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Employment agreements in the spotlight – „New“ German Verification Act as of 01.08.2022

To implement EU Directive 2019/1152, the German legislator is making far-reaching changes to German labour law. These concern in particular an update of the German Verification Act („Nachweisgesetz – NachwG“). From 01.08.2022 on, stricter terms will apply for the written (!) handover of the minimum working conditions to employees, the catalogue of which has also been significantly expanded. Both new and existing employment relationships are affected. In the event of violations of the new regulations, employers will face considerable fines in the future.

Due to the impending expiry of the deadline for transposition of the Directive (EU) 2019/1152 on transparent and foreseeable working conditions in the EU („EU Working Conditions Directive“), the German legislator has now been forced to implement comprehensive legal changes to comply with the requirements set out therein. The aim of the EU Working Conditions Directive is to create transparent and reliable working conditions for employees by means of comprehensive information and documentation obligations on employers. Although the legal regulations in this regard were quite far advanced in Germany, a violation of these requirements has so far remained without sanction. As a result, there continued to be cases in which employees had no employment agreements at all or only very “tenuous” ones. The heart of the regulations on the employer’s information and documentation obligations is – and was – the NachwG. However, due to the most recent amendment to the law there have been some changes to this. These will be examined in greater detail below, particularly from the employer’s point of view. (Please note: The other legal changes, such as in the German Vocational Training Act (“Berufsbildungsgesetz”) or in the German Employee Lending Law (“Arbeitnehmerüberlassungsgesetz”), are not the subject of this article.).

What is new in general?

The main changes have been adopted regarding the scope of the essential contractual terms of the employment relationship which have to be disclosed to the employee. There are also new regulations concerning the deadlines that have to be observed in this regard. The aforementioned new obligations are accompanied by the possibility of the supervisory authorities to impose sanctions in the event of violations of the employer.

What are the new essential contractual terms for employment relationships?

The essential contractual terms for employment relationships that have to be recorded in writing as of 01.08.2022 are according to § 2 (1) NachwG NEW:

  1. Name and address of the contracting parties,
  2. Date of commencement of the employment relationship,
  3. In case of a fixed-term employment relationships: Foreseeable duration or end date of the employment relationship,
  4. Place of work or, if the employee is not to work at only one particular place of work, an indication that the employee may be employed at different places or may freely choose his place of work,
  5. Brief characterization or description of the work to be performed by the employee,
  6. Duration of the probationary period, if agreed,
  7. Composition and amount of remuneration, including remuneration for overtime, bonuses, allowances, premiums and special payments, as well as all other components of remuneration, each of which has to be stated separately as well as their due date and the method of payment,
  8. Agreed working time, agreed rest breaks and rest periods and, in case of agreed shift work, the shift system, shift rhythm and conditions for shift changes,
  9. In case of on-call work in accordance with § 12 of the Part-Time and Fixed-term Employment Act (“Teilzeit- und Befristungsgesetz”):
    • the agreement that the employee shall perform work in accordance with the workload,
    • the minimum number of hours to be remunerated,
    • the time frame, determined by reference days and reference hours, set for the performance of the work and
    • the minimum period within the employer has to notify the employee in advance about the concrete working assignment.
  10. Possibility of ordering overtime and its conditions, if agreed,
  11. Duration of annual leave,
  12. Any entitlement to further training provided by the employer,
  13. Name and address of the pension provider of the company pension scheme, if the employer provides such pension to the employee; this obligation does not apply when the pension provider is obliged to provide this information,
  14. Information on the procedure to be followed by the employer and the employee when terminating the employment relationship, at least the written form requirement and the notice periods for terminating the employment relationship as well as the deadline for bringing up an action for protection against dismissal,
  15. A general reference to the collective agreements, works council agreements or other work agreements applicable to the employment relationship, as well as regulations of commissions with equal representation, which determine working conditions for the area of church employers based on church law.

How exactly the new regulations are to be implemented in practice, however, remains an open question. Neither the NachwG NEW nor the explanatory memorandum for the legal amendments give any indication.

