration of the course when coupled with paid leave).

In addition to the course duration, the costs borne by the employer and whether the employee has gained long-term benefits on the job market due to the training play a role. Subject to the condition that the employee is released from work for the duration of the training, the following guidelines apply:

A two-month training period typically justifies a binding period of no more than one year in most cases.
A course lasting three to four months can, in most cases, justify a binding period of up to two years.
If the training program spans six to twelve months, in most cases, a binding period of no more than three years is permissible.
For programs lasting more than two years, a binding period of up to five years is legally possible. However, this is an absolute maximum, rarely allowed in very exceptional cases.

These rules apply under normal circumstances. They do not apply when the costs borne by the employer are exceptionally high or low or when the benefits to the employee are exceptionally significant or minor.

4.6.5.4 Repayment Clauses for Bonuses

For a substantial bonus, the employer can expect the employee to refrain from resigning for a relatively longer period. If the bonus is relatively small, the employer can anticipate less extended job loyalty.

Specifically, labor court jurisprudence has established the following rules:

For so-called small bonuses, i.e., special payments of up to approximately 100.00 EUR, the employer cannot expect the employee to refrain from termination in the following year at all.
If the bonus is more than 100.00 EUR but less than one month’s salary, a binding period can be agreed upon until March 31 of the following year at the latest. In other words, the employee can contractually be required to repay the bonus if they resign earlier than March 31 of the following year. This means that an employee who receives a bonus of, for example, half a month’s salary towards the end of the year can resign in a way that they leave the employment exactly by March 31 of the following year without being obligated to repay the bonus (BAG, judgment of June 9, 1993, 10 AZR 529/92; BAG, judgment of May 21, 2003, 10 AZR 390/02).
If the bonus amounts to a full month’s salary or more, a binding period can be agreed upon until June 30 of the following year at the latest. In this case, the employee can be obliged to repay the bonus if they resign earlier than June 30 of the following year. Therefore, it is legally permissible to frequently find the agreement in practice that a bonus equal to a full month’s salary is repayable if the employee terminates the employment “on March 31 of the following year or earlier.”
Repayment clauses binding the employee for a period beyond June 30 of the following year are generally considered invalid.

For decades, it was the established jurisprudence that when a contractually agreed-upon binding period exceeded the legally permissible duration, it was to be reduced to the legally permissible scope. This correction of an excessive and hence inadmissible repayment agreement is called the “validity-preserving reduction” of a contract clause. It focused on the duration of the agreed-upon binding and did not affect the amount of the costs to be repaid by the employee.

Example:

In a repayment clause relating to training costs, a three-year binding period for the employee to the employment contract is agreed. The employer had incurred a total of 20,000 EUR for the training, during which the employee was released from work with continued pay for two months. According to the above-mentioned guidelines, such a binding period is too long, and the legally permissible duration should be at most one year. Under previous jurisprudence, this repayment clause was “reduced” to its legally permissible content, i.e., maintained to the extent of a valid binding of one year. However, this did not change the amount of the payment obligation. If the employee, in this example, left the employer six months after the completion of the training, i.e., halfway through the legally permissible binding, they had to repay 10,000 EUR.

Since the Schuldrechtsreform (Law Reform of Obligations) came into force on January 1, 2002, the legal provisions for reviewing general terms and conditions (AGB) are also applied to employment relationships. As a result, the jurisprudence of the Federal Labor Court concerning the validity-preserving reduction of excessive repayment clauses has become questionable. This jurisprudence, by favoring the employer who drafted the repayment clause, protected the employer from the risk of the total invalidity of the clause.

In contrast, it has been the predominant view in AGB law that the user of general terms and conditions bears the risk of their compliance with legal requirements. In other words, the validity-preserving reduction was rejected by the overwhelming jurisprudence.

With a ruling on January 14, 2009 (3 AZR 900/07), the Federal Labor Court abandoned its previous jurisprudence and held that a repayment clause presented by the employer as general terms and conditions is entirely invalid if the agreed-upon duration of the binding in it exceeds what may be legally permissible based on labor court jurisprudence. This judgment, concerning a repayment clause related to training costs, can be analogously applied to repayment clauses concerning bonuses. Hence, in repayment clauses related to bonuses as well, the employer will bear the full risk that the binding period resulting from the clause remains within the limits of what is legally permissible. If these limits are exceeded, the clause is not to be restricted to its permissible scope but is entirely invalid.

4.6.5.5 Right of Revocation Clauses

The Federal Labor Court declared contract clauses that grant the employer the right to revoke extra-contractual salary components at any time without restrictions as void (BAG, January 12, 2005, 5 AZR 364/04). However, for existing contracts, due to considerations of legal protection, an additional contract interpretation can be taken into account. In this interpretation, it is examined what the contracting parties would have agreed upon if they had known the invalidity of the revocation clause. If the interpretation shows that the parties would have agreed to revocation under certain circumstances, and those circumstances exist, then the revocation is permissible, as long as it doesn’t encroach upon the core area of the employment relationship protected by § 2 of the Kündigungsschutzgesetz (Protection Against Unfair Dismissal) (with a limit at additional remuneration components of 25% to 30% of the total compensation).

4.6.5.6 Penalty Clauses Pursuant to §§ 339 ff. BGB

The Federal Labor Court generally considers agreements on penalty clauses in the fine print of employment contracts to be permissible (BAG, December 18, 2008, 8 AZR 81/08). Concerns can potentially arise about the amount of the penalty, as the highest court objected to a penalty of three gross monthly salaries as an unfair disadvantage to the employee (BAG, September 25, 2008, 8 AZR 717/07). The Hanover Regional Labor Court similarly ruled on January 23, 2004, against a penalty of 20 gross daily earnings for an employee during the probation period (16 Sa 1400/03).

Furthermore, the courts demand that the amount of the penalty must be fixed from the outset. Therefore, a clause that stipulates a gross monthly salary as a penalty but the employee’s salary consists of both a fixed compensation and a variable sales participation alongside would be considered inadmissible. This was ruled by the Berlin-Brandenburg Regional Labor Court on November 12, 2009 (25 Sa 29/09). The Federal Labor Court also viewed a provision as inadmissible, which obligated an employee to pay a penalty if they gave the employer cause for immediate termination. The court saw this as an inappropriate overprotection of the employer (BAG, August 14, 2007, 8 AZR – 973/06).

Transfer Provisions

A transfer provision modeled after the provisions of § 106 GewO (German Trade Regulation) is effective. This applies even when no specific reasons for the transfer are given. Another question is whether the exercise of the transfer right complies with the reasonable discretion under § 315 BGB (German Civil Code) in each individual case. However, a transfer clause is invalid under § 307(1) BGB when it does not ensure that the assignment must at least involve equivalent work. A validity-preserving reduction of the overly broad transfer clause is not applicable.

4.7 The Employer’s Right of Directive

The right of directive, also known as the right of instruction, is the employer’s right, based on the employment contract, to issue instructions to the employee. The central provision governing the right of directive is § 106 of the Gewerbeordnung (German Trade Regulation). Through this right of determination as per §§ 315 ff. BGB (German Civil Code), the duties of the employee are specified in the contractual relationship. The right to issue instructions is vested in those who can exercise the right of directive and instruction over other employees as per § 106 of the Gewerbeordnung. Therefore, it is a derived right from the employer to concretize or influence the contractual obligation in terms of time, place, content, and manner, in whole or in part. Mere factual performance of concretization of duties is not sufficient.

The right of directive is improperly exercised if the instructions go beyond the terms of the employment contract. They must not violate any statutory prohibitions or be against public policy (§§ 134, 138 BGB). If an unlawful directive is not followed, there is no ground for termination, as the employee is not obligated to comply with an impermissible instruction. If sanctions are imposed for non-compliance with an impermissible directive, they violate the prohibition of discrimination as laid down in § 612a BGB.

The so-called expanded right of directive obligates the employee, due to their duty to avert harm, to follow the employer’s instructions in emergencies that go beyond the defined obligations in the employment contract. An emergency exists when an event is unforeseeable and avoidable, is not within the responsibility of the affected employer, and/or there is a risk of substantial financial damage.

Example:

Overtime instruction to the hotel receptionist because a busload of guests arrives later than expected due to a traffic jam.

The right of directive must be exercised according to § 106 of the GewO with reasonable discretion and is subject to judicial review. In this process, the fundamental rights of the employee must be considered, especially if the instruction affects matters subject to co-determination, in which case the works council must be consulted. If participation is omitted in such cases, the instruction is ineffective, and the employee is not obliged to follow it (theory of dual effectiveness requirement).

5 Establishment and Deficiencies in the Employment Relationship

5.1 Employer’s Questioning and Disclosure Obligations of Employees in Job Interviews

During contract negotiations between the employer and the applicant, two different sets of interests usually converge. The employer has a particular interest in gathering information about the suitability of the future employee for the intended position. The employee, on the other hand, may not want to disclose personal information to a stranger. The employee’s constitutional right to privacy guaranteed by Article 1 and Article 2 of the Basic Law (GG) is at stake.

According to general consensus, the employer is only entitled to ask questions when they have a legitimate, reasonable, and protectable interest in the answers for the employment relationship to proceed (BAG vom 07.06.1984 — 2 AZR 270/83). Such a legitimate interest exists only when the employer’s interest is so significant that it outweighs the employee’s interest in keeping personal circumstances private to protect their right to personal privacy and the inviolability of their individual sphere (BAG vom 15.10.1995 — 2 AZR 923/94, NZA 1996, p. 371).

From these principles, it follows that the employee must truthfully answer permissible questions. A false answer could potentially lead to the rescission of the employment contract under §§ 123, 142 BGB. Improper questions, on the other hand, can be answered untruthfully by the employee since not answering would be equivalent to providing a negative response, thus achieving the employer’s goal. In such cases, the employee has the “right to lie.”

Questions about Pregnancy

Generally, a female applicant is not obligated to disclose an existing pregnancy to the employer during the application process. According to the jurisprudence of the European Court of Justice, existing employment restrictions related to the specific job do not matter since European law prohibits rejecting the application of a pregnant woman for a permanent position if she cannot be employed in that position from the beginning due to a legal employment restriction. In most cases, asking about pregnancy before hiring an applicant is considered gender discrimination and a violation of the non-discrimination principle. As a result, such a question is impermissible and does not need to be truthfully answered. There is also no obligation to disclose an existing pregnancy (EuGH, Urt. v. 3. 2. 2000 – Rs C‑207/98).

Questions about Union Membership

Since the applicant’s membership in a labor organization does not affect their commitment to perform the required duties in the forthcoming employment relationship, questions about union membership are considered improper. Applicants are not required to disclose their union membership or answer such questions truthfully. An exception applies when the applicant is applying for a key position, particularly if the position demands the employer’s specific trust, in a labor union, an employers’ association, or a workers’ council.

Questions about Illnesses

Questions about illnesses are only permissible if the specific illness directly affects the applicant’s suitability for the job duties in question. In this context, the applicant is obligated to disclose their health status even without a specific inquiry from the employer if they realize or should have realized that their illness will prevent them from performing the contractually agreed-upon duties. The same applies if the applicant is currently ill at the time of the application and cannot expect to be healed by the time of employment commencement. If the applicant knows that they will be unable to work due to illness, injury, or convalescence, they must disclose this to the employer. Only questions about illnesses that could potentially affect the duties to be undertaken are permissible, not general questions about the overall health of the applicant.

Questions about an HIV Infection or AIDS

The question of an employer regarding an HIV infection and AIDS presents a unique challenge. The legal situation in this regard is evolving. It’s generally agreed that the following differentiation should be made: The question about the presence of an AIDS infection is entirely permissible since the seriousness of the disease would likely have a direct impact on the employee’s performance. As for the question about an HIV infection, the appropriateness of this inquiry depends on the effect it might have on the applicant’s job. This means that there may be a valid reason to ask in professions that deal with blood contact, such as healthcare workers, florists, and possibly pilots and professional drivers due to the absence of infection risks. However, in positions where there is no such risk, like kitchen staff, it is not appropriate to ask.

Questions about Work History

Questions about professional skills, career history, and prior employment are permissible. Particularly, in connection with the planned conclusion of an employment contract with no specific reason for termination, the employer has the right to ask the applicant whether they have previously worked for the same employer. The applicant must answer these questions truthfully.

Questions about Religion or Party Affiliation

Questions about religion or party affiliation are not permissible outside of organizations with a specific ideological or political orientation (tendenzbetrieb). Applicants do not have to answer these questions truthfully.

Questions about Criminal Records or Ongoing Investigations

In specific cases, questions about criminal records or ongoing investigations may be permissible if the nature of the job to be filled necessitates this inquiry. What matters is an objective standard, not the subjective attitude of the employer. For example, if the job involves handling money, questions about the applicant’s financial history, including past convictions for financial crimes, might be permissible.

Questions about Financial Situation

Questions about an applicant’s financial situation are only permissible to a limited extent. Applicants are not generally obliged to disclose their financial status. This obligation does not apply even when financial situations are poor, and wage garnishments have occurred. The appropriateness of questions about financial status, again, depends on the specific position being filled. These questions are supposed to be permissible when filling positions of trust, where disordered financial situations could potentially pose a threat to the employer’s financial interests.

However, the question of whether an applicant has taken an oath of disclosure about their insolvency, the existence of wage garnishments, or wage assignments, outside of special positions of trust, is not permissible solely due to the burden this imposes on the employer.

