26.03.2021

Labour & Employment Law Newsletter Issue 1, 2021

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Editorial

Dear Reader,

The Transparency in Wage Structures Act (Entgelttransparenzgesetz, EntgTranspG) entered into force on 6 July 2017. Its purpose is to implement the EU Equal Treatment Directive and enforce the requirement for equal pay for women and men performing the same work or work of equal value. Of practical relevance here is the employee‘s individual right to information, which raises several questions. The Federal Labour Court considered this issue of the employee‘s individual right to information in its ground-breaking decision of 25 June 2020. Joachim Reichenberger offers us an overview of this in his article. Nadine Ceruti also provides a review in the section “Judgment in Reviews” of a current decision of the Federal Labour Court in an action concerning unequal pay.

With the digitisation of the working world accelerating at a fast pace, the required involvement of works councils in the introduction and application of technical systems in accordance with Section 87 (1) No. 6 of the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG) is a perennial issue in company practice. No progress seems to have been made in the case law of the Federal Labour Court on the right of co-determination of works councils in accordance with Section 87 (1) No. 6 BetrVG and this complicates implementation of digitisation in companies. Klaus Thönißen offers an overview of this and details possible solutions in his article.

Of course, we also consider the latest developments in case law in this newsletter. We hope that the decisions we have selected will be of particular interest to you.

We look forward to receiving your feedback on these issues. Please contact the authors of the individual articles directly if you have any questions or suggestions.

Stay healthy!

Kind regards,

Achim Braner 

Transparency of Pay Act – landmark decision of the Federal Labour Court

In its decision of 25 June 2020, the Federal Labour Court creates legal certainty with
regard to the employee’s individual right to information under the German Transparency of
Pay Act (Entgelttransparenzgesetz, EntgTranspG).

lntroduction

The Transparency of Pay Act serves to implement the EU Equal Treatment Directive. Its aim is to enforce the principle of equal pay for women and men. To this end, it contains three „building blocks“: The individual right to information, the company auditing systems and the reporting obligation. The employee’s individual right to information is of particular practical relevance. This will be presented below on the basis of the decision of the Federal Labour Court. The right extends, inter alia, to information on the criteria and procedures for determining remuneration and to information on comparable remuneration for a comparable activity to be named. Even if it was declared a “toothless tiger” because of its natural restriction to mere information and the Federal Ministry for Family Affairs, Senior Citizens, Women and Youth (BMFSFJ) assumed that the right would be asserted by no more than 1% of employees, its potential impact should not be underestimated. After all, the employer may be forced to provide detailed insights into company remuneration systems and may subsequently find itself exposed to claims for salary adjustments, damages or compensation. The effective drafting of limitation periods in employment contracts, which also apply to claims based on a violation of the Transparency of Pay Act, is therefore of particular importance. In this context, caution is advised when amending old contracts in order not to lose any protection based on legitimate expectations concerning the sunset clause.

Right of freelancers to also request information

According to the wording of the law, the right to information exists for the “employed” and thus in particular for employees. Persons similar to employees or freelancers are thus not covered for the time being, although the explanatory memorandum to the law suggests a more comprehensive approach. Before the decision of the Federal Labour Court it was unclear whether the EntgTranspG could also apply to freelancers who were similar to employees. The Court now affirms this with a view to a uniform interpretation of the EntgTranspG in compliance with EU law. According to the Court, anyone who, during a specified period, performs services for another person in accordance with that person‘s instructions and receives remuneration in return falls within the scope of application of the Act. However, the Federal Labour Court‘s decision is not to be understood as a “blank cheque” for all freelancers. Rather, only the person who acts in accordance with instructions can assert a right to information. Particularly for the “crowd workers” currently in focus, the existence of this prerequisite must be examined very carefully.

Remuneration components and their grouping

In principle, one has a right to information on the average monthly gross remuneration and up to two individual remuneration components. According to the intention of the law, information is to be provided on the criteria and procedures for determining the remuneration, i.e. information on the determination of one‘s own remuneration as well as the remuneration for the comparable activity. However, this comparable remuneration is only to be stated as the extrapolated statistical median of the average monthly gross remuneration in relation to the full-time equivalents. With regard to the “remuneration components”, the Federal Labour Court now takes a very generous view, which is, however, at least questionable with regard to the wording of the law, which is actually unambiguous in this respect, to the effect that the term “individual remuneration components” is to be understood in relation to groups. Thus, in the case decided, the requested information on “all non-tariff supplements with or without reference to the activity“ was admissible as such with regard to only „two remuneration components“. In the opinion of the Federal Labour Court, the legislative goal of facilitating the enforcement of the right to equal pay for equal work or work of equal value could not be achieved when adopting a different view. Otherwise, employees without more detailed information would have to request information on possible remuneration components at random or proceed step by step by first requesting information on the criteria and procedures for determining remuneration and could only then also receive information on individual remuneration components. Furthermore, it should not depend on the designation of the individual benefit by the employer, but rather on the fact that the remuneration components are comparable in substance. The request for information therefore also included any comparable remuneration components described differently (e.g. supplements). However, the extensive view of the Court is only partially convincing, as it opens the door to global applications. Moreover, it is also questionable whether the decision actually helps the employees concerned. Because the more global the application, the more global the respective median is at the end. In other words, and referring to the “supplements” example: the more supplements there are behind a value, the less likely it will be possible to demonstrate or claim gender discrimination in relation to any one of them.

Immateriality of procedural errors

The Federal Labour Court also makes important statements with regard to formal aspects. Thus, the legislator actually prescribes the text form, i.e. a legible, declaration that is not signed which means that an e-mail, fax or also a message via instant messenger or social networks would be sufficient. In the opinion of the Federal Labour Court, however, the written form is sufficient. However, if one takes into account the higher requirements of the written form due to the required handwritten signature, the decision of the Federal Labour Court is not surprising. This is because, taking into account the legislative intention to eliminate existing differences in pay, compliance with higher requirements than those laid down by law cannot stand in the way of the right to information as a means of promoting equal pay.

On the other hand, the findings of the Federal Labour Court regarding the “correct recipient” of the right to information are of great practical significance. With regard to the responsibility for providing the information, the EntgTranspG regulates a „differentiated cooperation model“ between the employer and the works council, which is “equipped with extensive mutual information obligations”, depending on whether the employer is covered by a collective agreement. However, the Federal Labour Court considers it harmless with regard to the objective of “eliminating pay discrimination” if the request for information is addressed to a body which is not responsible for such matters in principle. The Federal Labour Court even goes one step further and considers the incorrect addressing to be irrelevant if the employer has explicitly named the correct recipient to the employee beforehand. Thus, in the future it can be irrelevant whether the right to information is addressed to the functionally (works council or staff council, employer or collective bargaining party) and/or geographically (works council at location X or Y) responsible recipient.

Conclusion

The decision of the Federal Labour Court of 25 June 2020 brings legal certainty, above all, to the question of the scope and details of the right to information. However, a “wave of lawsuits” is still not to be expected. It does not involve any fundamental extension of the rights of employees. Nevertheless, the decision should be reason enough for companies to put the issue of equal pay on the agenda, if it has not already done so, and to ensure compliance, if necessary.

Author

Dr. Joachim Reichenberger, LL.M., EMBA (Washington D.C.)
Rechtsanwalt
Steuerberater
Dipl.-Verwaltungswirt (FH)
Wirtschaftsjurist (Univ. Bayreuth)
Counsel
München

Perennial issue: software vs. co-determination (Section 87 (1) No. 6 BetrVG)

On the trials and tribulations of the German Federal Labour Court.