Also new are the comprehensive additional regulations in the event of an employee working abroad for more than a brief period of time, for example in the context of postings. Whereas previously the regulations of the NachwG were rather in this respect, the NachwG NEW now stipulates in his new § 2 (3) additional minimum requirements, especially for postings. This includes, e.g., the indication of the minimum wage of the posted country as well as the link to the only official national website of the posted country which indicates the local mandatory terms and conditions of employment for posted employees.

What does the “new” written form requirement regarding the essential contractual terms exactly mean? Do all employment agreements now have to be drawn up in writing?

Although the EU Working Conditions Directive, on which the NachwG” NEW is based, also provides the electronic form to fulfill the obligation to provide evidence of the essential working conditions, the German legislature continues to adhere to the strict written form. In practice, this means that the applicable essential contractual terms have to be laid down in written on paper and signed by the employer in the original. However, the NachwG NEU, does not require that employment agreements as such have to be signed by both parties in handwritten form. Nevertheless, the employer’s documentation and proof obligations under the NachwG NEW do not apply if the employee has already received a written employment agreement stating the essential working conditions. The employment agreement itself could therefore still be concluded orally or by means of an electronic signature, unless the law provides for a mandatory written form, as in the case of fixed-term employment agreement. In practice, however, it is advisable to conclude a written employment agreement directly.

What is next? To whom does the NachwG NEW apply? What do I do with my “old” employees? Do I need new employment agreements now?

The NachwG NEW affects every employee. In the future, it also includes short-term employment (such as temporary help/mini jobs). Previous exceptions in this regard have been abolished. In the context of new employment relationships, i.e., beginning on or after 01.08.2022, attention has to be paid to ensure that the essential working conditions are handed over to the “new” employees in writing and within the relevant deadlines (see below). In case of “old” employment relationships, i.e., those that already existed prior to 01.08.2022, there is initially no need for action. Yet, employees can demand that the employer informs them in writing about the agreed essential working conditions. Active action by the employer is not required. Accordingly, there is no need to conclude new written employment agreements for old employees. However, it is advisable to keep a standardized document containing the essential working conditions to be able to react quickly to an employee’s request – because deadlines also apply here! (See below)

What are the deadlines for providing the essential working conditions of employment to employees?

In the case of new employment relationships, there are different deadlines for handing over the essential working conditions, according to their content. This means that a written document has to be handed over to new employees

– on the first day of work: Information on the contracting parties, remuneration and working hours,

– seven days after the agreed starting date: Information on essential working conditions according to § 2 (1) s. 2 no. 2-6, 9 and 10 NachwG NEW (see above),

– no later than one month after the agreed starting date: Information on the remaining essential working conditions according to § 2 (1) s. 1 NachwG NEW (see above).

Old employees have to be provided with the essential working conditions according to § 2 (1) s. 2 no. 1 to 10 NachwG NEW in writing and no later than on the seventh day after receipt of the request; all remaining essential working conditions of employment according to § 2 (1) s. 2 NachwG NEW have to be provided no later than one month after receipt of the request.

What consequences do I face as an employer in the event of violations?

As employees rarely called on their employers to comply with their obligations under the NachwG in the past, violations of the documentation and verification obligations by the employer were previously mostly of no consequence. From 01.08.2022 such violations will be treated as administrative offenses and can be punished with a fine of up to EUR 2.000,00 for each case.

Conclusion

In practice, the impact of the new legislation is significant and implies an increased workload for employers. From 01.08.2022 it is necessary to fulfil the new evidence requirements and to pay explicit attention to the written form requirement. In view of the advancing digitalization of the modern business world, this is likely to be seen as a step backwards by the German legislator. A practical solution is, for example, the granting of appropriate authorizations/PoAs to the HR department, so that they can sign the employment agreements. Unresolved questions regarding the scope and level of detail of mandatory information are still open to be clarified by the labour courts. Unfortunately, there are gaps in the NachwG NEW in this regard, which even the explanatory memorandum to the law cannot answer. It remains to be seen to what extent the responsible supervisory authorities will sanction violations of the NachwG. In any case, employers should immediately start adapting their employment agreement templates to the new legal situation in order to avoid administrative fines.

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