Questions about Disability

Questions about the existence of a disability are not permissible when there are no signs that the indicated disability makes the applicant’s ability to perform the contractually agreed-upon work impossible, thus justifying differential treatment under § 8 Abs. 1 AGG (German General Equal Treatment Act). While the Federal Labor Court previously considered asking about disability to be permissible even in cases of disability not related to the job’s nature (BAG 05.10.1995 — 2 AZR 923/94), nowadays, the nearly unanimous opinion is that the employer’s right to inquire about disabilities has been largely rejected (LAG Hamm 19.10.2006 — 15 Sa 740/06). § 8 Abs. 1 AGG explicitly stipulates that differential treatment due to disability is only allowed when the absence of disability is an essential and decisive professional requirement due to the nature of the job or the conditions of its performance, provided that the purpose is legitimate and the requirement is proportionate. This provision excludes the employer’s right to inquire about disabilities for the reasons that the Federal Labor Court had recognized earlier. Only when the employer’s intention is to take positive action to promote disabled individuals can the employer ask about disability under § 5 AGG. In this case, the employer must disclose the

purpose of their questions (LAG Baden-Württemberg vom 06.09.2010 — 4 Sa 18/10). However, the Regional Labor Court Hamm ruled on June 30, 2010 (2 Sa 49/10) that, within an existing employment relationship, questions about disabilities are not generally impermissible. If the purpose of these questions is to inform the employer about the intervention of protective measures benefiting the disabled employee in the event of upcoming terminations (e.g., the necessity of approval from the Integration Office before terminating the employment), then the question is allowed. If the employee refuses to provide information or knowingly provides false information, it may be precluded from relying on the lack of approval from the Integration Office when the termination is otherwise valid, at least when the Integration Office has approved a subsequent dismissal.

In summary, employers must carefully consider the nature of their questions during job interviews to ensure that they comply with applicable laws and do not infringe upon the privacy or non-discrimination rights of applicants. Asking questions about certain aspects, such as pregnancy or disability, should be approached cautiously, and employers should be aware of legal and ethical guidelines to ensure a fair and nondiscriminatory hiring process.

5.2 Costs of the Job Interview

If the prospective employer invites a candidate to a job interview, according to the Federal Labour Court (Bundesarbeitsgericht), they must reimburse the candidate for the expenses incurred, regardless of the outcome of the interview (BAG vom 29.06.1988 – 5 AZR 433/87). These expenses are referred to as reimbursement of expenses under §§ 662, 670 of the German Civil Code (BGB).

Specifically, this includes the costs of travel to and from the interview by second-class train (LAG München, vom 30.05.1985 – 9 Sa 986/84). Furthermore, if the prospective employer provides an example in their directions that includes taking a taxi from the train station to the company’s location, the candidate may also use a taxi. However, they should confirm beforehand whether such costs will be reimbursed (ArbG Köln, vom 20.05.2005 – 2 Ca 10220/04). Similar rules apply to air travel: the company must generally have agreed to cover the relevant expenses (ArbG Hamburg, vom 02.11.1994 – 13 Ca 24/94). Otherwise, a reimbursement claim in such a case is only applicable for particularly specialized positions (ArbG Wuppertal, vom 28.04.1983 – 2 Ca 926/83). Additionally, possible necessary application expenses can include those for overnight stays and meals (BAG vom 14.02.1977 – 5 AZR 171/76).

The reimbursement obligation is waived if the invitation explicitly states that interview expenses will not be reimbursed (ArbG Kempten, vom 12.04.1994 – 4 Ca 720/94). In such cases, the secondary liability of the employment agency may be considered.

6 Rights and Obligations Arising from the Employment Contract

Just like any contractual agreement under civil law, the rights and obligations stemming from the employment contract are established. According to § 611a of the German Civil Code (BGB), the employee is obligated to provide the promised services, while the employer is obligated to provide the agreed-upon compensation. From this, the duties of work and loyalty of the employee are derived.

According to § 613 BGB, the employee is required to perform their work personally unless the employment contract specifies otherwise. They cannot simply send a substitute. On the positive side, they are not obliged to arrange for a substitute, for example, in case of illness. The duty to work is the primary performance of the employee, and in return, they receive the agreed-upon compensation. The duty to work is subject to legal provisions, such as the Occupational Health and Safety Act (ArbSchG) or the Maternity Protection Act, as well as valid collective agreements and company agreements. For temporary employment contracts, special regulations of the Temporary Employment Act (AÜG) apply.

The content, scope, time, and place of the duty to work are governed by the employment contract and the employer’s right to give instructions. The employee breaches their duty to work when they do not comply with permissible instructions from the employer. Violations of the duty to work can result in a warning, and in the case of repeated violations, it may lead to immediate termination.

Example:

The employee does not show up for work (“unexcused absence”). In such a case, the employer is not obligated to pay them any compensation.

The nature of the tasks that the employee is expected to perform is often a point of dispute. In principle, the employee is only obliged to provide the work performance specified in the employment contract. However, in emergencies and exceptional situations, the concept of the duty to work is interpreted broadly. Assigning lower-paid work is generally impermissible. Provisions to this effect can be included in the employment contract. Without such an agreement, the employer must obtain the employee’s consent. Without the employee’s consent, the only option for the employer is to issue a change notice. The employee can file a claim for wrongful dismissal against the change notice.

The employee does not owe the employer a specific work result but is only obliged to work within their capabilities under reasonable conditions. In the case of poor job performance, the employer can terminate the employment relationship based on behavior or performance. However, in cases of dissatisfaction due to poor job performance, the burden of proof lies with the employer because the quality of work is often not objectively determinable. A termination based on personal circumstances due to insufficient job performance requires the employer to demonstrate before the labor court that there is a “significant impairment of the company’s interests.” A rule of thumb is that a demonstrable decrease in performance of around one-third compared to the average of other employees may be considered as significant.

In addition to the duty to work, the employee has a number of general obligations falling under the term “duty of loyalty,” which derives from the principle of “good faith.” Among other things, the employee must refrain from any actions that could impair the employer’s interests and business situation. The extent of the duty of loyalty depends on the employee’s position within the company. The higher the employee’s position in the company, the greater their duty of loyalty.

Particularly noteworthy are the following duties of loyalty:

The duty of confidentiality
The duty not to accept bribes
The duty not to engage in competition
The duty to report imminent damages
The duty of loyalty begins even during the initial stages of an employment relationship, such as when information not intended for the public is disclosed to the prospective employee during a job interview. Even after the termination of the employment relationship, a certain degree of duty of loyalty continues to exist. Contrary to common belief, the duty of loyalty does not cease with the termination of the employment relationship. Attempting to solicit clients of a former employer after the termination of the employment relationship can also violate the duty of loyalty.

General obligations of employees and employers after the termination of the employment relationship include the return of all work equipment and business documents, as well as post-contractual confidentiality obligations. If an employee is terminated with immediate effect, the employer can demand the immediate return of the provided company car. According to a judgment of the Stuttgart Labor Court, this remains true even if the employee legally challenges the termination and files a timely protection against dismissal claim. An exception only applies if the termination is obviously invalid (Stuttgart Labor Court, May 18, 2010 – 16 Ga 50/10). Business and trade secrets obtained during the course of employment must be safeguarded. Employers must retain important documents for employees until the end of the legally required statute of limitations. Generally, there is no post-employment non-competition obligation. However, such a non-competition agreement can be established in writing, typically in exchange for compensation.

Every employment relationship carries the employer’s duty of care, which requires the employer to safeguard the interests of the employee relating to the employment relationship, as demanded by good faith and taking into account the interests and concerns of both parties in accordance with the principles of good faith. The employer’s obligation to protect the economic interests of employees also applies (BAG, January 14, 2009, 3 AZR 71/07). The additional obligations of the employer under labor law are not limited to providing employees with neither false nor incomplete information (BAG, May 23, 1989 – 3 AZR 257/88). To avoid legal consequences for employees, the employer may also be required to provide suitable information on their own initiative. While it is generally true that each party must look after their own interests and seek clarity about the consequences of a proposed agreement, the self-interest of each party has its limits when it infringes on the protected sphere of life of the other party (BAG, September 23, 2003 – 3 AZR 658/02). The obligation to provide information and clarification is based on the particular circumstances of each case and results from a comprehensive weighing of interests. The employer’s duty to provide information can be particularly significant, especially when a disadvantageous agreement is concluded at the employer’s initiative and in the employer’s interest.

Taking precautions to protect employees from risks to life and health is a special obligation of the employer. The employer must at least comply with occupational health and safety regulations. The German Civil Code imposes a duty of compensation on all parties under § 823 of the BGB if, at the very least, the life, body, health, or any other right of another is unlawfully and negligently violated. The same obligation applies to those who violate a law intended to protect someone else. The Occupational Health and Safety Act is one such law. Therefore, employees have a right to compensation from the employer in the event of physical harm and a violation of such regulations.

7 Liability of Employees in Labor Law

The Federal Labor Court has established principles of employee liability, to the extent that the employee’s actions are work-related, which apply the general civil liability rules with some adjustments.

The yardstick for liability is the severity of the fault. In this regard, the Federal Labor Court differentiates as follows:

If the employee intentionally caused the damage (e.g., arbitrary damage to a machine), they must fully compensate the employer for the damage.
If the employee is grossly at fault (the Federal Labor Court equates this with “gross” negligence) in causing the damage, they must also generally pay for the full damage. However, an exception is made if it would be grossly unfair under the circumstances. Contrary to § 276 BGB (German Civil Code), gross negligence can only be assumed if the employee has committed a “subjectively inexcusable” breach of duty. Only in this case can the employee be subject to a severe personal accusation, according to the case law of the Federal Labor Court.
If the damage is caused by the employee’s moderate (normal) negligence, the damage is divided between the employer and the employee based on principles of fairness. All circumstances of the individual case must be considered.
If the employee caused the damage only slightly negligently (“slight” and “very slight” negligence = minor fault), they are not obligated to compensate the employer for the damage at all.

In contrast to the Civil Code (BGB), intent and negligence must not only relate to the breach of duty but also to the impairment of the legal interest itself.

For example, intent and gross negligence are not assumed solely because the employee disregards the employer’s instructions.

Also deviating from the liability provisions of the BGB, the employer must prove the employee’s fault, according to § 619 a BGB. The courts must also consider the employer’s contributory fault ex officio. If the employer shares blame, it will reduce liability even when the employee caused the damage through gross negligence. If the employee caused damage to a third party within the scope of work-related activities, they are liable to the third party for the full damage. However, they have a claim for indemnification against the employer, as far as they are not liable or not fully liable according to the principles mentioned. This means they can demand that the employer pay the damage to the third party up to their share of liability. If the employer goes bankrupt and, as a result, cannot pay the third party, the employee is liable for the full damage.

When an employee’s behavior leads to harm to a fellow employee, the following rules apply:

In case of property damage, the employee is fully liable. However, they have a claim for indemnification against the employer to the extent that the employer is liable as mentioned above.
For personal injuries, all liability is excluded, according to § 105 (1) SGB VII.

8 Liability of Employees for Inventory Shortages

Mankohaftung (liability for inventory shortages) is a subset of employee liability. It concerns who is responsible for the damage suffered by the employer when items, especially goods or a cash register provided to the employee, have a shortage. The contractual basis for this is typically the so-called Mankoabrede (inventory shortage agreement) between the employer and the employee.

Contractual Mankoabreden typically govern:

A reasonable distribution of the burden of proof, adapted to the characteristics of the business and the job, to the disadvantage of the employee.
The “guaranteed” responsibility of the employee for an inventory shortage, even without proof of fault, which occurred exclusively in their work and control area.

The judiciary allows such “guaranteed” Mankoabreden, where a typical employer risk is transferred to the employee, only within narrow limits. The standards are § 138 BGB (violation of good morals) and § 242 BGB (good faith). Additionally, a Mankoabrede regarding the extent of liability must be clear and unambiguous.

The employee must receive reasonable financial compensation for assuming the additional liability risk, known as Mankogeld or Fehlgeldentschädigung (shortage money or deficiency compensation). This compensation must be sufficient for the employee to cover any shortages that may occur if necessary. Otherwise, it would constitute an unreasonable disadvantage, as the employee is assuming a special risk without receiving an equivalent economic benefit.

Another requirement is that the employee has sole control and access to the money or goods entrusted to them. Only in this case, according to the jurisprudence of the Federal Labor Court (BAG), can it be reasonably expected that the employee is responsible for an inventory shortage. For example, a delivery driver cannot be held liable for an inventory shortage through a Mankoabrede if the cash registers of the vehicle are jointly managed and used by multiple delivery drivers. A Mankoabrede is also void if it results in undercutting the tariff payment. Mankogeld or Fehlgeldentschädigung is considered part of the remuneration under § 2 (1) No. 6 NachwG (Notification Act). Therefore, a Mankoabrede must be included in the employment contract.

If an inventory shortage occurs, the employee’s liability can be based on a contractual Mankoabrede, provided that the legality conditions of the Mankoabrede have been met, particularly that reasonable Mankogeld has been paid. Liability is limited to the amount of Mankogeld. In the absence of a Mankoabrede or if it is invalid, the usual contractual and tort liability of the employee is applicable. In contrast to the Mankoabrede, both contractual and tort liability require a culpable breach of duty, which means wrongful and negligent behavior by the employee. Contractual liability can be based on a positive contract breach, as well as on the inadequate fulfillment of custody and storage duties or accounting and reporting duties. Tort liability based on wrongful acts derives from § 823 BGB.