Introduction

The required participation of the works council in the introduction and use of technical equipment pursuant to Section 87 (1) no. 6 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) is a perennial issue in business practices and has a considerable influence on the ongoing digitalisation of companies. COVID-19, as a catalyst, has had a significant impact on the world of work and with the resulting increase in working from home, the introduction of technical equipment (which regularly includes software) is the order of the day. The willingness of the vast majority of works councils to cooperate, which is often corona-related, has been impressive. Nevertheless, there is a tendency to see problems where there are none. In particular, there is unfortunately often a lack of conviction that performance and behaviour monitoring is not the reason for the introduction of software.

Companies have a great interest in offering their employees a modern infrastructure. From the employer‘s point of view, products such as Office 365 or MS Teams are not intended for monitoring purposes, but to simplify employees’ everyday work. The German Federal Labour Court should take this finding into account and change its case law. This is because the Federal Labour Court case law, which has been incorrect for decades with regard to the question whether technical devices are “designed” to monitor the employees, leads to the situation where ultimately every piece of software is a technical device within the meaning of Section 87 (1) No. 6 BetrVG.

In practice, this unfortunately leads to some works councils taking a fundamental obstructive approach. In essence, it is no longer about the employee and the company, but about the exercise of co-determination rights solely for the sake of co-determination.

Legal basis: law and overly rigid jurisdiction

Section 87 (1) No. 6 BetrVG: wording and history

The legal basis for co-determination in the case of technical equipment is Section 87 (1) No. 6 BetrVG. According to this provision, the works council must be involved in the “introduction and use of technical devices designed to monitor the behaviour or performance of the employees”. The actual scope of the co-determination provision cannot yet be surmised from the wording. Even when the provision came into force in 1971, its current significance could not be foreseen. This provision was introduced because of the special feature of monitoring by technical equipment that – unlike human monitoring – a large amount of data can be collected and processed. It is often not obvious to employees whether and how a technical device monitors their behaviour. In the explanatory memorandum to the law, the legislator states that this danger emanates from technical monitoring equipment which has the purpose of monitoring the behaviour or performance of employees.

According to the wording of the law, it is clear: the device must be specifically designed to monitor employees. Moreover, the scope of application should then only be opened if the employer wishes to use a device for monitoring purposes (even if the device per se is not designed for monitoring).

Federal Labour Court case law: designed for the purpose = possibility

Section 87 (1) No. 6 BetrVG has only gained such far-reaching significance through extensive interpretation by the Federal Labour Court. First and foremost, a 46-year-old landmark decision (Federal Labour Court, 9 September 1975 – 1 ABR 20/74), which continues to have an effect today. At the time of this decision, Microsoft was established only five months ago, and Google founders Larry Page and Sergey Brin were two years old. The Federal Labour Court stated at that time that a device was already designed for monitoring if the technical device was suitable for monitoring employee behaviour or performance. Neither an intention to monitor on the part of the employer nor an actual evaluation of the performance or behaviour-related data is necessary. The Federal Labour Court bases its interpretation on the consideration that it makes no difference to the employee whether monitoring is the objective pursued by the employer or only represents a side effect. The extent to which that reasoning can be used to justify the reinterpretation of the term ‛designed’ as meaning ‛suitable’ is not only questionable but incorrect. Since then, the Federal Labour Court case law has rightly come under heavy criticism. The Court did not provide any further specific details regarding this.

This extensive and, according to the view represented here, incorrect interpretation of the Federal Labour Court leads to an incorrect understanding of Section 87 (1) No. 6 BetrVG and ultimately to the fact that the works council must be involved in almost every introduction of a technical device. Consequently, even Microsoft Excel or an Outlook group calendar constitute such monitoring devices.

Reading tip: A more detailed article can be found in “SPA – Rapid Information for Personnel Management and Labor Law, Issue 8/2020”

Best practice: dealing with Section 87 (1) No. 6 BetrVG regarding the introduction of software

In practice, it is clear what difficulties the extensive Federal Labour Court case law entails, as almost every HR-relevant issue is co-determined. Since, according to the Federal Labour Court case law, co-determination is triggered by the collection of behaviour-related data, the introduction of office software is also affected. Even an attendance list maintained in Microsoft Excel can be used for monitoring. The sum function stored in Excel enables performance-related data to be processed (Hamm Higher Labour Court (Landesarbeitsgericht, LAG), 10 April 2018 - 7 TaBV 113/16; notwithstanding this, the Hamm LAG already considered the requirements to be met even without a stored sum function). The use of the Outlook group calendar allowed the employer to make an evaluation with regard to the coordination and concentration of appointments of the employee (Nuremberg LAG, 21 February 2017 - 7 Sa 441/16).

It becomes particularly problematic where technically complex solutions such as Workday, SAP Success Factors or the already mentioned Office 365 and MS Teams are involved. The company must manage to involve the works council in good time in order to build up the necessary technical knowhow in the committee – if this is not already available in the works council itself. Otherwise, the introduction of such comprehensive systems often leads to the involvement of the conciliation committee.

Access rights of the works council: co-determination must be related to a specific task

In consulting practice, the problem often arises that works councils want to have permanent access rights to certain software solutions without any concrete reason (frequently on the grounds of “compliance with data protection principles”). It should be emphasised that data protection per se - i.e. without any reference to the tasks of the works council - is not subject to co-determination. However, especially after the introduction of the EU GDPR, there is a misconception in many companies that the works council has a say in issues relevant to data protection even if it is not involved in the task. This frequently leads to works councils demanding far-reaching access rights to system and employee data. In a decision of 9 April 2019, the Federal Labour Court (1 ABR 51/17) once again highlighted two points in this context - the works council in this case demanded the automatic disclosure of notifications of an employee’s pregnancy - in continuation of established case law:

  • the works council must demonstrate that “a task of the works council exists in the first place” and that “in the individual case the requested information is necessary for the performance of the task”;
  • “Therefore, when making a request for information involving sensitive data, the works council must demonstrate the existence of measures that protect the legitimate interests of the employees concerned – in this case, the female employees communicating their pregnancy.”

In another context – it concerned the permanent transfer of salary lists requested by the works council – the Federal Labour Court stated: “The works council cannot demand permanent access to detailed gross salary payrolls for the works committee under any legal aspect.” (BAG, 29 September 2020 – 1 ABR 32/19).

Co-determination is also required for updates

Furthermore, it must be taken into account that the respective software is updated on a regular basis. Section 87 (1) No. 6 BetrVG does not establish a right of co-determination of the works council in the case of a large number of updates. This only exists if the update (i.e. the change in the software resulting from an update) gives rise to the possibility of more intensive monitoring or a new quality of monitoring. However, most updates are intended solely to improve system security or user-friendliness. In all these cases, the works council already has no right of co-determination.

Nevertheless, works councils demand – often without considering their own time capacity – that all updates be subject to a comprehensive approval process. When drafting works agreements, the following conciliatory solution has proven successful:

Formulation guide: “Updating the software”

(1) The Software shall be implemented with the technical status as it exists on the date this agreement takes effect. The parties agree that updates of the software do not constitute a new introduction or acquisition of the software as long as the version or the modules contained therein are not changed by the employer and the operation of the software is carried out in accordance with the principles governed in this company agreement. Against this background, service and security updates initiated by the manufacturer of the software, as well as updates that serve to eliminate errors, can be carried out without informing the works council.

(2) The employer shall monitor developments in connection with the software, in particular with regard to privacy and security, and shall take necessary measures at its own discretion to ensure compliance with the principles provided for in this company agreement.

(3) The works council may, if and to the extent that the functionality changes with regard to the privacy of employees, lodge an objection with management regarding this change in functionality, which will examine such objection and enter into open-ended discussions with the works council in order to coordinate further measures.”

If, on the other hand, the quality of the monitoring changes as a result of the update, this constitutes a (renewed) introduction of a technical device and thus a measure subject to co-determination. The same applies, of course, if various elements or packages are additionally purchased after the introduction of a comprehensive HR suite. Particular caution is required in the case of a “SaaS model” (“software as a service”). A characteristic feature of SaaS is that the entire IT administration of the software is taken over by an external service provider. The latter also carries out maintenance work and software updates, sometimes without the client knowing anything about it. This could result in a situation contrary to co-determination occurring unnoticed.

