Energy price brake: obligation to preserve jobs and ban on bonuses

On 20 December 2022, the German Act on the Introduction of an Electricity Price Brake [Gesetz zur Einführung einer Strompreisbremse, StromPBG] and the German Act on the Introduction of Price Brakes for Piped Natural Gas and Heat [Gesetz zur Einführung von Preisbremsen für leitungsgebundenes Erdgas und Wärme, EWPBG] came into force. Both Acts contain the basic principles of the so-called energy price brake and are intended, among other things, to provide relief for companies in light of the exorbitant rise in energy prices. However, the amount of relief to be received by companies may, under certain conditions, lead to a job security obligation for such companies and to a limitation of bonus and dividend payments.

Energy price cap

The two Acts passed by the Bundestag provide for the following energy price caps:

Natural gas and heat 

For small and medium-sized companies with a consumption of up to 1.5 million kilowatt hours (kWh) per year, a maximum of 12 Ct/kWh gross (9.5 Ct/kWh gross for heat) will apply to 80 percent of projected annual consumption in September 2022. In large-scale industry, by contrast, the price cap is 7 Ct/kWh net for 70 percent of annual consumption in 2021 (7.5 Ct/kWh net for heat).

Electricity

Small companies with a previous electricity consumption of up to 30,000 kWh per year will pay a maximum of 40 Ct/kWh gross for 80 percent of the annual consumption forecast by the network operator. For medium and large companies with a previous electricity consumption of more than 30,000 kWh per year, the maximum price is 13 Ct/kWh net for 70 percent of the annual consumption forecast. 

If the consumption exceeds the aforementioned limits, the prices agreed with the respective supplier will apply.

Job retention obligation

In line with European law, both the StromPBG and the EWPG provide for a job retention obligation (Sec. 37 StromPBG and Sec. 29 EWPBG) if companies receive relief totalling more than 2 million euros, bearing in mind the fact that the relief amounts paid under the StromPBG and the EWPBG are added together.

Specifically, the statutory regulations stipulate that companies will only receive more than €2 million in subsidies if they make arrangements through a collective agreement or shop agreement to secure employment for the period up to at least 30 April 2025. However, should negotiations fail, the company may present an explanation stating reasons for the failure and submit it to the relevant authorities. Furthermore, the company is required to make a unilateral commitment to preserve jobs in a scope of at least 90 percent of the full-time equivalent jobs existing on 01 January 2023 until at least 30 April 2025. This also applies if there is no works council and no collective bargaining agreement.  

In accordance with the wording of the law, the specific number of jobs to be preserved is calculated on the basis of full-time equivalents, which then also covers part-time constellations. This also includes jobs that are filled by temporary workers.

The deadline for submitting the (shop/collective bargaining) agreement or the voluntary declaration by the company is 15 July 2023. After expiry of the deadline, the relief amount will be reduced to 2 million euros or - in cases where disbursements have already been made – reclaimed in a corresponding amount. 

With regard to the evaluation of the individual amount of the subsidy, the authorities have discretionary powers. A factor to be taken into consideration, among other things, is that the amount to be reclaimed corresponds in percentage terms to the deficit in the previously ensured number of jobs to be preserved (but at least 20%). 

Companies are also obliged to provide evidence of job development in the period up to 30 April 2025, as part of a final report. Here as well, the competent authorities have discretionary powers in assessing whether and, if so, in what amount subsidies may have to be repaid. 

In this respect, companies now have to make a (financial) assessment of whether it makes more economic sense to retain the subsidy opportunities or to cut jobs. In cases where job security is to be agreed, it is particularly important that negotiations with the collective bargaining partner or the works council are swiftly initiated. It has not yet been clarified when negotiations are actually considered to have failed and companies will be able to issue their own declaration of voluntary commitment. The threshold for this ought not to be too high here, however, as a unilateral statement by the company without the involvement of the collective bargaining partner or the works council is sufficient. However, an agreement with the employees' representatives is advisable if there is to be a deviation from the statutory requirements. This applies in particular with regard to the extent of the job security, as a quota of 90 percent is only provided for in the event that the company makes a voluntary declaration.

Ban on bonuses and dividends

In addition to the above, the energy price brakes provide for limitations on the distribution of bonuses and dividends (see Sec. 37a StromPBG and Sec. 29a EWPBG). 

If a company receives a subsidy of more than €25 million, a graduated ban on bonuses applies to members of the management and supervisory bodies. The same also applies to the distribution of dividends. 

In case of received subsidies in a scope of 25 million euros to 50 million euros, the ban only applies to bonus agreements that were concluded prior to 01 December 2022. 

If the total subsidy exceeds an amount of EUR 50 million, a complete ban on disbursement applies to both bonuses and dividends. 

However, companies have until 31 March 2023 to declare that they will forego funding opportunities above 25 million, so they are not bound by the aforementioned restrictions.

Questionable in this context, however, is how such a statutory prohibition can be implemented with regard to contractually agreed bonus payments. Here, an amicable settlement with the parties concerned is probably advisable. 

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