Regarding liability based on fault, the judiciary distinguishes between “independent” and “dependent” employees. In this regard, economically independent employees, who can independently manage the entrusted goods or money, are considered liable under the custody and mandate provisions of the BGB. This is justified by the presence of elements of custody and mandate in employment contracts. In contrast, economically dependent employees are only liable for inadequate performance based on general principles. In all cases, any contributory fault on the part of the employer must be considered under § 254 BGB, both in the liability based on a Mankoabrede and in the contractual and tort liability of the employee. Contributory fault of the employer is present, especially when the employer does not rectify organizational deficiencies, overburdens the employee, fails to implement security measures, neglects regular inspections and inventories, or keeps spare keys to cash registers managed by the employee without strict security measures. It is undisputed that the principles of internal damage compensation are applicable to Mankohaftung.

In case of an inventory shortage, the employer must:

Prove the existence of a valid Mankoabrede.
Establish the employee’s sole control and access to the managed cash register or goods.
Demonstrate that an effective shortage, not just a bookkeeping error, has actually occurred, and it is not due to other causes.

In the absence of a specific Mankoabrede, the employer must generally prove the employee’s wrongful behavior, the damage caused by it, and the employee’s fault (at least ordinary negligence). Regarding the mandatory risk distribution in labor law, it is disputed whether a burden of proof reversal in favor of the employee is permissible.

9 Employer Liability in Labor Law

Employers are generally held liable for damages under the same conditions as employees are liable for damages.

The employer must have:

Violated their legal obligations,
Caused harm as a result of the violation, and
Committed the violation intentionally or negligently.

If the employer is a legal entity (such as a GmbH or AG), the liability depends on the fault of the managing director (GmbH) or the board members (AG).

However, your employer’s liability is excluded when the damage:

Involves personal injury and
Can be attributed to an “insurance event” as defined by accident insurance law, and
The employer did not intentionally cause this insurance event or personal injury.

This exclusion of liability is based on § 104 (1) Sentence 1 of the Seventh Book of the Social Code (SGB VII). This provision states:

“Entrepreneurs are only obligated to compensate insured persons, who work for their companies or have another relationship to their companies that establishes insurance, and their relatives and survivors, for personal injury caused by an insurance event if they intentionally caused the insurance event or it occurred in a way insured under § 8 (2) Nos. 1 to 4.”

The reason for this exclusion of liability is that in the cases mentioned here, where the employer is not liable, the accident insurance covers the employee’s (the “insured person’s”) damage. Therefore, the employer, who finances the accident insurance through their contributions, is relieved from liability in the case of an insurance event. The exclusion of liability also applies to claims for pain and suffering.

However, for property and financial damages suffered by the affected employees, the employer’s liability is not excluded. Since statutory accident insurance does not provide compensation for such losses, the employer remains liable.

The employer is considered to have caused harm “culpably” (intentionally or negligently) not only when personal fault can be attributed to them personally but also when their “agents” (employees, independent contractors) have acted negligently and, as a result, caused harm. According to § 278 of the German Civil Code (BGB), the employer is attributed the fault of their agents as if it were their own fault.

Example:

The security guard, without thinking (negligently), hands over the key to the bike storage room to an unauthorized person, who subsequently steals an employee’s bicycle. In this case, the employer is liable due to the negligent breach of their secondary obligations under the employment contract. They must attribute the negligence of the security guard (their “agent”) as their own fault. Whether the security guard is an employee or employed by an external company is irrelevant.

In some cases, the employer or their agents may not be at fault or their fault cannot be proven. In such situations, it is questioned whether the employer might still be required to compensate for a loss suffered by their employees without any fault. For example, it is questioned how the obligation to replace worn-out or completely soiled clothing works, or whether the employer might be responsible for damages incurred due to the particular hazards of the job.

Since there is no obligation for compensation under general rules without fault, the employer’s obligation to compensate is derived from the obligation of the principal to reimburse expenses. Legally, such financial losses of the employee are not treated as damages but as “expenses” incurred by the employee, which are voluntary sacrifices of their assets. The relevant provision for this is § 670 of the German Civil Code (BGB), which states:

“If the agent, for the purpose of executing the commission, makes expenditures that he or she is justified in considering necessary under the circumstances, the principal shall be obligated to reimburse.”

According to the jurisprudence of the Federal Labor Court regarding this provision, the following rules apply: First and foremost, the employee has no claim for compensation for property damages that can be expected based on the nature and type of the work or operation. This primarily concerns damages that are inevitable or regularly occur. Such damages (such as heavily soiled or worn-out clothing) are considered “job-related.” Therefore, in the employment relationship, they are not considered “expenditures” within the meaning of § 670 BGB.

For other (non-“job-related,” but “extraordinary”) damages, there is a claim for compensation, in accordance with the application of § 670 BGB, if these damages cannot be attributed to the employee’s personal life but are within the scope of the employer’s activities, and the employee does not receive special compensation covering the risk of such damages.

Example:

In a psychiatric hospital, a patient damages a nurse’s glasses. Since this property damage is not “job-related” (but rather “extraordinary”), it can be attributed to the employer’s scope of activities, and the employee does not receive special compensation from the employer to cover the risk of such property damages caused by dealing with patients, the jurisprudence of the Federal Labor Court recognizes a claim for compensation by the employee.

According to legal precedent, the employee also has a claim for compensation for damage to their private vehicle when the employee uses the vehicle for business trips with the “approval” of the employer (i.e., “within the scope of the employer’s activities”) and does not receive special compensation covering the risk of accident-related damages. The usual reimbursement paid per kilometer, commonly referred to as mileage allowance, typically does not cover the specific risk of accident-related damages but is only compensation for ongoing costs and normal wear and tear. The use “within the scope of the employer’s activities” typically occurs when the employer would need to use their own vehicle if the employee’s vehicle were not used. If the employee’s private vehicle is not directly damaged during a business trip but while parked near the workplace between two (to be carried out on the same day) business trips, this parking is still considered use “within the scope of the employer’s activities.” In such a case, the employer must compensate the employee for the damage to their vehicle if the employee does not receive alternative compensation.

10 Termination of the Employment Relationship

An employment relationship is based on a civil law contract in the form of a continuous obligation. Therefore, all the termination circumstances that generally apply to such contracts are also applicable. However, there are usually specific labor law considerations.

Under German labor law, an employment contract can terminate due to the following reasons:

Fixed-Term Contract (Befristung):

Termination by the passage of time when the contract is only valid for a specific period. The legal regulations regarding fixed-term contracts also apply when the employment relationship is intended to commence upon the occurrence of a certain event. However, fixed-term employment contracts are only valid if there is an objective reason for the limitation or if the agreement is made with a new employee for a maximum of the first two years of the employment relationship.

Fulfillment of a Dissolving Condition (Eintritt einer auflösenden Bedingung):

While a fixed-term contract results in the termination of the employment relationship at a predetermined date or upon the occurrence of a reasonably anticipated event, a dissolving condition ends the employment relationship if an event of uncertain occurrence takes place.

A common example is the termination of the employment relationship upon the commencement of retirement benefits. This condition must be agreed upon in the relevant collective bargaining agreement or individually in the employment contract to take effect. Otherwise, the employment relationship must be terminated through dismissal or mutual agreement once the employee reaches the retirement age. Such contractual clauses are considered justifiable and valid according to consistent case law from the Federal Labor Court and are not in violation of European law, especially regarding age discrimination (ECJ, 12 October 2010 – C‑45/09). In this decision, the ECJ determined that § 10(3)(5) of the General Equal Treatment Act, which allows for an agreement to end the employment relationship without notice at a time when the employee can apply for an old-age pension, does not constitute prohibited age discrimination.

Another good example is the agreement with an actress from the television series “Gute Zeiten – Schlechte Zeiten” (in the role of Charlotte Bohlstädt) where the employment relationship would automatically end when the actress’s role in the series was no longer included.

Dissolving conditions are considered valid by the Federal Labor Court if they are justified by an objective reason. The agreement with the actress was deemed justified as an expression of artistic freedom because the role was discontinued, and the series continued without Charlotte. The automatic termination of the employment relationship through a dissolving condition was deemed valid.

Mutual Agreement for Termination (Aufhebungsvertrag):

Voluntarily ending an employment relationship is permissible. To be effective, such agreements, like fixed-term agreements and dismissals, require written form (§ 623 BGB). However, the written form does not apply to mutually agreed terminations in the form of a settlement agreement (a contract specifying the modalities for the conclusion of the employment relationship after the issuance of notice of termination to avoid negative consequences for unemployment benefits). Disputes in labor courts regarding terminations often conclude with a settlement on ending the employment relationship with payment of a severance payment. Substantively, this is also a settlement agreement. In these cases, the social security implications should be considered. Under recent case law from the Federal Social Court and the implementation instructions from the Federal Employment Agency, the signing of a termination or settlement agreement often results in a waiting period for unemployment benefits. Employees should be aware that by signing a termination agreement, they forfeit any protection against dismissal, and a subsequent legal challenge to the termination is not permitted. This applies even if the employer unexpectedly presents the termination agreement in a conflict situation. The protection that applies to door-to-door contracts does not apply here, according to current case law. Affected employees should request at least one day to think about the termination agreement and, if necessary, carefully review the agreement with legal assistance. In some cases, a dismissal without notice may be more favorable because it can be fully reviewed by a court, which is only limited in the case of a termination agreement.

Ordinary Termination (Ordentliche Kündigung):

Ordinary termination results in the end of the employment relationship through a unilateral declaration. Notice periods specified by law (§ 622 BGB), a collective bargaining agreement, or the employment contract must be observed. Notice of termination must be made in writing according to § 623 BGB.

Employee terminations are not subject to any additional requirements. However, employers in the scope of the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz) must prove grounds for the termination that justify it on social grounds. For certain groups of individuals with special protection from dismissal, the employer can only terminate their employment with good cause or with the approval of an authority. In cases with a reimbursement clause, an unpleasant consequence of employee termination may be the financial reimbursement of benefits received or expenses incurred to the employer.

Extraordinary Termination (Außerordentliche Kündigung):

Extraordinary termination can be made without notice or with notice, but it requires an important reason to be valid. It must also be issued within two weeks of becoming aware of the grounds for termination (§ 626(2) BGB). These requirements apply to both employee and employer terminations.

Amendment Termination Pursuant to § 2 of the German Protection Against Unfair Dismissal Act (Änderungskündigung gemäß § 2 KSchG):

An amendment termination is the termination of an employment relationship coupled with an offer to enter into a new contract to continue the relationship under revised terms.

Dissolution Order by the Labor Court (Auflösungsurteil durch das Arbeitsgericht):

The dissolution order is a unique aspect of labor law. The labor court can terminate an employment relationship by judgment through a declaratory action, with the requirement ort he payment of severance, if an employer‘s termination is socially unjustifiable and, therefore, ineffective. Such a decision is only possible under specific circumstances.

Rescission Pursuant to Sections 119 ff. of the German Civil Code (Anfechtung gemäß §§ 119 ff BGB):

An employment relationship can be rescinded if the party seeking to annul the contract made an error at the time of its conclusion, was threatened, or was deceived by fraudulent conduct. However, it should be noted that the deception of an employee does not give the employer the right to rescind if the deception was not illegal; in other words, the employer asked an impermissible question, and the employee had a “right to lie.”

Rescission usually retroactively annuls the contract, as if it had never existed (ex tunc). Performances made are unwound. However, employment services cannot be retroactively undone, so rescission of an employment relationship that has already been executed (i.e., a defective employment relationship) is not retroactive but operates similarly to an immediate effect like a termination without notice.

Death of the Employee (Tod des Arbeitnehmers):

The death of the employee terminates the employment relationship. The provision of work is a highly personal obligation that cannot be assumed by the heirs. Conversely, the death of the employer does not affect the existence of the employment relationship, as the heirs assume the legal position of the deceased employer.

11 Fundamental Employment Laws

11.1 The Part-Time and Fixed-Term Employment Act

The Part-Time and Fixed-Term Employment Act (TzBfG) regulates part-time employment and fixed-term employment in German labor law. The aim of this law is to promote part-time work, define the conditions for the permissibility of fixed-term employment contracts, and prevent discrimination against part-time and fixed-term employees (§ 1 TzBfG).

The first section includes general provisions such as the objectives, definitions of part-time work and fixed-term employment, as well as anti-discrimination and non-discrimination provisions. The second section regulates part-time work, specifically the employee’s statutory right to work fewer hours than the regular working hours under certain circumstances and sets minimum standards.

11.1.1 Employee’s Right to Reduce Working Hours

§ 8 TzBfG The TzBfG establishes a legal entitlement to a part-time job (§ 8 TzBfG). However, this entitlement only applies to companies with typically more than 15 employees, with the number of individuals in vocational training not being counted (§ 7 TzBfG). In other cases, all employees are assessed with a factor of 1. This significance is also provided in § 15 (7) of the Federal Parental Allowance and Parental Leave Act (BErzGG), which has also guaranteed the right to part-time work during parental leave since January 1, 2001. An entitlement to part-time employment is also included in the disability employment law since January 1, 2001. According to § 81 (4) SGB IX, disabled individuals have a right to part-time employment if shorter working hours are necessary due to the nature or severity of the disability. According to § 8 (1) TzBfG, it is only necessary that the employment relationship has existed for more than six months (waiting period). The request to reduce working hours must be made three months before the start of the requested working hours reduction (§ 8 (2) TzBfG). While the entitlement to a reduction arises only after the six-month waiting period has expired, the request for a reduction can be made three months before the entitlement begins. When requesting a reduction in working hours, the employee must also specify how the reduced weekly working hours should be distributed across the individual working days of the week (§ 8 (2) sentence 2 TzBfG). The employer must communicate the decision on this request for reduction to the employee in writing no later than four weeks before the start of the reduction (§ 8 (5) sentence 2 TzBfG). If the employer does not make this decision, the working hours must be reduced according to the employee’s request (§ 8 (5) sentence 2 TzBfG). The agreed or desired distribution of weekly working hours can be changed by the employer if the company’s interest significantly outweighs the employee’s interest in maintaining it (§ 8 (5) sentence 3 TzBfG), with the works council being involved according to § 87 BetrVG. In order to minimize administrative efforts, an application for a reduction in working hours can be submitted again at the earliest two years after the previous request (§ 8 (6) TzBfG). The request must be for an indefinite reduction. The entitlement is limited to reducing working hours at the current job, not a right to be allocated a different, available job. However, the employer can generally choose which comparable job the reduction request would best apply to. Nevertheless, he must make his decision based on reasonable judgment. The distribution proposal of reduced working hours can only be rejected for operational reasons. The employer cannot, therefore, present an arrangement that appears more convenient to him as an objection to the employee. If the employee wants an even reduction of working hours on individual days of the week, the employer cannot object by stating that he would prefer to have days off gathered during a full-day work. Such a rejection must instead be based on operational reasons and must be clearly explained (§ 8 (4)).