Typical: prohibition of use as evidence

Increasingly since the introduction of the EU GDPR, works councils often state that they agree to the introduction of a software solution if a comprehensive prohibition of use as evidence is included in a company agreement. In fact, it must be noted that the works council does not have a right of co-determination in this respect. Even if such a provision were to be included, it would have no effect – at least with regard to the disciplinary measures inherent in the employer’s relationship with the employee concerned – in the event of labour court proceedings. This is because the parties simply have no regulatory competence to agree on prohibitions of use as evidence. Thus, in a judgment of 6 June 2018 (21 Sa 48/17), the Baden-Württemberg LAG pointed out the following with pleasing clarity with regard to a prohibition of use as evidence clause in a works agreement:

“Any independent prohibitions of use as evidence expressed in the company agreements in the event of violations of the regulations contained in the company agreements regarding the evaluation and collection of data do not constitute a judicial prohibition of use as evidence or a restriction of the principle of the free assessment of evidence by the court. In the absence of regulatory competence, the parties to the agreement cannot create prohibitions of use as evidence for the judiciary, to which courts belong, among others, that are broader than those provided for by current legislation.”

This understanding is of importance for companies because, according to the view represented here, the provision regarding a prohibition of use as evidence cannot be the subject of the ruling of a conciliation committee. Against this background, the following formulation is often chosen in practice when introducing software:

“Performance and behaviour monitoring

(1) Data generated is in principle used exclusively for the administration of the software (e.g. troubleshooting, access control). Access to such generated data is exclusively permitted to the persons entrusted with the administration for the purposes of system administration.

(2) In principle, the employer undertakes not to use any data that may be generated by the software for the purposes of monitoring performance and behaviour. This does not apply if the legitimate interests of the employer outweigh those of the employee.

(3) The employer’s legitimate interests are the avoidance of threats to system security as well as the prevention and detection of breaches of duty and criminal offences under the terms of the employment contract, misuse or breaches of the usage rules set out in this company agreement. The justified, concrete and documented suspicion of a violation entitles the employer to initiate monitoring measures and, if necessary, also to carry out personal evaluations, while observing the principle of proportionality. The works council must be informed of this.”

Conclusion

In practice, employers are well advised to involve works councils in the planned acquisition of software at an early stage. In addition, a clear understanding of the problems that regularly occur when dealing with updates and the evaluation of data (keyword: prohibition of use as evidence) must be communicated. Otherwise, the introduction of software can be considerably delayed; in the worst case, such projects can even fail completely. It usually helps if representatives of the works council attend promotional workshops of the various providers. An accompanying measure regarding software solutions can be the conclusion of a framework company agreement. For example, how to deal with later software updates may be agreed in advance in such an agreement.

Author

Klaus Thönißen, LL.M. (San Francisco)
Partner
Essen

Presumption of discrimination on grounds of gender in the context of an action for equal pay

In the context of an action for equal pay, the fact that the claimant’s pay is lower than the pay of the comparison group of the other gender disclosed by the employer frequently gives rise to the – rebuttable – presumption that the disadvantage in pay was gender-related.

Federal Labour Court, judgment of 21 January 2021 – 8 AZR 488/19 – Press release

The case

The claimant is employed by the defendant as a head of department. She received information from the defendant pursuant to Section 10 et seqq. of the German Transparency of Pay Act (Entgelttransparenzgesetz, EntgTranspG) on the comparable pay of the male heads of department employed by the  defendant. As provided for by the EntgTranspG, the data referred to the “statistical median extrapolated to full-time equivalents” of the average monthly basic salary above the collectively agreed pay scale and the supplement above the collectively agreed pay scale. The information provided showed that the claimant’s remuneration was lower than the comparable remuneration of male employees, both in terms of basic salary and in terms of the supplement. The claimant took this as an opportunity to sue for payment of the difference between her basic salary and her supplement and the median salaries disclosed for this purpose. The labour court upheld the claim whereas the regional labour court (LAG) changed the first-instance ruling on the appeal of the defendant employer and dismissed the claim.

The decision

The claimant’s appeal on points of law to the Federal Labour Court has been successful. The Federal Labour Court came to the conclusion that the LAG should not have dismissed the action on the grounds that there were already no facts within the meaning of Section 22 of the German General Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz, AGG), from which it may be presumed that there has been discrimination concerning the pay based on the gender. In its grounds, the Federal Labour Court states that the claimant was immediately discriminated against within the meaning of Section 3 (2) Sentence 1 EntgTranspG in comparison to the comparative persons notified by the defendant employer because her remuneration was lower than that of the comparators stated. It may be presumed from this fact, which can, however, be rebutted by the defendant, that the claimant is being discriminated against on grounds of her gender. However, the findings made by the LAG were not sufficient to place the Federal Labour Court in a position to decide whether the defendant had succeeded in rebutting this presumption of discrimination. The defendant bears the burden of proof in this regard. The case was therefore referred back to the LAG for a new hearing and decision.

Our comments

The decision of the Federal Labour Court is consistent and not objectionable. It may be argued – sometimes maybe even rightly so – that the median salary of the comparison group is sometimes not very meaningful. The median does not represent the average of the salaries of the comparison group, but represents the value that is in the middle when the salaries are sorted by their amount. This means, that there are just as many salaries below the median as above it. Now, under certain circumstances, the communication of the median content of the comparison group can give the impression of discriminatory unequal treatment. This is the case if the median salary for both female and male employees is identical, e.g. EUR 2,000 gross, but the female employee only earns EUR 1,600 gross. For the female employee making the enquiry, this gives the impression that she earns significantly less than the male comparison group, even though the salaries in the group of female employees have the same median. The median can also lead to erroneous assumptions in other cases. However, within the framework of the EntgTranspG, the legislator has decided that the right to information on the salary structure of the comparison group refers to the median. At the very least, it cannot be denied that the median can provide indications of possible pay discrimination.

Since the legislator now assumes that the median salary of the comparison group will generally be suitable for providing indications of pay discrimination, the Federal Labour Court correctly found that in the case under review there was a fact from which discrimination could be presumed within the meaning of the Section 22 AGG. The employer can now try to rebut this presumption of discrimination. It remains to be seen which arguments will be accepted by the courts in the future. A longer period of service or a special qualification could presumably constitute valid reasons for the setting of different salaries.

Author

Nadine Ceruti
Rechtsanwältin
Fachanwältin für Arbeitsrecht
Senior Associate

Granting of leave in the event of termination without notice

According to the case law of the Federal Labour Court, an employer may, under certain conditions, grant the employee leave as a precautionary measure in connection with the issuing of a termination without notice where such termination without notice does not terminate the employment relationship. With the present decision, the Federal Labour Court has now had the opportunity to further clarify these conditions.

Federal Labour Court, judgment of 25 August 2020 – 9 AZR 612/19

The case

On 18 September 2017, the employer terminated the employment relationship with the employee without notice or, alternatively, with due notice, observing the relevant two-month notice period. The termination letter said: “In the event of the termination without notice being effective, I will compensate you for the leave you have not taken up to the date of termination. In the unlikely event that the termination without notice is ineffective, I have alternatively given you ordinary notice of termination. The following shall apply in such a case: You will take all your unused leave immediately following the date of receipt of this notice during the period from 19 September 2017 to 11 October 2017. The compensation paid is then to be understood as payment of the holiday pay for the period in question. In any event, I unconditionally undertake to pay you remuneration for the period of your leave.” The employer did the payroll accounting for the employment relationship up until 18 September 2017 including the leave compensation for the aforementioned period and paid the resulting net amount to the employee. The employee brought an action against the notice of termination given to him. In the labour court proceedings, the employer and the employee reached a settlement which, among other things, provided for the termination of the employment relationship only on 31 October 2017.As part of the subsequent final payroll accounting for the employment relationship, the employer treated the leave compensation already paid as holiday pay (already paid) and did not pay it to the employee (again). The employee considered the employer’s precautionary granting of leave to be unlawful and brought an action against the employer for payment of what he considered to be outstanding pay in the amount of the holiday pay.