The procedure for realizing the entitlement to part-time work and specifying the distribution request consists of three phases:

It begins with the employee’s request to reduce their working hours and a proposed distribution plan.

The second phase involves discussing these proposals jointly with the employer (§ 8 Sec. 3 TzBfG). Although the employer is not obligated to engage in negotiations, no sanctions are specified if negotiations do not take place. However, doubts about the seriousness of the reasons for refusal could be raised in later legal proceedings. An amicable agreement aligns best with practical needs. The employee can involve a member of the works council in these negotiations.

As a result, in the third phase, three possibilities are conceivable:

Special annual payments with the character of remuneration are to be reduced accordingly, and for the months in which full work was performed, they are to be paid in full on a pro-rata basis.

According to § 8 Sec. 4 TzBfG, the employer must consent to the reduction in working hours and specify their distribution in accordance with the employee’s wishes, provided there are no operational reasons to the contrary. This establishes an obligation for the employer to issue a declaration of intent. Sec. 4 creates a contractual obligation for the employer to reduce the contractual working hours to the extent desired by the employee. The obligation to consent is only waived in the presence of objective operational reasons.

An entitlement to reduce working hours and/or object to the distribution of specific working hours is not granted if the employer presents operational reasons under § 8 Sec. 4 Subsec. 1 TzBfG that oppose the employee’s wishes. The burden of proof for the existence of operational reasons rests with the employer. Operational reasons, in particular, exist when reducing working hours would significantly impair the organization, workflow, or safety in the company, or cause disproportionate costs (§ 8 Sec. 4 Subsec. 2 TzBfG).

Originally, the draft law for TzBfG proposed that the operational reasons presented by the employer must be “urgent.” However, the adjective “urgent” was removed during subsequent legislative proceedings. Instead, the examples initially provided only in the explanatory memorandum were incorporated into the text of the law. Nonetheless, the absence of “urgent” does not imply that operational reasons can be arbitrary. The two legal specifications (“significant impairment” and “disproportionate costs”) make it clear that operational reasons must be of substantial weight to override the employee’s part-time request.

The employer’s required proof of a “significant impairment” or “disproportionate costs” implies that when implementing the part-time request, some disruption to the existing organizational workflow and additional costs may be accepted, provided they are in reasonable proportion to the part-time request.

The requirement of a “significant impairment” suggests that not every disruption to company operations justifies refusing the entitlement. Instead, the employer must make reasonable efforts, particularly by exercising their right of direction, to internally reorganize and minimize any disruptions to workflow or organizational functioning. Anything less would render the entitlement under § 8 TzBfG practically meaningless.

While an organizational concept presented by the employer, in the context of operational reasons, cannot be examined for its appropriateness by the labor court, following the case law of the Federal Labor Court on termination law and the employer’s prerogative to organize, the employer must submit specific information regarding a comprehensible corporate plan for scheduling work hours. This makes the operational reasons substantiated and not merely expressed in catchphrases. The reasons must be comprehensible in their impact on workflow, organization, or safety in the company, which allows the labor court to fully review whether the asserted operational reasons indeed exist and significantly impair workflow or organization or pose safety concerns within the company.

The criterion of “significant impairment” is, incidentally, known from § 111 BetrVG (Works Constitution Act) and has been quantitatively interpreted by jurisprudence concerning the scope of the company’s workforce. Here, it’s conceivable that the extent of the part-time request is related to the existing volume of working hours, and a specific threshold may be developed. On the other hand, the criterion of “disproportionate costs” does not have a parallel in other laws and is likely to be interpreted in close connection with the “significant impairment” criterion.

This also applies to the objection that the corporate concept only envisages full-time employees and the objection that no suitable additional workforce can be found. The first objection is only valid if it can be inferred from the company’s previous personnel policy. The latter objection is only relevant if the employer proves that no additional workforce corresponding to the employee’s job profile is available in the relevant job market. Mere references to difficulties in finding a suitable employee in the past may not be sufficient.

The fact that the introduction of part-time work and hiring additional staff can incur costs for the employer was recognized and accepted by the legislator. The legislative rationale notes that these additional costs may be offset by ongoing cost savings through increased productivity and better capital utilization. Therefore, the employer must present the cause and amount of costs, along with the circumstances that substantiate the disproportionality. Increased costs alone are not sufficient.

The collective bargaining parties are authorized to specify, through collective agreements, the reasons for rejecting a reduction in working hours, taking into account the specific requirements of each industry (§ 8 Sec. 4 Subsec. 3). The reasons for rejecting a reduction in working hours that are regulated in a collective agreement within the scope of that agreement can also be agreed upon between non-unionized employers and employees (§ 8 Sec. 4 Subsec. 4 TzBfG).

11.1.2 The right of part-time employees to extend their working hours, § 9 TzBfG

The Part-Time and Fixed-Term Employment Act not only grants full-time employees the right to reduce their working hours but also allows part-time employees, under the conditions of § 9 TzBfG, to claim an extension of their agreed-upon working hours. Therefore, the employer must consider the request of a part-time employee for an increase in their contractually agreed working hours, favoring them when filling an appropriate available position of equal suitability, unless there are operational reasons or the working hour wishes of other part-time employees stand in the way. Moreover, the employee takes precedence over external applicants with equal qualifications, § 9 TzBfG.

The employee’s request for an increase in their contractually agreed working hours can be informal and doesn’t have to be in writing. According to the wording of the law, it is not necessary to specify the extent of the increase. However, the employee should provide an approximate number of hours desired since otherwise, the labor court cannot verify which available positions are relevant. The Berlin Regional Labor Court (judgment of December 2, 2003 — 3 Sa 1041/03) has also ruled that the notification does not have to refer to a specific position.

A claim for an increase in working hours according to § 9 TzBfG also requires the existence of an “appropriate job” with longer working hours. The requirement of an “appropriate job” is usually met only when the position to be filled is comparable in content to the position on which the part-time employee performs their contractually required tasks. Both tasks generally place the same demands on the personal and professional qualifications of the employee. Part-time employees only exceptionally have a claim to an increase in working hours if it is associated with a change to a position with higher-value duties. Such an exceptional case is affirmed when the employer’s personnel organization only allows part-time work at a lower hierarchical level than previously held. This creates a self-binding effect: the boundary between the two hierarchy levels becomes permeable for the later request to increase working hours by the part-time employee. In this case, the position with the higher-value duties is also considered an “appropriate job” within the meaning of § 9 TzBfG (Federal Labor Court, judgment of September 16, 2008 — 9 AZR 781/07).

In addition, the part-time employee must be suitable for the vacant position. In particular, the employer is not obliged to consider them when filling available positions for which the employee is either not sufficiently qualified or overqualified.

If another suitable available position that matches the working hour wishes of the part-time employee is available, it is difficult to imagine any operational reason why they should not be allowed to fill that position. The rationale that the part-time employee cannot be replaced is not sufficient and clearly contradicts the purpose of the law. If an increase in hours on the current position is demanded, the employer can successfully argue that they only want to carry out a certain activity with part-time employees. The Federal Labor Court confirmed that the entrepreneurial decision to fill a full-time position with two part-time employees in the future can even constitute an urgent operational requirement for a change in termination (Federal Labor Court, judgment of April 22, 2004 — 2 AZR 385/03). So, an urgent operational reason for refusal can also be the fact that the employer only employs part-time workers. However, the employer in this case is not entirely free in their decision. In case of a dispute, they must put forward comprehensible workplace-related reasons for the exclusive establishment of part-time positions (Cologne Regional Labor Court, judgment of September 30, 2010 — 7 Sa 952/10).

If the conditions are met, the employer is obligated to transfer the vacant position to the employee. If the employer violates this obligation, the employee typically has two options:

If the position has not been filled by someone else, it is advisable to first seek an interim injunction to prevent the employer from filling the position elsewhere and then file a lawsuit in the main proceedings to obtain consent for the extension of the contractual working hours. If, on the other hand, the position has already been filled elsewhere, the employee’s right to performance is extinguished due to impossibility (§ 275 Abs. 1 BGB — German Civil Code). The employer is then obliged to pay damages to the employee. In this case, the requisite negligence (§ 276 Abs. 1 BGB) is necessary for liability. The third section covers fixed-term employment contracts (§§ 14 et seq. TzBfG). These are understood to be employment relationships that are not concluded for an indefinite period but are instead limited by time or purpose. Accordingly, there are distinctions made between time limitation (unjustified limitation) and purpose limitation (justified limitation). Apart from the mandatory written form requirement under § 14 Abs. 4 TzBfG, a fixed-term employment contract must fulfill additional requirements to be legally effective. The effectiveness of the limitation depends on whether it is a time limitation or a purpose limitation.

11.1.3 Fixed-term employment with an objective reason, § 14 Abs. 1 TzBfG

A (written) fixed-term employment contract is valid if there is an objective reason according to § 14 Abs. 1 TzBfG. Possible objective reasons that justify a limitation are listed in § 14 Abs. 1 TzBfG in the form of standard examples. An objective reason for a fixed-term or purpose limitation exists, in particular, according to § 14 Abs. 1 TzBfG, when:

There is a temporary operational need for the employee’s work.
The limitation follows an education or study program to facilitate the employee’s transition to subsequent employment.
The employee is hired to substitute for another employee.
The nature of the work justifies the limitation.
The limitation is for trial or testing purposes.
There are personal reasons concerning the employee that justify the limitation.
The employee is paid from funds designated for limited-term employment by budgetary regulations and is employed accordingly.
The limitation is based on a court settlement.

If such an objective reason exists, a purpose limitation is valid. As the term “in particular” indicates, this list of eight different objective reasons for a limitation is not exhaustive, meaning the employer can justify the permissibility of the limitation with other reasons not included in this list. The enumeration of objective reasons for the limitation of employment contracts in § 14 Abs. 1 Satz 2 No. 1 — 8 TzBfG is not comprehensive. However, other objective reasons not mentioned in § 14 Abs. 1 Satz 2 No. 1 — 8 TzBfG can only justify the limitation of an employment contract if they correspond to the valuation criteria expressed in § 14 Abs. 1 TzBfG and are of equal significance to the objective reasons listed in the catalog in § 14 Abs. 1 Satz 2 No. 1 — 8 TzBfG. This also applies to reasons regulated by a collective agreement (Federal Labor Court, judgment of December 9, 2009 — 7 AZR 399/08). The difference compared to the non-objective fixed-term contract under § 14 Abs. 2 TzBfG is that with objective reasons for limitation, there is no maximum duration specified since it is determined by the specific reason.

11.1.4 Fixed-term employment without an objective reason, § 14 Abs. 2 TzBfG

According to § 14 Abs. 2 sentence 1 TzBfG, it is permissible to extend a fixed-term employment contract without an objective reason up to three times, with a total duration of up to two years. An extension, as defined by § 14 Abs. 2 sentence 1 TzBfG, requires that it is agreed upon during the term of the contract being extended, and it primarily changes only the duration of the contract, not the other terms and conditions of employment. This applies even when the modified employment conditions are more favorable for the employee. Otherwise, it would be the initiation of a new fixed-term employment contract, and such a limitation without an objective reason is not permissible under § 14 Abs. 2 sentence 2 TzBfG due to the existing employment relationship. This does not exclude changes to the employment conditions during the term of the original contract or the extended contract. Changes to the contract during an extension under § 14 Abs. 2 TzBfG are permissible when the alteration is based on an agreement previously reached between the parties or when the employee had the right to the contract change at the time of the extension. In both cases, the modified contract condition is based on the existing employment contract between the parties. This was decided by the Seventh Senate of the Federal Labor Court (BAG) in its judgment of August 23, 2006 (7 AZR 12/06), in addition to its previous case law on § 14 Abs. 2 TzBfG.

Both types of limitations must be agreed upon in writing according to § 14 Abs. 4 TzBfG for the limitation to be valid. In the case of an agreement that is solely oral or is otherwise impermissible, the fixed-term employment contract is considered to have been concluded for an indefinite period under § 16 TzBfG.

When a fixed-term employment contract has been concluded, the employment relationship does not end through termination but by the expiration of the agreed-upon period. Ordinary termination is, therefore, generally precluded during the term of the contract, as stated in § 15 Abs. 3 TzBfG, unless such a termination option is provided for individually or through an applicable collective agreement. Consequently, the employer has the advantage of not having to fear an unfair dismissal lawsuit. On the other hand, it is always possible to terminate the contract prematurely for a grave reason. This legal option does not need to be explicitly agreed upon. According to § 15 Abs. 2 of the Part-Time and Fixed-Term Employment Act (TzBfG), a purpose-limited employment contract ends when the purpose is achieved or, at the earliest, two weeks after the employer informs the employee in writing about the attainment of the purpose.

Finally, the fourth section contains common provisions, such as provisions for preventing circumvention and references to other statutory and collective regulations.