The decision

The employee’s action has been dismissed in all courts. In the opinion of the Federal Labour Court, the employee was also not entitled in particular to the remuneration he was seeking based on a default of acceptance on the part of the employer.

The conditions for the employee to be entitled to compensation for default of acceptance are not met, as the employer validly granted the employee leave for the period from 19 September to 11 October 2017 in his termination letter. The determination by the employer of the timing of the leave without this being requested by the employee is also legally effective, if the employee did not express any other wishes regarding such leave in response to the employer’s declaration. The employer could also grant the employee leave as a precautionary measure in the event that an ordinary or extraordinary notice of termination issued by the employer did not terminate the employment relationship. In such a case, however, the effective granting of leave requires that the employer, despite the uncertainty of the parties as to the continuation of the employment relationship, clearly expresses by means of an appropriate declaration that the employee will be definitively released from the obligation to work in order to fulfil the entitlement to recreational leave. The above declaration of the employer in the letter of termination satisfied these requirements. The uncertainty about the employee’s obligation to work during the period of the granted leave would have been retroactively removed by the employer and the employee through the settlement concluded in the labour court, so that an obligation to work existed according to the objective legal situation. Even the uncertainty of the parties as to the continuation of the employment relationship, which actually existed prior to the conclusion of the settlement agreement, did not preclude the granting of leave by the employer, since the purpose of the leave did not require that there be already final certainty as to the employee’s obligation to work at the time of the commencement of the leave. In order for the claim to paid annual leave to be satisfied and the purpose of the leave to be achieved, it is not essential, in relation to the leave of absence component, that the employee is aware of the existence of his obligation to work, but that, by being granted leave, he has the certainty that he will not be required to work for a certain period of time and that, as a result, he will have free time for rest and relaxation. The employee would only be unreasonably restricted in his holiday arrangements if he did not know at the start of his leave whether the employer would require him to perform work during the relevant period and he would therefore have to be on standby. Finally, the granting of leave by the employer does not preclude the employee’s obligation to cooperate with the Employment Agency with regard to the receipt of unemployment benefits after the employer had terminated the employment relationship without notice. With the determination of the leave period and the unconditional promise of the holiday pay, the employer as debtor had done everything required under holiday law. All events occurring thereafter that interfere with the leave – such as the obligations to act under social security law – were fundamentally part of the personal fate of life and fell within the sphere of risk of the individual employee. A redistribution of this risk in favour of the employee can only be considered in exceptional cases – which the case under review is not. The employee has no “duty to rest”. The satisfying of leave entitlements is therefore not excluded if it was already foreseeable at the time of granting and taking the leave that the employee will be exposed to pressures or efforts in his personal life during the planned leave period which negatively affect his self-determined recreation, as long as the minimum requirements intended by the paid annual leave with regard to safety and health protection in the organisation of working time are met – as is the case here.

Our comments

The decision of the Federal Labour Court continues its previous case law. What is positive about this from the employer’s point of view, is that the judges in Erfurt have now found a concrete wording for the (precautionary) granting of leave in the case of termination without notice to be suitable. This provides further certainty of action and gives employers an instrument to avoid being subject to double claims of the employee to the extent possible. Furthermore, it is positive that the objection that obligations to act under social security law would hinder the granting of leave was initially countered in the interest of employers.

The Federal Labour Court’s indication that employees can object to the unilateral granting of leave by the employer with reference to their own vacation wishes and thus block the granting of leave under certain circumstances must be kept in mind in company practice. It can be assumed that such objections will increase, not least as a result of the present decision. In this respect, however, it must be examined on a case-bycase basis whether and to what extent such an objection is possible at all or can lead to results that deviate from the unilateral granting of leave by the employer.

Author

Thorsten TilchRechtsanwalt
Fachanwalt für Arbeitsrecht
Senior Associate
Leipzig

Monthly inspection of the payroll showing gross salaries by the works council

The works council’s request for a monthly inspection of the payroll showing the gross wages and salaries pursuant to Section 80 (2) sentence 2, half-sentence 2 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) cannot be justified by the mere exercise of a supervisory task or a right of co-determination. The works council must rather explain the reasons why the requested monthly inspection is necessary.

Federal Labour Court, decision of 29 September 2020 – 1 ABR 23/19

The case

The parties to the labour court proceedings pursuant to Section 2a of the German Labour Court Act (AGG) (referred to as “resolution proceedings” below) disagree concerning the request made by the works council to inspect the payroll showing the gross salaries on a monthly basis. The background to this was the works council’s inspection of an Excel spreadsheet in January 2017, in which a total gross salary was listed for each employee for each month of 2016, together with an annual total and a monthly average total. During the inspection the works council identified considerable differences in the total gross salaries and suspected that the employer had paid bonuses in violation of the right of co-determination pursuant to Section 87 (1) No. 10 or No. 11 BetrVG. In June 2017, the works council again requested the employer to grant it access to the payrolls showing the current gross wages and salaries. Upon inquiry the works council informed the employer that it wished to inspect the payroll regularly on a monthly basis. The employer did not comply with this request, which is why the works council filed for resolution proceedings. In the resolution proceedings, the works council took the view that it should be allowed to inspect the payroll showing the gross salaries on a monthly basis so that it could monitor compliance with a company agreement on working time and the granting of bonuses for overtime, work on Sundays and public holidays as well as night work. In addition, based on the gross salary payroll inspected in January 2017, it could not be ruled out that the employer was making bonus payments in violation of the co-determination rights under Section 87 (1) No. 10 and No. 11 BetrVG.

After the works council had won in the first instance, the Regional Labour Court dismissed the works council’s application in the appeal proceedings initiated by the employer.

The decision

The appeal of the works council on a point of law to the Federal Labour Court for reinstatement of the first-instance decision was unsuccessful.

The Federal Labour Court considered the works council’s request to be able to inspect the gross salary payroll on a monthly basis to be without merit. In the opinion of the Federal Labour Court, the works council is not entitled to make such a request under Section 80 (2) sentence 2, half-sentence 2 BetrVG. According to this provision, the works council must be granted access at any time to any documentation it requires to discharge its duties upon request and in this connection the works council is entitled to inspect the payroll showing the gross wages and salaries of the employees. However, the right to inspect exists only if it is necessary to carry out the tasks of the works council. If the works council refers to a supervisory task pursuant to Section 80 (1) No. 1 BetrVG such a task reference usually exists. The works council does not have to demonstrate a special need for supervision in this case. The necessity required by Section 80 (2) sentence 2 half-sentence 2 BetrVG is to be assessed in relation to the specific request for inspection. According to these principles, the Federal Labour Court did not consider that there was a justified claim to the requested regular monthly inspection of gross wage and salary payrolls. The works council itself has not demonstrated the necessity for such a right of monthly inspection. The works council’s reference to monitoring compliance with the company agreement on working hours in force at the company, which governs bonuses for overtime, work on Sundays and public holidays as well as for night work, does not justify the necessity of a monthly inspection, in particular because the works council has not alleged that overtime or night work regularly occurs on a monthly basis. With regard to the differences in the total gross remuneration identified by the works council during the inspection in January 2017, it was not apparent to the Federal Labour Court why the works council assumed that a monthly review would be required.