The legally permissible maximum duration of working time is regulated by the Working Hours Act (Arbeitszeitgesetz or ArbZG). The Working Hours Act does not apply to managing employees, chief medical officers, and department and personnel managers in the public sector, as stated in § 18 ArbZG. An exception is also made for employees, such as employed childcare workers, who live with the individuals they are responsible for in a domestic setting.

According to § 3 of the ArbZG, the daily working time for employees should not exceed 8 hours in principle. Therefore, it is essential to clarify the definition of working time and other basic terms related to working time. The following are the most essential definitions:

Working Time: This is the period from the start to the end of work, excluding rest breaks. In underground mining, rest breaks are considered part of working time (§ 2 Abs. 1 ArbZG). It is the span during which the employee must make their working capacity available to the employer and for which they receive remuneration. It does not matter whether they are actually assigned work. The duration of working time is typically regulated by an employment contract.

Travel Time: This is the time required to travel from home to the workplace and back. It is not considered working time, and there is no entitlement to remuneration for travel time. However, travel time within the company or from the company to an external workplace is considered part of working time.

Rest Time: This is the time after the end of the daily working time during which the employee does not perform work or standby duties (§ 5 Abs. 1 ArbZG). During this period, the employee should recover from the work performed and gather new strength. § 5 Abs. 1 ArbZG requires that employees be granted an uninterrupted rest period of at least 11 hours after work. An exception exists in the transportation and hospitality sector: in some areas, the rest period can be reduced to 10 hours if there is compensation within a month or a four-week period through an extension of rest times. § 7 Abs. 1 no. 3 ArbZG allows for an even further exception: in a collective agreement, a reduction of the rest period to 9 hours and compensation within a freely defined period can be agreed upon. Rest time, of course, is not considered working time.

Rest Breaks: These are predetermined interruptions of working time, during which the employee is released from all service obligations, including the obligation to remain on standby. The employee can leave their workstation and determine how and where they spend their time. § 4 ArbZG states that after more than 6 hours of working time, a rest break of half an hour should be provided, which can be replaced by two breaks of a quarter-hour each. Rest breaks are not considered working time. Interruptions of less than 15 minutes are not considered rest breaks under the Working Hours Act and are counted as working time.

Standby Duty: This is the time when an employee is not performing full work but must remain at their workplace and be ready to intervene at their discretion. According to the definition provided by the Federal Labor Court (BAG), it is a “period of alert attentiveness in a state of relaxation.” Standby duty is considered working time.

Example:

An employee in a call center who has no customer contact for three minutes is not on standby duty but is working because there is no opportunity for relaxation. On the other hand, a velotaxi driver who only occasionally transports a customer is on standby duty. The same applies to a taxi driver with longer “downtimes” between customer transports or a firefighter.

However, standby duty is not assessed as full working time. If standby duty regularly occurs during working hours and to a significant extent, a collective agreement may extend the daily working time beyond ten hours. This is already assumed to be the case with around 30 percent standby duty.

On-Call Duty: On-call duty involves an employee being available at a specified location with the obligation to promptly commence work when required. An example of this is an on-call doctor. On-call duty is considered working time (ECJ ruling of 09.09.2003 — C‑151/02) and thus counts towards calculating the maximum working time as per the Working Hours Act. However, it can be compensated differently.

Standby: Standby is the obligation for an employee to stay at a location specified by the employer and to start work immediately when called upon. The notification of location may be omitted if the employee can be reached via a mobile phone, and their location does not lead to a delay in commencing work. Standby is not considered working time according to the Working Hours Act and is treated as rest time in terms of working time law. The time spent on standby (including travel times) during standby duty is included when calculating working time limits and interrupts rest time. Regarding compensation, time spent on standby that leads to work is considered overtime.

Night Time: Night time, as defined by the Working Hours Act, is from 23:00 to 6:00, and in bakeries and confectioneries, it is from 22:00 to 5:00 (§ 2 Abs. 3 ArbZG).

Night Work: According to this law, night work is any work that spans more than two hours during the night time (§ 2 Abs. 4 ArbZG).

Night Workers: Night workers under this law are employees who, due to their work schedule, regularly perform night work in rotating shifts or work at night on at least 48 days per calendar year (§ 2 Abs. 5 ArbZG).

Sunday Work: Sunday work is defined as work between 0:00 and 24:00 on Sundays. Two Sundays should typically be work-free within a month. If employees are required to work on a Sunday, they must be granted a substitute rest day within a period of two weeks that includes the working day. The substitute rest day must not fall on a public holiday.

Public Holiday Work: Public holiday work is work between 0:00 and 24:00 on statutory public holidays.

Overtime: Overtime refers to the hours worked that temporarily exceed the agreed-upon working hours. It is sufficient if the supervisor is aware of and tolerates these hours (consistent jurisprudence of the Federal Labor Court). According to the ECJ, the obligation to pay overtime supplements exists only if the employment contract or a collective agreement stipulates this.

Additional Work: Additional work refers to working hours that exceed the regular legal working hours.

Short-Time Work: (SGB III §§ 169 ff) Short-time work involves temporarily reducing the working hours stipulated in the collective agreement or employment contract to bridge a temporary lack of orders. Short-time work should be an unavoidable, temporary occurrence resulting from economic reasons or an inevitable event. Structural changes due to economic reasons can also justify short-time work. Short-time work is not permissible for seasonally or regularly fluctuating operational capacities.

Working Days: Working days are calendar days on which work is required as per the employment contract.

Business Days: Business days are all calendar days that are not Sundays or statutory holidays (§ 3 Abs. 2 BUrlG).

Despite the general rule that work should not exceed 8 hours per day, exceptions can be made in legally regulated cases. According to § 3 sentence 2 ArbZG, an extension of the daily working time to 10 hours on business days is always permitted. However, this requires that an average of 8 hours per business day is achieved within a compensation period of six months or 24 weeks.

Example:

Suppose an employer faces a sudden increase in workload. They can extend the daily working hours to 10 hours for a period, e.g., for four weeks if, within the next six months, the employees work only 6 hours per business day for four weeks. In this case, you can only speak of an average 8‑hour workday.

§ 7 Abs. 1 no. 1 ArbZG opens up the possibility of achieving even greater flexibility through a collective agreement. If standby duty occurs regularly and to a significant extent within the working time, the 10-hour limit can be exceeded. The collective agreement can also establish a longer compensation period. Furthermore, there is the option to completely forego compensation, provided that, in a year, ten hours are worked on a maximum of 60 days.

According to § 14 Abs. 1 ArbZG, in emergencies and extraordinary situations that occur independently of the will of those affected and cannot be resolved in any other way, deviations from the regulations of § 3 ArbZG are permitted. In these cases, there are no upper limits.

§ 15 Abs. 1 no. 1 ArbZG states that the competent supervisory authority can approve deviations from the time framework set by § 3 ArbZG under certain conditions.

According to § 15 Abs. 2 ArbZG, further exceptions are possible if they are urgently necessary in the public interest.

11.3 The Maternity Protection Act

11.3.1 Introduction

Maternity protection is the legal safeguard for pregnant women and young mothers in the workplace. Its purpose is to ensure that pregnant women and young mothers are not treated unfairly at work and are granted specific rights and benefits.

Maternity protection in Germany is based on the principle of equal treatment. This means that pregnant women and young mothers must be treated the same as other employees regarding pay, working hours, and job security. They also have the right to paid leave and to return to their previous position after maternity leave.

Since January 1, 2018, the new Maternity Protection Act (MuSchG) has been in force, bringing about significant changes. The regulation for the protection of mothers in the workplace has been integrated into the existing law to make the provisions of the Maternity Protection Act more comprehensible and transparent. In addition to several substantive changes, the revised law also affects female students and trainees, for example, in terms of the mandatory location, time, and conduct of training sessions.

11.3.2 Scope of the Maternity Protection Act

The Maternity Protection Act applies to the following:

When the place of employment is within the national territory, regardless of the nationality of the parties to the employment contract.
In all types of businesses and administrations, as well as for employees in family households and in agriculture.
For female employees, regardless of whether they work full-time or part-time, on a trial basis, as temporary staff, as their main or secondary occupation; for homeworkers and those deemed equivalent, as well as for women in training or participating in further education or retraining measures. The provisions of the Maternity Protection Act cannot be waived to the detriment of those affected.

Self-employed individuals and freelancers, on the other hand, have no legal entitlement to maternity protection and maternity benefits. However, they can also apply for maternity benefits under certain circumstances.

11.3.3 Notification and Information Obligations

Pregnant women should inform their employer about their pregnancy and the expected date of delivery as soon as they become aware of their pregnancy, in accordance with § 15 MuSchG.

It is sufficient to inform the employer that a pregnancy is likely. However, the employer may request the pregnant woman to provide a relevant certificate from a doctor, midwife, or delivery nurse.

The MuSchG does not establish an obligation for the pregnant woman to provide this notification. Such an obligation may arise from her general contractual duty of loyalty if the employer has a legitimate interest in being informed.

This is particularly the case when the employer needs to make arrangements in advance (e.g., for a woman in a leadership position who requires an extended training period for her successor). In individual cases, a culpably delayed or entirely omitted notification may lead to claims for damages.

11.3.4 Reporting Obligations of the Employer

After the woman has notified that she is pregnant or breastfeeding (if the pregnancy was not previously communicated), the employer must immediately inform the competent supervisory authority responsible for monitoring compliance with maternity protection provisions.

In North Rhine-Westphalia, this is the respective district government. The employer is obligated to provide information to this authority. If the information is intentionally or negligently omitted, the employer may be fined up to €5,000.

11.3.5 Protection Periods Before and After Childbirth

The Maternity Protection Act primarily safeguards women in the period immediately before and after childbirth. This protection period begins six weeks before childbirth and ends eight weeks after childbirth.

In cases of medically induced premature births, multiple births, and upon request, also in the case of the birth of a child with a disability, the protection period ends twelve weeks after childbirth.

During this time, it is generally assumed that the woman cannot continue her occupational activities.

However, the female employee can voluntarily agree to continue working during the protection period before childbirth, thus remaining employed.

The pregnant woman can revoke her consent to work during the protection period before childbirth, allowing her to terminate her work at any time.

11.3.6 Health Protection

In addition to notifying the employer of her pregnancy, this notification has far-reaching implications for the health protection that the employer must ensure in the pregnant woman’s workplace. This concerns both permissible working hours and the maternity protection-compliant arrangement of specific working conditions.

In principle, the MuSchG is designed to allow a pregnant or nursing woman to continue working at her existing workplace.

A prohibition on employment for operational reasons is only conceivable in exceptional cases, when it is incompatible with health protection and no milder measures are possible. The workplace and work processes must be designed in such a way that risks to the health and life of the pregnant (and nursing) woman are avoided, and irresponsible risks are eliminated.

The concept of “unacceptable risk” is a central term in occupational safety law. Such a risk is assumed when the probability of harm to a woman or her child, in relation to the expected severity of the damage, is not acceptable. It is, therefore, necessary to balance probability and impending harm, so that in cases of particularly severe impending harm, the requirements for the likelihood of such harm are significantly reduced.

For example, if there is a risk of poisoning the unborn child due to hazardous substances at a workplace, given the seriousness of the potential harm (death of the child), the requirements for the likelihood of such poisoning in this case would not be very high.

The employer must take the following measures in particular to protect the health of pregnant or nursing women in the workplace:

The employer must first conduct a so-called risk assessment for each workplace in his company, in which he assesses whether the workplace poses a risk to a pregnant or nursing woman or her child. This obligation exists regardless of whether a pregnant or nursing woman is employed.
Subsequently, based on the assessment, it must be determined whether protective measures are necessary for a pregnant or nursing woman, what specific protective measures may need to be taken, or whether the woman in question, in exceptional cases, cannot work at the workplace.
As soon as a woman has informed the employer that she is pregnant or nursing, the employer must promptly establish the necessary protective measures based on their risk assessment. Furthermore, he must offer the woman a discussion about further adjustments and review the effectiveness of the protective measures.

If it is a workplace where the elimination of an irresponsible risk is not possible or would require a disproportionate effort for the employer, the employer can transfer the pregnant or nursing woman to another suitable workplace within his company, if this is reasonable for the woman.

If no other suitable workplace is available, and all possibilities to avoid an irresponsible risk have been exhausted, in exceptional cases, a so-called company employment ban can be imposed as a last resort.

It is essential that these steps are taken before a pregnant or nursing woman is (further) employed at the respective workplace. Maternity protection-compliant working conditions also include the woman having the opportunity to briefly interrupt her work and to lie down, sit, and rest during these interruptions, as well as during her regular breaks.

The MuSchG lists a range of activities and working conditions that pose an irresponsible risk to pregnant women. This is assumed when the pregnant woman could be exposed to the substances described in the law, as specified in § 11 MuSchG:

Hazardous substances,
Biological agents,
Physical impacts,
Stressful working environment, or
Physical strains or mechanical impacts

Similar provisions can be found for nursing women in the MuSchG (§ 12).

11.3.7 Other Employment Prohibitions

In addition to the previously mentioned company-specific employment ban, there are also explicitly named statutory employment prohibitions concerning working conditions:

For instance, a pregnant or nursing woman should not be required to do piecework or other work where she would earn more by increasing her work pace. The same applies to assembly line work or timed work with a prescribed work pace when the nature of the work or the work pace poses an irresponsible risk to the pregnant or nursing woman or her child. Piecework or assembly line work is only possible with the issuance of an exceptional permit by the supervisory authority.