Our comments

With its decision, the Federal Labour Court continues its previous case law under which a specific review of the necessity with regard to the specifically asserted request for inspection is required if the works council requests the inspection of payrolls showing the gross wages and salaries. In this context, the Federal Labour Court emphasises that the hurdles for an inspection by the works council are generally low, since it is sufficient for the works council to refer to its supervisory duties. In this case, it does not need to demonstrate a particular need for supervision. The reference to a specific task required for the right of inspection regularly results from the fact that the works council, pursuant to Section 80 (1) No. 1 BetrVG, has to ensure that the applicable laws in favour of the employees are complied with. Nevertheless, there are limits to the rights of the works council. If the works council invokes a specific regular cycle, trigger or task, it must demonstrate a need for supervision related to this. By way of an example the Federal Labour Court states that a request for inspection is excluded if the local works council seeks to inspect the gross salary payrolls not only of its own company but of all group companies. In this case, there is no right of inspection justified by the supervisory task defined in Section 80 (1) No. 1 BetrVG, and a possible right of co-determination. On the same day, the Federal Labour Court had to decide on another case in which the works council requested access to gross salary payrolls, this time, however, with reference to its task of promoting the enforcement of equal pay (Federal Labour Court, decision of 29 September 2020 - 1 ABR 32/19). However, the works council had not explained for which concrete promotion measures certain information was required, so that the works council’s appeal on points of law was also unsuccessful in this case. In this decision, the Federal Labour Court clarified on the one hand that a general reference to the statutory duties merely repeating the wording of the law is insufficient. On the other hand, the Federal Labour Court pointed out that neither the right of inspection pursuant to Section 80 (2) sentence 2 half-sentence 2 BetrVG nor the right to inspect and evaluate under Section 13 (2) sentence 1 of the German Transparency of Pay Act (Entgelttransparenzgesetz, Entg- TranspG) established a right to permanent access to payrolls. It is therefore worthwhile to carefully review the works council’s request for inspection and its justification.

Author

Sandra Sfinis
Lawyer
Senior Associate
Hamburg

Co-determination in employee transfers and the risks relating to a global application

Whether a transfer is subject to co-determination within the meaning of works constitution law depends on the duration of the work assignment, even in the case of a short-term assignment to another work area. If a global application also covers circumstances which are not amenable to the sought-after determination, the global application must be rejected in its entirety.

Federal Labour Court, decision of 29 September 2020 – 1 ABR 21/19

The case

The employer operates furniture stores in Germany. In the furniture store in question, a so-called “Lucky Luke call” is usually made on days when there is a significant influx of customers. All employees are asked to help out in the cash register areas and in logistics. Employees who are otherwise primarily engaged in administrative activities in the office or who work in “food”, “local marketing” and other areas also work in the warehouse, on the sales floor and at the cash registers on these days. These assignments last between half an hour and a maximum of six hours. The changed work assignment does not entail other changes, in particular a change in remuneration or working hours.

The works council wanted to have it determined that these short-term work assignments were transfers within the meaning of Section 95 (3) sentence 1, 2nd alternative of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) and thus in accordance with Section 99 BetrVG the consent of the works council is required. The short-term work assignments involved substantial changes in conditions. Employees would have to work in the checkout area with customer contact and the associated stress. They were also increasingly exposed to draughts, noise and cold in the warehouse. The works council submitted a so-called global application (Globalantrag), which covered all employees and work assignments, i.e. a large number of cases. The Lower Saxony Higher Labour Court (Landesarbeitsgericht, LAG) granted this application for certain cases.

The decision

The Federal Labour Court lifted the decision of the Lower Saxony Higher Labour Court and dismissed the works council’s application in its entirety. A transfer within the meaning of the Act is the assignment to a different work area, which is either expected to continue for more than one month or which involves a substantial change in the conditions in which the work is to be performed. Only the actual assignment to another work area is relevant. The question of whether the employer is entitled with respect to the rights of the individual to assign the employee to the corresponding work area is irrelevant regarding the works council’s right of co-determination, the Court held.

The Federal Labour Court defines the term “transfer” in detail and distinguishes between an assignment to a different work area and a change in external circumstances.

In the view of the Court, the term “work area” is to be understood spatially and functionally and includes the task and responsibility, the type of activity as well as its classification in the company’s workflow. This must be assessed from the point of view of a neutral observer familiar with the operating conditions. However, the value of the activity under the collective bargaining agreement is not a criterion.

A ‘change in the conditions’, on the other hand, covers only the external circumstances in which the changed activity is to be carried out, for example the timing and external influences such as temperature, noise and dirt. Circumstances which are inseparably part of the work to be performed could therefore not be external circumstances. The works council’s argument that the circumstances were considerably different because the employees had to work at the cash desk in contact with customers was therefore not convincing. The customer contact was inherent in the work at the cash desk and therefore only justified the assignment to a “different work area”, but not a substantial change in the external circumstances.

A change in external circumstances is “substantial” if they are objectively significant and serious for the employee concerned. Again, this has to be assessed from the point of view of a neutral observer. A relevant factor in this respect is, in particular, the amount of time during which the employee is exposed to the changed circumstances.

In the present case, at least the half-hourly deployment of employees who also occasionally work in the cash register area as part of their other work was not accompanied by a “substantial change in the conditions”, so that at least in this case there was no transfer within the meaning of Section 95 (3) BetrVG. These employees are also exposed to negative external circumstances, such as draughts and noise, in the course of their normal work.

However, it was not possible to grant the works council’s global application under restrictive conditions, as the LAG had done. The court would thus no longer remain within the scope of the application, but would incorrectly award something different than that which was applied for.

Our comments

The judgment is interesting on two counts. On the one hand, a detailed description was provided as to when there is a transfer within the meaning of Section 95 (3) BetrVG. On the other hand, it becomes clear once again how tricky global applications are.

With regard to the question of whether a transfer within the meaning of works constitution law has occurred, the following two statements of the court are to be taken to heart in particular:

Firstly, a distinction must be made between a “change in the work area” and a “change in the conditions”. If a circumstance is an inseparable part of the work to be performed, it cannot at the same time constitute a substantial change in the conditions.

Secondly, even in the case of a short-term transfer within the meaning of Section 95 (3) sentence 1 2nd alternative BetrVG, the time element plays a significant role.

The question of whether a change in the conditions is objectively significant and serious for the employee concerned is also related in particular to the length of time during which the employee is exposed to the changed circumstances. For employers, this means that they can briefly transfer employees to other work areas without first consulting the works council, provided they are entitled to do so taking due account of the rights of the individual.

The works council loses this case, even though its application also covers cases which the Federal Labour Court would probably regard as transfers. However, its global application was too broad and also covered cases which are not transfers within the meaning of Section 95 (3) BetrVG. This clearly shows the risks relating to global applications. If they are too broad, they run the risk of being rejected, even though the right aim is in essence being pursued. The global application must therefore be formulated with care and the circumstances of the case must be precisely defined.

Author

Lukas Gallenkämper
Associate
Düsseldorf

Scope of the reference to collective bargaining agreements with employer associations – interpretation of a collective bargaining agreement

The Federal Labour Court dealt with the scope of a reference clause in a recognition collective bargaining agreement as well as the principles for the interpretation of reference clauses in collective bargaining agreements and the requirements for their effectiveness.

Federal Labour Court, judgment of 11 November 2020 – 4 AZR 210/20

The case

The claimant asserted a claim to leave of absence days under a collective bargaining agreement for the 2019 calendar year. The employment relationship of the claimant, who is a member of IG Metall, is directly and mandatorily governed by the collective agreement concluded between the defendant and the union IG Metall (Haustarifvertrag) by virtue of the fact that both parties are bound by the collective bargaining agreement. Pursuant to § 5 (5) of the union/company collective agreement, “all agreements, supplementary agreements, amendments and new versions of collective bargaining agreements as well as all new collective bargaining agreements and provisions which are agreed between the employer association and IG Metall for the collective bargaining area shall apply”. The union/company collective agreement also provides that certain collective bargaining agreements specified in the union/company collective agreement shall apply with immediate effect (§ 2 of the union/company collective agreement) or, with regard to increases in wages, salaries, remuneration and trainee remuneration, immediately after their future conclusion (§ 3). Furthermore, an obligation to negotiate with regard to the recognition of other collective bargaining agreements with employer associations (Verbandstarifverträge) already in force at the time of the conclusion of the union/company collective agreement and which are specifically listed in an annex to the union/company collective agreement is regulated (§ 4). Following the entry into force of the union/ company collective agreement, IG Metall and the employer association agreed on a collective bargaining agreement on supplementary pay and an amendment to the framework collective agreement, under which employees are entitled to leave of absence days in lieu of the supplementary pay under certain circumstances. Against this background, the question arose whether the reference in § 5 (5) of the union/company collective agreement meant that these collective bargaining agreements are also valid for the employment relationship.

The Bonn Labour Court and the Cologne Regional Labour Court dismissed the action. The Federal Labour Court lifted the judgment and found that the claimant was entitled to leave of absence under the framework collective agreement for the calendar year 2019.

The decision

The Federal Labour Court affirmed the claimant’s claim for the granting of leave of absence days for the calendar year 2019, which was asserted by way of an action for a declaratory judgment. The collective bargaining agreement called “Additional remuneration under a collective bargaining agreement” and the amendment to the framework collective agreement, from which the entitlement to the collectively agreed leave of absence days results, apply directly and mandatorily in the employment relationship of the parties, since they are covered by the reference in § 5 (5) of the union/company collective agreement.

Under the established case law of the Federal Labour Court, the rules applicable to the interpretation of laws apply accordingly to the interpretation of the normative part of a collective bargaining agreement, whereby the wording is to be taken as a starting point. In case of doubt, the interpretation of the agreement which leads to a reasonable, appropriate, purpose-oriented and practicable solution is to be chosen. These principles also apply to the interpretation of recognition collective agreements (Anerkennungstarifvertrag). The Federal Labour Court no longer expressly supports the view it took, without further substantiation, in an earlier decision of 16 June 2010 (4 AZR 944/09), that a reference to other collective bargaining agreements is to be interpreted narrowly in case of doubt. Since the reference clause in § 5 (5) of the union/company collective agreement refers to such collective bargaining provisions as are “agreed upon”, this expressly covers the collective bargaining agreements newly agreed upon after the entry into force of the union/company collective agreement. § 5 (5) of the union/ company collective agreement refers only to those collective bargaining agreements concluded subsequently for which the union/ company collective agreement does not contain any other provisions concerning their application and which are not covered by the obligation to negotiate in accordance with § 4 of the agreement in conjunction with the annex. The Federal Labour Court does not follow the employer’s argument that the inclusion of § 5 (5) of the union/company collective agreement is a drafting error, since nothing in the union/company collective agreement suggests that new collective bargaining agreements should generally not be referred to despite the clear wording of § 5 (5) of the union/ company collective agreement. Therefore, the reference in § 5 (5) of the union/company collective agreement also extends to the entitlement to the collectively agreed leave of absence days.

The effectiveness of the reference clause depends on the fact that the scope of the referenced collective bargaining provisions, such as the collective bargaining agreement “Additional remuneration under a collective bargaining agreement” in the case under review, and the amendment to the framework collective agreement, are closely related to the scope of the referencing collective bargaining provision. In addition, the parties to the collective bargaining agreement must be able to repeal, modify or replace the referral provisions at any time, and the structure of the termination provisions must not create an excessively longtime commitment without any possibility to withdraw from the agreement. These conditions were met in the case under review.

Our comment

The decision once again confirms the previous case law of the Federal Labour Court on the interpretation of the normative provisions of a collective bargaining agreement, such as the reference clause in a recognition collective agreement in this case. By reducing the scope of application of the reference clause at issue to newly concluded collective bargaining provisions, the Federal Labour Court makes use of the broad scope of interpretation and thus arrives at a consistent and legally secure demarcation from the other reference provisions of the union/ company collective agreement. Caution is therefore required when negotiating referral clauses so that the subsequent interpretation does not lead to unpleasant surprises.

Author

Martina Ziffels
Lawyer
Counsel
Hamburg

Integration into an establishment within the matrix structure

The transfer of the employer’s rights to issue instructions by way of representation or authorisation via the reporting channels within the group structure does not in principle change the existing employment relationship. Similarly, it does not prevent the establishment of a single uniform establishment if several work-related purposes are pursued in the establishment. If an employee within the matrix structure also fulfils the business purposes of the parent company in addition to the business purposes of the individual company, the employee can be assigned to both the employer under the employment contract and the controlling entity.

Hessen Higher Labour Court (LAG), 26 August 2020, 2 Sa 119/20

The case

The parties are in dispute about the legal validity of the termination of an employment relationship.

The defendant is part of an international group of companies. In addition to a production facility, the defendant’s permanent establishment also has a department responsible for the local distribution of the products. The claimant holds a degree in business administration and was employed by the defendant between 2003 and 2008. From September 2013, the claimant was again employed by the defendant – initially as Regional Manager Europe and from June 2015 as Chief Commercial Officer (CCO). The continuing employment contract provided for a direct reporting line for the claimant to the Chief Executive Officer (CEO) of the parent company. The remuneration was adjusted with the change of position in 2015 and again in 2016.

All marketing and sales teams worldwide, including the defendant’s Local Sales Manager, Mr E., head of a team of three, and the defendant’s Director Marketing & Product Development, Mr F., functionally reported to the claimant. He approved expense reports and leave requests and in some cases represented them during absences. The claimant coordinated his leave with the CEO of the parent company and reported this to the defendant’s HR department. The claimant had an office at the defendant’s premises, but could also work from home and had to undertake extensive worldwide business travel. As CCO, the claimant received no functional instructions from the defendant’s managing director. The claimant’s remuneration under the employment contract was paid by the defendant, a part of which was charged in any event to the parent company.

The defendant ordinarily terminated the employment relationship of the parties by letter dated 29 May 2019 with effect from 30 November 2019. The claimant’s assistant and Mr F. were dismissed at the same time. Effective 1 June 2019, the defendant appointed an external applicant to fill a product controller position at its establishment.

The Frankfurt am Main Labour Court ruled in favour of the claimant.

The decision

The Frankfurt State Labour Court dismissed the defendant’s appeal because it was without merit. In the view of the Court, the employment relationship between the parties has not been terminated as there is no social justification for dismissal by the defendant.

The court held, that the supplemental agreements adjusting the claimant’s position and remuneration in 2015 and 2016 makes reference to the 2013 employment contract. This has not been replaced by the supplementary agreement. The previous explicit reporting line to the CEO of the parent company has been maintained. It is not decisive for the existence of an employment relationship that the reporting line is to a person not employed by the defendant, namely the CEO of the parent company. Rather, the employer’s right to issue instructions can be exercised by way of representation or authorisation by a third party. The claimant is also integrated into the defendant’s work organisation and is not free to organise his own working hours.

The claimant also had to be assigned to the defendant’s establishment. The definition of an ‘establishment’ used in Section 23 (1) of the German Protection against Dismissal Act (Kündigungsschutzgesetz, KSchG) is essentially the same as that set out in Section 1 of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG). In particular, the pursuit of a uniform work-related purpose with the independent exercise of an essentially uniform power of management in personnel and social matters also applies here. This is not precluded by the fact that several different work-related purposes are pursued in a uniform establishment. In addition to a production unit, the defendant’s establishment maintained another department, the purpose of which was to distribute the products manufactured by the defendant.