Moreover, a pregnant or nursing woman is not allowed to engage in overtime, night, or Sunday work. However, exceptions to these employment prohibitions can be made, with the consent of the woman, and are regulated in §§ 3 ff. of the Maternity Protection Act (MuSchG).

11.3.8 Medical Employment Ban

Furthermore, a medical employment ban can also be issued before the start of the legally prescribed protection period (six weeks before childbirth).

For this, a medical certificate must attest that the health of the pregnant woman or her child is endangered if employment continues. This can pertain to specific tasks or apply generally.

A medical certificate must always be presented. Wages must be paid until the end of the employment ban. Regardless of the number of employees, companies can demand full reimbursement of the absences of the maternity protection-eligible woman due to an employment ban outside the protection periods from the woman’s health insurance.

11.3.9 Special Protection Against Termination

Section 17 of the Maternity Protection Act (MuSchG) regulates special protection against termination for pregnant or nursing women. From the start of pregnancy to four months after childbirth, a general prohibition on termination exists. A termination received during this period is invalid, irrespective of the intended termination date. This applies even if the employer was unaware of the pregnancy at the time of the termination but is informed about it within two weeks of receiving the termination notice.

Only in exceptional cases can the Industrial Safety Office allow the termination of the employment relationship during pregnancy. The condition for this is that there is a circumstance independent of the pregnancy that makes the continuation of the employment relationship unreasonable for the employer. Such a circumstance may exist if the employee is terminated for behavioral reasons due to severe misconduct or criminal actions against the employer.

Other grounds for termination, such as fixed-term contracts, termination agreements, or self-termination by the employee, are also possible during pregnancy and nursing.

11.3.10 Financial Benefits

Maternity benefit is designed to partially offset the income loss during pregnancy and immediately after childbirth. The benefit is paid for a maximum of 14 weeks (6 weeks before and 8 weeks after childbirth). In the case of multiple births, the benefit is paid for a maximum of 16 weeks.

Maternity benefit is provided by the health insurance company. To receive the benefit, the woman must apply to the health insurance company.

The amount of the benefit is based on the net income for the last three calendar months. Maternity benefit is a maximum of 13 euros for each calendar day. If the average daily net income exceeds 13 euros, the employer is obligated to pay the difference as a subsidy to the maternity benefit.

For this subsidy, the employer can apply for 100% reimbursement from the health insurance company under the provisions of the Cost Compensation Act from the so-called U2 levy, paid by all companies for each employee.

11.4 Disability Law

11.4.1 Introduction

The Basic Law (GG) of the Federal Republic of Germany grants disabled individuals the right to self-determined and comprehensive participation and equality in all areas of society. The prohibition of discrimination in favor of disabled individuals is contained in Article 3 of the Basic Law.

This provision is based on the principle of equal treatment and the prohibition of discrimination. It is meant to ensure that disabled individuals are not disadvantaged compared to others.

The Basic Law guarantees that disabled individuals are not treated worse than other people and that they have the same rights and opportunities as everyone else. This includes the right to participate in all areas of public life, to have access to education and employment, and to receive the necessary support to fully participate in society.

11.4.2 Innovations Introduced by the Federal Participation Law (BTHG)

On December 16, 2016, the Bundestag, with the approval of the Bundesrat, passed the Federal Participation Law (BTHG), which aims to strengthen the participation and self-determination of people with disabilities.

The BTHG is the most significant reform of the Social Code IX (SGB IX) to date. It seeks to improve the living situation of people with disabilities by promoting more self-determination and increased participation.

The law came into force at the end of 2016 and is being implemented gradually in four stages, with most of the changes having already come into effect in 2017, 2018, and 2020.

Ultimately, the reform will lead to a revised SGB IX with new content and a new structure.

11.4.3 The Four Stages of Reform in the BTHG

The Federal Participation Law (BTHG) is divided into four stages, with the first three already in effect.

The phased implementation is designed to ease the transition into practice, as the changes are quite extensive. The full implementation of the law will be completed by 2023.

The first stage of reform came into effect on January 1, 2017, and includes changes to disability law and improvements in income and asset consideration.

On January 1, 2018, Parts 1 and 3 of the new SGB IX were introduced. These include procedural law (Part 1) and disability law (Part 3).

In 2020, a separation between integration assistance and subsistence benefits was introduced. The law on integration assistance became Part 2 of the new SGB IX and was completely removed from SGB XII (Social Assistance).

The fourth and final stage of the BTHG is expected to come into effect on January 1, 2023, and will redefine the group of people eligible for integration assistance.

The social reform introduced by the BTHG is a significant step toward improving the living situation of people with severe disabilities in Germany.

The website https://umsetzungsbegleitung-bthg.de provides information on the progress of the Federal Participation Law’s implementation. In addition to answers to current questions, the site offers information on the implementation status in individual federal states and reviews of events related to the BTHG.

The project is funded by the Federal Ministry of Labor and Social Affairs and is likely to remain a valuable source of information on this topic in the future.

11.4.4 Who Falls Under the Protected Group?

Individuals with severe disabilities and those deemed equivalent are granted special protection under labor law. This is regulated in §§ 151 ff. of the Social Code IX (SGB IX). Severely disabled individuals are those with a degree of disability (GdB) of at least 50. The determination of severe disability is made by the independent cities and municipalities, which are also responsible for issuing the severe disability ID.

The official determination of disability is important for individuals who need to prove their severe disability status, as this proof can typically only be provided through the determination notice or the severe disability ID. The Federal Employment Agency can grant equivalency status to individuals with a GdB of at least 30 but less than 50 upon request, designating them as severely disabled individuals.

The condition for such equivalency is that the affected person, due to their disability, cannot obtain or retain a suitable job without the equivalency status. The decision is at the discretion of the Federal Employment Agency. With the exception of additional leave, those granted equivalency status are treated the same as the severely disabled under labor law.

It should be noted that young people with disabilities during their vocational training or career orientation are legally considered equivalent to severely disabled individuals, even if their degree of disability is less than 30 or not determined at all. This is demonstrated through a certificate from the Federal Employment Agency. While the special protective provisions for severely disabled individuals do not apply to this group, employers can still receive benefits for them.

11.4.5 SGB IX: When is There an Obligation to Employ?

The number of severely disabled people that a company must employ depends on the size of the company. A company with at least 20 but fewer than 40 employees must employ one severely disabled person. Companies with 40 to fewer than 60 employees must employ two severely disabled individuals, and larger companies must fill at least 5% of their jobs with severely disabled individuals (§ 154 SGB IX).

Multiple establishments of the same employer are considered a single unit in this context. Training positions are not counted as jobs. In cases of fractional positions when calculating the required positions, for companies with fewer than 60 employees on an annual average, rounding to 0.5 or more is applied (§ 157 Abs. 2 SGB IX). The obligation quota applies even when, due to the company’s structure, disabled people cannot be employed. For disabled people in training, at the discretion of the Federal Employment Agency, two to a maximum of three mandatory positions are considered.

11.4.6 How Much Is the Compensation Payment?

Employers are obligated to fill vacant positions with severely disabled individuals according to the principles mentioned above. Failing to do so results in a compensation payment. The amount of the compensation payment varies depending on the size of the company and is regulated by § 160 SGB IX.

For each unfilled mandatory position, the employer must make a monthly compensation payment ranging from €140.00 to €360.00. The specific compensation payment amount is calculated based on the annual average employment rate of severely disabled individuals for companies with 60 or more employees:

Employers with an annual average of fewer than 40 employees must pay a compensation payment of €140.00. This applies only if, on average, they employ fewer than one severely disabled person.
Employers must calculate the compensation payment themselves and remit it annually, no later than March 31 of the following year, to the integration office responsible for their establishment. Also, by March 31 of the following year, employers must report to the Federal Employment Agency, which is responsible for their location, the number of positions filled in the previous year and the number of severely disabled individuals employed. Late payments are typically penalized with default interest.

11.4.7 What Does the Duty of Care Entail?

Within the framework of what is reasonable for the company’s operations and economic viability, the employer is obliged to set up the business in a way that allows the employment of as many severely disabled individuals as possible. This can also lead to claims by the employees. Therefore, the employer is obligated to establish a workplace suitable for disabled employees and provide them with the necessary technical aids; subsidies can be applied for from the integration office.

11.4.8 Do Severely Disabled People Get Extra Leave?

Severely disabled individuals are entitled to five paid additional leave days in the vacation year according to § 208 Abs. 1 SGB IX. If a part-time severely disabled employee is entitled to only a portion of the basic leave during the vacation year, the additional leave is granted proportionally. If the status of severe disability does not exist throughout the entire calendar year, a proportional entitlement to additional leave exists (one twelfth for each full month of severe disability status; fractions of leave days that amount to at least half a day are rounded up).

In cases where collective, company, or other vacation regulations provide for a longer additional leave for severely disabled individuals, these regulations take precedence. Equivalent persons are not entitled to statutory additional leave.

11.4.9 Special Job Protection

n Germany, severely disabled individuals are provided with special job protection under §§ 168 ff. SGB IX. This law takes precedence over general job protection regulations and aims to provide extra protection for people with severe disabilities.

Therefore, the employment of a severely disabled person can only be terminated if the Integration Office has given its approval. The employer must apply for approval in writing (in duplicate) with the Integration Office responsible for the company’s location. The application must be thoroughly justified and must include an explanation of the reasons for termination and supporting evidence. The Integration Office must make its decision within two weeks of receiving the application. If the authority does not meet this deadline, the approval is considered granted.

Before making a decision, the Integration Office consults the works council and hears from the severely disabled individual. The workplace’s disabled employee representation must be involved; otherwise, the termination is invalid.

Even with a regular termination, the employer must adhere to a notice period of at least four weeks. Longer legal, collective, or individual contract notice periods remain unaffected.

If a company is facing closure or dissolution or if an insolvency procedure has been initiated, approval from the Integration Office must be sought within one month.

The special job protection for severely disabled individuals does not apply if the employee’s status of severe disability had not been established at the time of the termination and the employee had not filed an appropriate request. The protection also does not apply during the first six months of employment. However, according to a decision by the European Court of Justice (Judgment of 10.02.2022; Case C 485/20), there might be an obligation to consider whether alternative employment opportunities are possible even after reasonable retraining or further education, even if they might be under worse conditions (restructuring before the notice period), or if the employee’s temporary absence can be bridged by other measures, such as hiring temporary staff. It remains to be seen how the judgment of the European Court of Justice will be implemented by German labor courts.

11.4.10 Regulations Regarding Working Hours

According to § 207 SGB IX, severely disabled individuals can be exempted from additional work at their request. The same applies to individuals who are equivalent to severely disabled persons, § 151 Abs. 1 and 3 SGB IX.

However, overtime in the context of this provision only refers to work exceeding 8 hours per day. If the individual working hours of a severely disabled employee are less, overtime can be assigned up to the 8‑hour limit.

11.4.11 The Employer’s Right to Inquire During Hiring

When filling positions, employers must assess whether disabled people can be employed.

Inquiring about existing severe disability is generally prohibited. Therefore, an applicant is no longer required to truthfully answer questions regarding severe disability. They may remain silent or exercise their “right to lie” lawfully. If the employer nonetheless asks the question and receives an untrue answer from the applicant, they cannot void the employment contract according to § 123 BGB due to fraudulent deception.

Different treatment (and thus the right to inquire) of disabled applicants compared to non-disabled applicants is only acceptable when differentiation is permissible due to the specific requirements of the particular job.

This is the case, for example, when questions are asked regarding disabilities that specifically affect the company’s workflow or result in the applicant not being able to perform the designated job tasks fully or only with limitations.

If a severely disabled person applies for a position in the company, the employer is obligated to discuss this application with the disabled employee representation and forward it to the works council along with the disabled employee representation’s statement.

11.4.12 The Disabled Employee Representation

In companies where five or more severely disabled people are employed on a non-temporary basis, a representative and a deputy are elected by the severely disabled employees every four years, as specified in § 177 Abs. 1 SGB IX.

In all matters affecting an individual severely disabled person or severely disabled people as a group, the disabled employee representation, as stated in § 178 Abs. 2 SGB IX, must be informed in a timely and comprehensive manner and heard before a decision is made.

It is particularly important to note that a termination of a severely disabled person by the employer without such participation is void, according to § 178 Abs. 2 SGB IX.

The disabled employee representation can attend all works council meetings in an advisory capacity. The legal status of the representative is equivalent to that of a works council member; they are to be granted leave from work to perform their duties and enjoy absolute protection from regular termination. The disabled employee representation has the right to access job application materials and participate in job interviews.

The integration of severely disabled people is an important task for every employer. To ensure the equal participation of severely disabled people in the workforce, the employer and the disabled employee representation enter into an inclusion agreement.

11.4.13 What Is an Inclusion Agreement?

The inclusion agreement is an instrument aimed at further supporting the participation of severely disabled people in the workforce by steering the integration efforts within a company through goal agreements. These agreements should be made at the company level and should be effective in significantly improving the employment situation.

An inclusion agreement is a contract made between the leading representative of disabled employees, in cooperation with the works council, the employer, and the employer’s inclusion representative. The goal of this agreement is to facilitate the participation of severely disabled people in the workforce, improve their employment situation, and formulate and implement specific goals for workplace integration.

This can include provisions regarding personnel planning, workplace design, the work environment, working hours, and work organization, among others.

§ 166 of the Social Code IX (SGB IX) obliges all private and public employers to enter into a binding inclusion agreement with the representative of disabled employees, the works council, or staff council, and in cooperation with the employer’s inclusion representative (§ 166 SGB IX).

11.4.14 Employer’s Inclusion Representative

The employer appoints an inclusion representative, who represents the employer in matters concerning severely disabled individuals. It is preferable for the inclusion representative to be a severely disabled person themselves.

The duties of the inclusion representative include promoting the integration of severely disabled individuals into the company and ensuring the protection of their rights. The inclusion representative also represents the employer to authorities and other organizations that provide services for severely disabled individuals.

11.4.15 Obligations of the Employer Towards Authorities

Employers in Germany are legally required, according to § 163 Abs. 1 in connection with Abs. 6 SGB IX, to maintain a separate list of severely disabled individuals employed in each company and department. This list must be provided to the Federal Employment Agency or the Integration Office upon request. If no positions are offered for severely disabled individuals, the data must only be reported to the Federal Employment Agency upon request.

This provision ensures that individuals with severe disabilities have equal access to employment opportunities. It also allows the government to monitor compliance with the law and support employers who are striving to employ severely disabled individuals.

11.4.16 Penalty Provisions

An employer can be fined up to 10,000 euros under § 238 SGB IX if they intentionally or negligently violate certain obligations outlined in the SGB IX. These penalty provisions primarily relate to statutory reporting requirements and the obligation to involve the representative of disabled employees.

11.5 General and Specific Termination Protection

Termination protection in German labor law makes it more difficult for employers to terminate employment contracts. There are two main types of termination protection: general and specific.

11.5.1 General Termination Protection

General termination protection involves specific legal regulations that only permit certain grounds for termination. According to § 1(2) sentence 2 of the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz or KSchG), only personal, behavioral, or operational reasons can justify a dismissal. Any other reason for termination leads to the invalidity of the dismissal within the scope of the Protection Against Unfair Dismissal Act.

Furthermore, for operational dismissals, a special selection process has been defined, requiring the employer to select among several employees who may be terminated for operational reasons, those who will be least affected by the dismissal based on their social situation (known as the social selection). The criteria for selection set by the legislature include the length of service, age, maintenance obligations, and the degree of disability of the employees, as per § 1(3) of the KSchG.

Additionally, different legal requirements have been developed by the courts depending on the type of termination. For dismissals due to employee misconduct – whether regular or immediate – it is generally required that the employee has received a prior written warning for similar contract-violating behavior. The Federal Labor Court assumes that a behavioral dismissal is not a sanction by the employer but rather a means of protecting against further misconduct. Whether further misconduct is expected can only be determined if the employee, despite a previous warning, engages in such behavior once again. For personal-related terminations, especially those due to illness, the employer is generally required to demonstrate significant periods of absence due to the same illness and provide a reasonable and substantiated prognosis of the future course of illness.

For operational dismissals, the employer must present a comprehensible business decision leading to job reductions. However, the courts only review the existence of this decision, not its sensibility. Besides the termination protection stemming from the KSchG, there are other general regulations that exclude certain terminations. For instance, there is a “prohibition of discrimination” under § 612a of the Civil Code (BGB), which renders a dismissal invalid if it is based on the employee’s legitimate interests, such as union activities within the company. A special regulation in this context is the prohibition of termination due to a business transfer or a transfer of part of a business under § 613a (4) BGB, which is similar to the legal principle in rent law that “sale does not break the lease” (§ 566 BGB).

Lastly, there are statutory regulations that indirectly contribute to termination protection, such as the written form requirement for terminations under § 623 BGB, the limitation period of two weeks after becoming aware of the termination grounds for immediate dismissal as stated in § 626 (2) BGB, and the requirement for works council involvement, the disregard of which would render a dismissal invalid under § 102(1) of the Works Constitution Act (BetrVG).

As (termination) protection provisions in favor of the employer, we can consider judge-made claims for damages upon termination by the employee before the notice period expires, or the requirement of a prior warning in the case of an immediate termination by the employee (for example, due to non-payment of wages). However, these claims primarily follow general principles of contract law and are less aimed at the general protection of the employer from unjustified terminations by employees.

11.5.2 Specific Termination Protection

In addition to general termination protection, the legislator has excluded or made terminations more difficult for certain groups of individuals who are considered particularly vulnerable. The following regulations, among others, can be mentioned:

Individuals in Special Situations:

Prohibition of terminating pregnant women until four months after childbirth, as per § 9 of the Maternity Protection Act (Mutterschutzgesetz — MuSchG).
Termination of severely disabled employees only with the approval of the Integration Office, according to § 85 of the Social Code IX (Sozialgesetzbuch IX — SGB IX).
Prohibition of ordinary termination of trainees after the probationary period, as per § 22 of the Vocational Training Act (Berufsbildungsgesetz — BBiG).
Prohibition of ordinary termination during parental leave, as per § 18 of the Federal Parental Allowance and Parental Leave Act (Bundeselterngeld- und Elternzeitgesetz — BEEG), as well as during care leave, as per § 5 of the Care Leave Act (Pflegezeitgesetz).

Individuals in Special Functions:

Prohibition of ordinary termination of works council members and candidates, as per § 15 of the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz — KSchG).
Extraordinary termination of works council members only with the consent of the works council, as per § 103 of the Works Constitution Act (Betriebsverfassungsgesetz — BetrVG).
Prohibition of ordinary termination of staff council members, election board members, and candidates for these positions (respective state personnel representation laws).
Prohibition of ordinary termination of members of youth and apprentice representation councils (according to works constitution or personnel representation law).
Prohibition of ordinary termination of severely disabled representatives, as per § 96 of the Social Code IX.
Prohibition of ordinary termination of data protection officers, as per § 4f(3) of the Federal Data Protection Act (Bundesdatenschutzgesetz — BDSG).

11.6 The Federal Holiday Act (Bundesurlaubsgesetz)

Vacation is paid time off intended for rest and relaxation. The Federal Holiday Act (Bundesurlaubsgesetz — BUrlG) regulates not only the duration of the vacation but also its carryover to the following year and vacation pay upon termination of the employment relationship. The beneficiaries of the law include “employees,” which encompasses apprentices and even persons who are similar to employees, meaning individuals who are self-employed but, due to their economic dependence on their principal, should have paid vacation just like regular employees. The Federal Holiday Act explicitly grants vacation rights to a particular group of these employee-like individuals, home-based workers (Heimarbeiter), as per § 12 of the BUrlG.

The Federal Holiday Act mandates a minimum paid vacation of 24 working days per year for each employee. “Working days” are the six days from Monday to Saturday. Therefore, every employee, regardless of the number of their individual weekly working days, has a legal minimum vacation of four weeks per year. For employees who work fewer than six days a week, the legal entitlement of 24 working days should be converted to workdays. For example, an employee working five days a week has a vacation entitlement of 20 working days according to the following conversion:

24 working days : 6 working days = 4 weeks of vacation
4 weeks x 5 working days = 20 working days of vacation

Consequently, an employee who works four days a week has an entitlement of 16 working days of vacation:

24 working days : 6 working days = 4 weeks of vacation
4 weeks x 4 working days = 16 working days of vacation

With three working days a week, an employee has 12 working days of vacation per year, with two working days, eight working days of vacation per year, and with one working day a week, four working days of vacation per year.

The entitlement becomes due for the first time after six months of the employment relationship (§ 4 BUrlG). The permissibility of contractual deviations from the statutory holiday provisions is regulated by § 13 BUrlG. The principle of non-negotiability applies, meaning that deviations from the provisions of the BUrlG that are unfavorable to employees are not allowed (§ 13 Abs. 1 S. 3 BUrlG). Only in collective agreements can rules that are less favorable to employees, with the exception of §§ 1, 2, 3 BUrlG, be established (so-called collectively modifiable statutory law).

It is not permissible to pay out a vacation entitlement within an existing employment relationship. The so-called vacation compensation entitlement is automatically triggered when an employee is still entitled to outstanding vacation upon the termination of the employment relationship, which they could have taken if the employment relationship had continued (§ 7 Abs. 4 BUrlG). The amount of the vacation compensation entitlement is calculated according to § 11 BurlG, i.e., in the same way as the entitlement to vacation pay.

Minors have an increased minimum vacation entitlement under the Youth Employment Protection Act (JArbSchG), and disabled individuals have a similar entitlement under the Ninth Book of the Social Code (SGB IX). Minors who are under 16 years old at the beginning of the calendar year are entitled to a minimum of 30 working days of vacation per year. If the minor is under 17 (or 18) years old at the beginning of the calendar year, their minimum vacation entitlement is 27 (or 25) working days per year. This is specified in § 19(2) JArbSchG.

Disabled individuals have an additional entitlement to five paid working days of vacation within the vacation year. If the regular working time of the disabled individual is spread across more or fewer than five working days in a calendar week, the additional vacation is adjusted accordingly. Any longer additional vacation periods specified by collective bargaining agreements, company rules, or other vacation regulations for disabled individuals remain unaffected.

The additional vacation for disabled individuals as per § 125(1) SGB IX extends the vacation specified in collective bargaining agreements or individual employment contracts and does not merely supplement the statutory minimum vacation. This additional vacation cannot be effectively reduced in a collective bargaining agreement since it is the statutory minimum vacation. If the disability does not exist throughout the entire year, the disabled individual is entitled to a proportional additional vacation as per § 125(2) SGB IX. When determining the transfer of the additional vacation to the next year due to the retrospective recognition of disability, the regulations of § 7(3) BUrlG apply accordingly.

According to § 4 BUrlG, the full vacation entitlement of four weeks is earned with a new employer after a waiting period of six months. Before the waiting period expires, the employee cannot demand the full vacation of four weeks but, instead, fractional vacation as per § 5(1) BUrlG, equivalent to one-twelfth of the annual vacation for each full month of employment. If the employee leaves the employment before the waiting period is fulfilled, they are also entitled to one-twelfth of the annual vacation for each full month of employment, as per § 5(1)(b) BUrlG. The fractional vacation entitlement should not depend on a minimum employment duration, especially in the entry year. A provision often overlooked in practice in the BUrlG stipulates that even after the waiting period has been fulfilled, the employee can only request fractional vacation entitlement equivalent to one-twelfth of the annual vacation for each full month of employment when the employment ends in the first half of a calendar year (§ 5(1)© BUrlG).

This means that if the last day of employment falls on January 1st or June 30th or any day between these two dates, fractional vacation is applicable. However, the fractional allocation of vacation entitlement in the entry and exit year does not apply in all cases. If the employee leaves the employment in the first half of the calendar year and has already taken all of the vacation in February, they do not need to repay the received vacation pay, even partially (BAG NZA 2001, 663).

According to § 7(1) BUrlG, the employee’s vacation preferences are to be “considered” when determining the timing of their vacation unless urgent operational concerns or other employees’ vacation preferences, which deserve priority for social reasons, conflict with them. The phrasing of the law that the employee’s preferences are only to be “considered” might suggest that these preferences play a subordinate role in vacation scheduling. However, according to case law, the employee’s vacation preferences generally take precedence over operational interests. The employer can exceptionally refuse the employee’s timing request only when urgent operational concerns or the vacation preferences of other more socially protected employees oppose it.

The determination or granting of vacation is exclusively done by the employer, not the employee. Self-granted leave without prior agreement with the employer can be grounds for behavioral termination, which can be issued as an extraordinary or immediate termination, depending on the situation. If a dispute arises between the employee and employer regarding vacation that the employee has already planned and is about to take, they can apply to the labor court for an interim injunction requiring the employer to grant the vacation.

Such expedited proceedings live up to their name – in extreme cases, it’s even possible to have a hearing in the labor court and receive a decision on the same day. In general, the employer cannot revoke once-granted vacation. Revocation of granted vacation by the employer is only permissible in extremely exceptional circumstances. Consequently, revocation of granted vacation by the employer is generally not permissible, meaning the vacation, once granted, is legally binding and must be honored.

However, even an unlawful revocation of previously approved leave by the employer before the employee’s vacation commences means that the employee is initially not allowed to take the (initially approved but later revoked) vacation. In such a case, the employee must seek the assistance of the labor court. Going on leave without proper authorization constitutes self-authorization, which has the severe legal consequences mentioned above.

The situation is different when the employer revokes approved leave after the vacation has started. Such a declaration does not require the employee to interrupt the vacation or take legal action.

In general, the entitlement to vacation time is irrevocably lost if the employee does not use it within the current calendar year (until December 31). The transfer of leave to the first three months of the following year (the “carryover period”) is an exception that is only allowed under specific legal conditions.

According to § 7(3) of the Federal Leave Act (BUrlG), it states:

“§ 7 Timing, Transferability, and Compensation for Leave.

Leave must be granted and taken within the current calendar year. The transfer of leave to the next calendar year is only permissible if compelling operational or personal reasons justify it.”

If such compelling operational or personal reasons for transferring leave do not exist, the employee, from a legal perspective, no longer has any remaining leave the following year or during the carryover period. An exception to this rule may arise from a company practice if the employer has consistently agreed to transfer leave to the following year for all employees without exception.

If an employee falls ill shortly before the end of the year and, therefore, cannot take their entire vacation by December 31, the employee should request to reschedule their leave for a time after returning to work. This is because, according to legal precedent, the vacation partially expires, namely for the duration of the unused vacation days until the end of the year. The reason is that the employee’s illness constitutes a “personal reason” for transferring the leave to the following year only if the vacation in the previous year couldn’t be taken exclusively due to the illness. If an employee recovers before the end of the year, they can take their leave again.

If the leave is effectively transferred to the first three months of the following year, the employee must take it by March 31 of the following year, as it will otherwise expire for good.

In § 7(3), sentence 3 of the Federal Leave Act (BUrlG), it states:

“§ 7 Timing, Transferability, and Compensation for Leave.

(3) (…) In the case of transfer, leave must be granted and taken during the first three months of the following calendar year.”