The claimant was integrated into this establishment. He was the functional supervisor of several staff members employed in the defendant’s sales area and also represented them sometimes vis-à-vis customers in cases of absence. The claimant had his own office at the defendant and was provided with an assistant by the defendant. The defendant’s HR department was his point of contact in the event of vacation and illness. The defendant essentially bore the claimant’s personnel costs. The claimant’s extensive business trips are irrelevant in this regard. Integration into a business does not require a minimum presence or a certain amount of time spent on the activity in order to achieve the business purpose. This is not contradicted by the fact that the claimant also pursued work-related purposes of the parent company. In his role as CCO, he was responsible for a uniform marketing, development and sales organisation throughout the group. In the case of such hybrid forms, in which an employee also fulfils the operational purpose of a third party, it is possible within the matrix structure to assign the employee both to the contractual employer and to the controlling entity.

The claimant was also subject to the defendant’s operational management power. The key personnel decisions, in particular the termination of the employment relationship, were made by the defendant. The CEO of the parent company was an authorised representative of the defendant, so his conduct was attributable to the defendant. A corresponding declaration made to the claimant (Section 167 (1) 2nd alternative. of the German Civil Code (Bürgerliches Gesetzbuch, BGB)) is contained in the supplementary agreement to the employment contract. In granting leave, the CEO of the parent company acted on the defendant’s behalf, to whom the application for leave had to be ultimately submitted. In addition, the conduct of the parent company’s CEO is also attributable to the defendant from a functional perspective insofar as it related to the pursuit of the defendant’s business purposes. The pursuit of the parent company’s business purposes also does not prevent this, since it is legally possible to act in one’s own name and in the name of a third party at the same time and this does not prevent it from being attributed to the representative.

The termination is disproportionate because of the claimant’s existing opportunities for continued employment. A product controller position existed at the defendant. The claimant is technically qualified for this position. Although the claimant studied business administration 20 years ago and the plaintiff did not focus on finance and controlling, it is admitted that the claimant performed these duties of a product controller during the period of his prior employment with the defendant between 2003 – 2008.

The decision is not final. An appeal has been filed with the Federal Labour Court under file number 2 AZR 447/20.

Our comment

The decision of the LAG deals with the - sometimes difficult - question regarding the classification of hybrid positions within the matrix structures of group companies and solves this by applying the already known and largely proven criteria.

It is to be welcomed that the LAG, when assessing the existence of an employment relationship, adheres to the known criteria, in particular assignment and integration under contract and employment law to and into the employer’s operating procedures within the group structure. Accordingly, employers can also use the well-known standards for differentiating between their own and externally employed staff in the case of cross-company activities. The partial transfer of instruction rights, particularly within the matrix structure of a group, is necessary for the effective utilisation of the reporting systems. The assignment of hybrid positions to the establishment of a group company as well as to the controlling entity of the parent company is also to be advocated. This option takes into account intra-group and cross-company cooperation. In practice, however, a flexible assignment also results in a need for clear structures and an unambiguous assignment on a contract and employment law basis. In addition, the manner in which the activity is carried out in practice should always be borne in mind in order to avoid a de facto shift in the employer’s role. In practice, it is therefore important to carefully consider when choosing to assign an employee under personnel law whether the employment contract and the employee should be assigned to the parent company or whether it seems reasonable for the employee to remain in the establishment of the group company. It should also be noted that, in the context of a restructuring and a necessary reduction in the workforce, significant differences may arise from the assignment of an employee to the parent company or to a group company.

However, the broad inclusion of activities during periods of prior employment in the employer’s establishment in the assessment of the existence of opportunities for continued employment is to be viewed critically. In practice, the extended inclusion of activities going back a long time leads to difficulties. The additional effort resulting from such an inclusion is enormous. In addition, the job profile is changing, particularly in view of the advancing digitisation and specialisation of the individual occupational fields. The presentation of these differences in the context of legal proceedings becomes imperative.

Author

Cyrielle Therese Ax
Lawyer
Associate
Frankfurt a. M.

Leave due to lack of orders does not constitute the granting of recreational leave

The granting of a leave of absence by the employer only has the effect of satisfying the leave entitlement if the employee can recognise that the employer intends to release him from the obligation to work for the purpose of self-determined recreational leave. In particular, the employer cannot subsequently declare a period of time without work to be recreational leave.

Berlin-Brandenburg Higher Labour Court, judgment of 30 October 2020 – 12 Ca 60/20 (final)

Reasons for the decision

The parties are in dispute over the amount of compensation for days of leave not taken. The employee claimed payment in lieu of leave after termination of the employment relationship. The employer countered that the employee’s leave entitlement had already been satisfied. It did not have a suitable post to deploy the employee for a period of a few weeks and allowed him to stay at home during that time. The defendant’s managing director claims that it was agreed that the claimant’s absences during this period would be offset against his leave entitlement. The labour court found in favour of the employee and ordered the employer to pay the leave compensation. The court based its decision on the grounds that the employee is entitled to the claimed leave compensation under his employment contract in conjunction with the Federal Leave Act (Bundesurlaubsgesetz, BUrlG). The employer, who bears the burden of submitting facts (Darlegungslast) and of proof (Beweislast) did not submit any substantiated evidence that an agreement actually existed as presented by it.

The employer’s appeal was unsuccessful. The appeal was already partly inadmissible due to the lack of a proper statement of reasons and, moreover, unfounded. The employee can claim the leave compensation under Section 7 (4) BUrlG from the employer as awarded. Periods without work, even in combination with an agreement on offsetting them against the leave entitlement, may not always be regarded as granting statutory leave. Rather, this would require an irrevocable declaration of release from work on the part of the employer before the start of the leave that is sufficiently specific in terms of its scope. In the present case, the employee had not been able to rely on the fact that the leave would not end abruptly because there were work assignments for him again.

Pension proximity permitted as a differentiating factor in the redundancy programme

If a redundancy programme contains a provision under which severance pay is not provided for employees who can receive a pension free of deductions, this results in direct discrimination on grounds of age, which, however, is justified pursuant to Section 10 sentence 3 No. 6 in conjunction with Section 10 sentence 2 of the German General Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz, AGG).

Mecklenburg-Western Pomerania Higher Labour Court, judgment of 8 December 2020 – 2 Sa 152/20 (final)

Reasons for the decision

The employee seeks payment of severance pay under a redundancy programme. The reconciliation of interests concluded in the context of the closure of a depot and the reduction of jobs provided that only employees who were far from retirement were to receive a basic severance payment, while only a modified severance payment or no severance payment at all was provided for employees who were close to retirement. After the end of the employment relationship, the employee receives an old-age pension for those insured for a particularly long period without any pension deductions. The labour court dismissed the employee’s action. The employee was entitled neither to a basic severance payment nor to a modified severance payment under the provisions of the framework redundancy programme due to the fact that he or she did not satisfy the necessary conditions. The fact that employees close to retirement received only a reduced severance payment under the framework redundancy programme does not result in the provisions becoming invalid in this case.

The employee was also unsuccessful in his claim before the higher labour court. The claimant is not entitled to the claim asserted either under the framework redundancy programme or under the principle of equal treatment. Section 10 sentence 3 No. 6 alternative 2 of the German General Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz, AGG) opens up the possibility for the parties to exclude employees from social benefits under the redundancy programme because they are eligible to draw an old-age pension. Under the provisions agreed by the parties in the framework redundancy programme, no severance payment is provided for in the case of the claimant. These provisions are also not invalid in this case.

The parties were in principle free to decide whether and to what extent they wanted to compensate or mitigate the disadvantages suffered. In assessing the disadvantages to be expected, the parties had considerable leeway in their assessment. The exclusion of those employees who can draw a retirement pension without deductions is necessary because they would otherwise have received disproportionate preferential treatment.