If the employer unreasonably fails to grant the transferred leave, which had been requested on time, during the first three months of the following year, even when it could have been granted, the entitlement to leave under the BUrlG will expire. However, in such circumstances, the employee has a claim for damages against the employer, which is aimed at providing the unlawfully denied leave. Under such conditions, the remaining leave from the previous year can still be requested after March 31.

If an employee falls ill during their vacation, the days of incapacity for work, proven by a medical certificate, are not deducted from the annual leave, as stated in § 9 of the BUrlG. This is because the purpose of relaxation during leave cannot be achieved if the employee is ill. Recovery is necessary before one can enjoy their time off. However, this non-deduction rule applies only to the legally prescribed minimum leave in accordance with §§ 1, 3 of the BUrlG, but not to leave exceeding this minimum as specified by a collective bargaining agreement or an employment contract. The parties to such additional leave beyond the legal minimum are free to make alternative arrangements, so differing regulations can be validly agreed upon.

If an employee is abroad during their illness, they are required, according to § 5(2) of the Continued Remuneration Act (Entgeltfortzahlungsgesetz, EFZG), to notify the employer of their incapacity for work, the expected duration of the illness, and their address at the place of stay in the quickest means of communication. The costs for this notification must be covered by the employer. Additionally, if the employee is a member of a statutory health insurance, they must also inform the health insurance provider about the incapacity for work and its expected duration.

If an employee wishes to extend their leave with the sick days, attaching the sick days directly to their “vacation days,” they must obtain the employer’s consent beforehand. From a legal perspective, this constitutes a new request for leave. The comments above regarding “self-authorization” apply here.

According to the consistent case law of the Federal Labor Court (BAG) since 1982, the emergence of the leave entitlement does not depend on the employee having worked during the year in which they are entitled to leave (BAG, judgment of March 24, 2009 — 9 AZR 983/07). Even if the employee was continuously ill during the entire leave year, they still have the right to receive leave. However, they cannot claim their leave due to illness, meaning they are unable to use the leave while sick. In such cases, the leave is carried over to the next calendar year.

The BAG had been of the opinion, in its constant case law since 1982, that the transfer provision in § 7(3), sentence 2 of the BUrlG should also apply when the employee was prevented from taking leave within the leave year due to a lengthy illness (BAG, judgment of May 13, 1982, 6 AZR 360/80). In other words, even a permanent illness constitutes a compelling “personal reason” for not taking leave within the leave year.

The legal consequence of this interpretation was that the leave not taken due to a lengthy illness was transferred to the next calendar year in accordance with the provisions of § 7(3), sentence 2 of the BUrlG and ultimately expired on March 31 of the following year, according to § 7(3), sentence 3 of the BUrlG. In the event of the termination of the employment relationship, the employee could not claim compensation for unused leave from the previous year, even if they were not healthy at the time of termination, provided that termination occurred no later than March 31. The justification provided by the BAG was that the claim for compensation replaces the leave entitlement, meaning its “surrogate.” If the employee is not fit for work at the time of termination, there is no entitlement to leave in kind, and therefore, no right to its surrogate or compensation for leave.

However, this case law was overturned by the European Court of Justice (ECJ) in January 2009, declaring it inconsistent with European law (ECJ, judgment of January 22, 2009 — C‑350/06). The reason is that Article 7 of Directive 2003/88/EC on certain aspects of the organization of working time (Directive 2003/88/EC) provides for a minimum leave entitlement of four weeks for all workers. According to the ECJ, this legally mandated minimum leave entitlement would not be respected or effectively implemented if employees who were continuously ill would lose their leave entitlement under national laws.

As a result of this judgment, employees who have been continuously ill for extended periods can now demand unused leave from previous years as carryover leave if they return to work or request financial compensation for their unused leave when their employment ends. This employee-friendly decision, however, only applies to the statutory leave entitlement under § 3 of the BUrlG and not to additional leave beyond the statutory minimum provided by a collective bargaining agreement, works council agreement, or individual contract. The amount of these claims can be substantial, as the courts have not yet set a time limit on when leave not taken due to illness in the past can be claimed.

This change in labor law will have implications for employment protection law. In the future, employers will likely make more effort to terminate employment relationships with employees who have been absent from work for extended periods due to illness. Illness-related terminations are expected to be more often considered lawful or proportionate by the courts, as employers can argue the financial consequences of the long-term suspended employment due to leave rights under the changed holiday law.

Table of con­tents

1 Scope of Labor Law and Basic Con­cepts

1.1 The Sub­ject Mat­ter Regu­la­ted by Labor Law

1.2 Scope of Labor Law Employees and Employ­ers, Employ­ment Con­tracts, and Employ­ment Rela­ti­onships

1.3 The Con­cept of an Employee in the Legal Sen­se of Labor Law

1.4 Con­cept of the Employ­er

1.5 Appli­ca­bi­li­ty of Labor Law to Spe­ci­fic Groups of Indi­vi­du­als

1.5.1 Per­sons Simi­lar to Employees

1.5.2 Indi­vi­du­als Enga­ged in Home­work

1.6 The Employ­ment Con­tract

1.7 Con­cept of the Employ­ment Rela­ti­onship

1.8 Manu­al Workers and Sala­ried Employees

1.9 Exe­cu­ti­ve Employees and Their Legal Sta­tus

2 Legal Struc­tu­re of Labor Law

2.1 Indi­vi­du­al Labor Law

2.2 Coll­ec­ti­ve Labor Law

2.2.1 Coll­ec­ti­ve Agree­ment Law

2.2.2 Works Con­sti­tu­ti­on Law

3 Sources of Labor Law and Design Fac­tors, and Their Hier­ar­chy

4 Indi­vi­du­al Labor Law Fac­tors

4.1 Euro­pean Law

4.1.1 Pri­ma­ry EU Law

4.1.2 Secon­da­ry EU Law

4.2 Con­sti­tu­tio­nal Law

4.3 Labor Laws

4.4 The Coll­ec­ti­ve Bar­gai­ning Agree­ment

4.5 The Works Agree­ment (Betriebs­ver­ein­ba­rung)

4.6 The Employ­ment Con­tract

4.6.1 The Pro­of of Employ­ment Law (Nach­weis­ge­setz)

4.6.2 Gene­ral Terms of Employ­ment

4.6.3 Com­pa­ny Prac­ti­ce

4.6.4 The Prin­ci­ple of Equal Tre­at­ment in Labor Law

4.6.5 Clau­ses in Employ­ment Con­tracts and Their Signi­fi­can­ce

4.6.5.1 For­feit­u­re Clau­ses

4.6.5.2 Repay­ment Clau­ses

4.6.5.3 Repay­ment Clau­ses for Trai­ning Cos­ts

4.6.5.4 Repay­ment Clau­ses for Bonu­ses

4.6.5.5 Right of Revo­ca­ti­on Clau­ses

4.6.5.6 Penal­ty Clau­ses Pur­su­ant to §§ 339 ff. BGB

4.7 The Employer’s Right of Direc­ti­ve

5 Estab­lish­ment and Defi­ci­en­ci­es in the Employ­ment Rela­ti­onship

5.1 Employer’s Ques­tio­ning and Dis­clo­sure Obli­ga­ti­ons of Employees in Job Inter­views

5.2 Cos­ts of the Job Inter­view

6 Rights and Obli­ga­ti­ons Ari­sing from the Employ­ment Con­tract

7 Lia­bi­li­ty of Employees in Labor Law

8 Lia­bi­li­ty of Employees for Inven­to­ry Shorta­ges

9 Employ­er Lia­bi­li­ty in Labor Law

10 Ter­mi­na­ti­on of the Employ­ment Rela­ti­onship

11 Fun­da­men­tal Employ­ment Laws

11.1 The Part-Time and Fixed-Term Employ­ment Act

11.1.1 Employee’s Right to Redu­ce Working Hours

11.1.2 The right of part-time employees to extend their working hours, § 9 TzBfG

11.1.3 Fixed-term employ­ment with an objec­ti­ve reason, § 14 Abs. 1 TzBfG

11.1.4 Fixed-term employ­ment wit­hout an objec­ti­ve reason, § 14 Abs. 2 TzBfG

11.2 The Working Hours Act and Basic Terms Rela­ted to Working Time

11.3 The Mate­r­ni­ty Pro­tec­tion Act

11.3.1 Intro­duc­tion

11.3.2 Scope of the Mate­r­ni­ty Pro­tec­tion Act

11.3.3 Noti­fi­ca­ti­on and Infor­ma­ti­on Obli­ga­ti­ons

11.3.4 Report­ing Obli­ga­ti­ons of the Employ­er

11.3.5 Pro­tec­tion Peri­ods Befo­re and After Child­birth

11.3.6 Health Pro­tec­tion

11.3.7 Other Employ­ment Pro­hi­bi­ti­ons

11.3.8 Medi­cal Employ­ment Ban

11.3.9 Spe­cial Pro­tec­tion Against Ter­mi­na­ti­on

11.3.10 Finan­cial Bene­fits

11.4 Disa­bi­li­ty Law

11.4.1 Intro­duc­tion

11.4.2 Inno­va­tions Intro­du­ced by the Fede­ral Par­ti­ci­pa­ti­on Law (BTHG)

11.4.3 The Four Stages of Reform in the BTHG

11.4.4 Who Falls Under the Pro­tec­ted Group?

11.4.5 SGB IX: When is The­re an Obli­ga­ti­on to Employ?

11.4.6 How Much Is the Com­pen­sa­ti­on Pay­ment?

11.4.7 What Does the Duty of Care Ent­ail?

11.4.8 Do Sever­ely Dis­ab­led Peo­p­le Get Extra Lea­ve?

11.4.9 Spe­cial Job Pro­tec­tion

11.4.10 Regu­la­ti­ons Regar­ding Working Hours

11.4.11 The Employer’s Right to Inqui­re During Hiring

11.4.12 The Dis­ab­led Employee Repre­sen­ta­ti­on

11.4.13 What Is an Inclu­si­on Agree­ment?

Table of contents

1 Scope of Labor Law and Basic Concepts

1.1 The Subject Matter Regulated by Labor Law

1.2 Scope of Labor Law Employees and Employers, Employment Contracts, and Employment Relationships

1.3 The Concept of an Employee in the Legal Sense of Labor Law

1.4 Concept of the Employer

1.5 Applicability of Labor Law to Specific Groups of Individuals

1.5.1 Persons Similar to Employees

1.5.2 Individuals Engaged in Homework

1.6 The Employment Contract

1.7 Concept of the Employment Relationship

1.8 Manual Workers and Salaried Employees

1.9 Executive Employees and Their Legal Status

2 Legal Structure of Labor Law

2.1 Individual Labor Law

2.2 Collective Labor Law

2.2.1 Collective Agreement Law

2.2.2 Works Constitution Law

3 Sources of Labor Law and Design Factors, and Their Hierarchy

4 Individual Labor Law Factors

4.1 European Law

4.1.1 Primary EU Law

4.1.2 Secondary EU Law

4.2 Constitutional Law

4.4 The Collective Bargaining Agreement

4.5 The Works Agreement (Betriebsvereinbarung)

4.6 The Employment Contract

4.6.1 The Proof of Employment Law (Nachweisgesetz)

4.6.2 General Terms of Employment

4.6.3 Company Practice

4.6.4 The Principle of Equal Treatment in Labor Law

4.6.5 Clauses in Employment Contracts and Their Significance

4.6.5.1 Forfeiture Clauses

4.6.5.2 Repayment Clauses

4.6.5.3 Repayment Clauses for Training Costs

4.6.5.4 Repayment Clauses for Bonuses

4.6.5.5 Right of Revocation Clauses

4.6.5.6 Penalty Clauses Pursuant to §§ 339 ff. BGB

4.7 The Employer’s Right of Directive

5 Establishment and Deficiencies in the Employment Relationship

5.1 Employer’s Questioning and Disclosure Obligations of Employees in Job Interviews

5.2 Costs of the Job Interview

6 Rights and Obligations Arising from the Employment Contract

7 Liability of Employees in Labor Law

8 Liability of Employees for Inventory Shortages

9 Employer Liability in Labor Law

10 Termination of the Employment Relationship

11 Fundamental Employment Laws

11.1 The Part-Time and Fixed-Term Employment Act

11.1.1 Employee’s Right to Reduce Working Hours

11.1.3 Fixed-term employment with an objective reason, § 14 Abs. 1 TzBfG

11.1.4 Fixed-term employment without an objective reason, § 14 Abs. 2 TzBfG

11.2 The Working Hours Act and Basic Terms Related to Working Time

11.3 The Maternity Protection Act

11.3.1 Introduction

11.3.2 Scope of the Maternity Protection Act

11.3.3 Notification and Information Obligations

11.3.4 Reporting Obligations of the Employer

11.3.5 Protection Periods Before and After Childbirth

11.3.6 Health Protection

11.3.7 Other Employment Prohibitions

11.3.8 Medical Employment Ban

11.3.9 Special Protection Against Termination

11.3.10 Financial Benefits

11.4 Disability Law

11.4.1 Introduction

11.4.2 Innovations Introduced by the Federal Participation Law (BTHG)

11.4.4 Who Falls Under the Protected Group?

11.4.5 SGB IX: When is There an Obligation to Employ?

11.4.6 How Much Is the Compensation Payment?

11.4.7 What Does the Duty of Care Entail?

11.4.8 Do Severely Disabled People Get Extra Leave?

11.4.9 Special Job Protection

11.4.10 Regulations Regarding Working Hours

11.4.11 The Employer’s Right to Inquire During Hiring

11.4.12 The Disabled Employee Representation

11.4.13 What Is an Inclusion Agreement?

11.4.14 Employer’s Inclusion Representative

11.4.15 Obligations of the Employer Towards Authorities

11.4.16 Penalty Provisions