Informing the works council when using a job application management system

If the employer uses an electronic job application management system, it is not sufficient to submit only the documents stored in the system for the purpose of properly informing the works council pursuant to Section 99 (1) sentence 1 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG). The works council’s right to information is only adequately taken into account if the functionalities used in the system are also made available to the works council and can be inspected by it.

Cologne Higher Labour Court, decision of 15 May 2020 – 9 TaBV 32/19 (appeal on points of law pending)

Reasons for the decision

The parties are in dispute over the replacement of the works council’s consent to the planned recruitment of a female applicant. The employer uses a job application management tool that allows recruiting teams to share information about applicants and communicate. For this purpose, a virtual application folder is created for each applicant. A team chat function allows comments to be entered about the applicants. The applicant, for whose recruitment the employer seeks the consent of the works council, was offered a position for which an employee already employed by the employer had also applied. The employer consulted the works council by means of a hearing sheet on the intended permanent employment of the applicant. In addition, the works council was given access to the applicant’s CV and letter of motivation via the job application management system. The works council objected to the hiring on the grounds, among others, that it had not been provided with the necessary documents. The employer unsuccessfully applied to the labour court for the works council’s consent to the recruitment of the applicant to be substituted.

The higher labour court upheld the decision of the labour court. Pursuant to Section 99 (1) sentence 1 BetrVG, the employer has to inform the works council prior to each recruitment, to submit to it the necessary application documents and to provide information about the persons involved. The information provided to the works council by the employer did not meet the requirements of Section 99 (1) sentence 1 BetrVG. As regards the applicant, the employer did not submit all the relevant application documents. The works council had only been granted limited access to the software system used to manage applicants. In particular, the works council had not had access to the comment function. The provision of complete information to the works council by the employer is, however, a prerequisite for the works council to be able to properly exercise its rights pursuant to Section 99 (2) BetrVG.

Employment contract as a sham transaction

An employment contract is to be regarded as a sham transaction and thus void pursuant to Section 117 (1) of the German Civil Code (Bürgerliches Gesetzbuch, BGB), if the employee has not worked in the employer’s business since the establishment of the employment relationship and has also not at any time offered his labour to the employer.

Federal Labour Court, judgment of 14 October 2020 – 5 AZR 409/19

Reasons for the decision

The parties are essentially in dispute over remuneration claims. The claimant entered into an employment contract as a consultant with the defendant company in 2005. At that time, her husband and another person (Mr S.) were the sole shareholders of the company. At the end of 2017, Mr S. took over the company as the managing partner and terminated the employee’s employment with effect from 31 May 2018. No action for unfair dismissal was filed. While the defendant had still paid the employee for the month of January 2018, he failed to do so for the following months. The employee did not perform any work for the defendant in 2018. The employee asserted claims for compensation in her lawsuit. In court, she pleaded that she had not worked or offered to work for the company of defendant since the beginning of the employment relationship. From the beginning, she had received her salary without performing any work. The Federal Labour Court agreed with the lower courts and dismissed the appeal. The employment contract concluded in 2005 was void as a sham transaction pursuant to Section 117 (1) BGB, so that a claim arising from an employment relationship for the requested payment was excluded. A sham transaction exists when the parties agree to create the appearance of concluding a legal transaction, but do not want the associated legal effects to occur. This is the case if the parties do not want the employee to have to perform any work at all on the basis of the employment contract concluded. In this case, they do not wish to bring about the occurrence of the legal obligations set out in the declarations of intent they have made. An employment contract is therefore to be classified as a sham transaction if the parties agree at the time of the conclusion of the contract that the agreed remuneration is not to be paid in whole or at least in part as consideration for the performance of work and an obligation to perform work is not established. According to her own statement, the claimant did not perform any work, and the defendant did not request her to do so. This was not the intention of either party.

Proof of receipt for a registered letter

The informative value of the delivery status of a registered letter (Einwurfeinschreiben) is not sufficient to establish prima facie evidence of the proper receipt of a termination letter. It does not show the name of the carrier, nor does it contain a technical reproduction of the signature of the carrier. A distinction is to be made between the delivery status and proof of delivery.

Baden-Württemberg Higher Labour Court, judgment of 17 September 2020 – 3 Sa 38/19 (final)

Reasons for the decision

he case to be decided concerned the continuation of the employment relationship of a paramedic. The defendant employer had argued that the claimant had received a letter of termination. They employer had chosen the registered letter as the form of transmission and had submitted a posting receipt and a delivery status for that purpose. The claimant, on the other hand, submitted that he had not received any notice from the defendant. The Reutlingen Labour Court upheld the action for a declaratory judgment on the continued existence of the employment relationship and justified this on the grounds that it was not possible to prove that the letter of termination had been received. The higher labour court agreed with the decision of the first instance and stated that the informative value of the delivery status was not sufficient in order to base the prima facie evidence of receipt on it. The delivery status does not show the name of the deliverer, nor does it contain a technical reproduction of the signature of the deliverer certifying that the letter was delivered to the mailbox. The only thing that could be deduced from the delivery status was that a consignment had supposedly been delivered, the number of which corresponded to one of the consignment numbers indicated on the posting receipt. The consignment status merely offers the sender the possibility of receiving confirmation of the respective status of the consignment using the delivery number. In addition, the higher labour court clarifies in its decision the essential difference between the reproduction of the proof of delivery that may be obtained from Deutsche Post AG and the delivery status. In the case of registered mail, the Deutsche Post AG employee documents the posting of the registered letter into the recipient’s mailbox with an exact date and time. The delivery receipt produced in the process is then scanned in a reading centre centrally for Germany, so that the exact delivery data is available. Although the original proof of delivery is destroyed during the scanning process, the sender can subsequently obtain a printout of the proof of receipt against payment of a fee, on which the date and place of posting and the name of the Deutsche Post AG employee are documented.

Lack of transparency of a contractual penalty provision

The agreement of a contractual penalty in an employment contract is ineffective pursuant to Section 307 (1) sentence 2 BGB due to a lack of transparency if the remuneration for a certain period is provided for as a contractual penalty but, due to the lack of a more detailed determination of the number of fixed working hours or remuneration, it is not clear which remuneration is due for this period.

Berlin-Brandenburg Higher Labour Court, judgment of 30 October 2020 – 9 Ca 508/20 (final)

Reasons for the decision

The Berlin-Brandenburg Higher Labour Court had to rule on a counterclaim for payment based on a contractual penalty. The claimant was a parcel delivery driver who worked for the defendant for a period of two weeks. An hourly wage of EUR 10 was agreed in the employment contract for a working time of up to 195 hours per month. In addition, the employment contract provided for a contractual penalty in the amount of a full month’s salary (or in the amount of two weeks during the probationary period) in the event of culpable failure to take up employment or culpable termination of employment in breach of the contract. A corresponding contractual penalty is also payable if the employment relationship is terminated by the employer for cause and the employee has culpably given good cause for this. In response to the termination of the employee without notice during the probationary period, the employer retained EUR 900 of the employee’s wages as a contractual penalty. The Higher Labour Court upheld the first-instance decision and dismissed the appeal as being without merit. The employer was not entitled to payment of a contractual penalty. The contractual penalty provision violates the transparency requirement of Section 307 (2) sentence 2 BGB and is therefore invalid, the court held. The user of general terms and conditions is obliged to present the rights and obligations of the contractual partner as clearly and comprehensibly as possible, so that the contractual partner of the user can already recognise what is in store for him when the contract is concluded. This is intended to counter the risk that the contracting party is deterred from enforcing his rights. The present clause does not satisfy those requirements. It is not clear from the clause what remuneration the employee is entitled to for two weeks. Only an hourly wage of EUR 10 was agreed for a working time of up to 195 hours per month. In this context, it was not sufficiently clear what working time and thus also what remuneration would be due, which is why the amount of any contractual penalty was not foreseeable for the claimant when the contract was concluded.

General notes

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