Employment Law19.12.2022 Newsletter
Focus on Labor Law – 4th Quarter 2022
A year ago, our Newsletter took a look at the coalition agreement signed by the new so-called traffic-light coalition at the beginning of December 2021. Not much of the labour law aspects of this agreement has been implemented to date.
And this, despite the fact that "working time recording” is a most pressing topic for companies. This is fuelled not least by the surprising decision of the German Federal Labour Court [Bundesarbeitsgericht, BAG] of 13 September 2022. As things currently stand, the government is likely to introduce its first draft legislation on the recording of working hours in the first quarter of next year.
In the current issue of Focus on Labour Law, you will find the usual overview of the most important labour court decisions, news regarding the minimum wage, and the social security calculation parameters that will apply from 01 January 2023. Finally, we would like to draw your attention to our new Legal Tech Tool, which allows you to quickly and easily check online the compliance risks associated with your company’s use of external personnel.
We wish you and your families a relaxing holiday period and all the best for the year 2023!
1. New case law
1.2 Operational integration of a manager in the matrix structure
1.3 Central works council: delegation of non-company employees also permissible
1.4 Internal data privacy officers enjoy special protection against dismissal
1.5 An executive position per se is not a reason for a fixed-term contract
1.7 Deployment of external personnel - limits on informing the works council
1.8 Dismissal without prior consultation of the works council is a gross breach of duty
1.9 Video surveillance system not suited to monitor hours worked
1.10 Right to (digital) unavailability?
2. Legal developments
2.1 News from Europe: Directive on adequate minimum wages
2.2 2023 social security calculation parameters
Legal Tech: new tool for the deployment of external staff - compliance check
1. New case law
1.1 Representative body for severely disabled persons continues to exist if threshold value is fallen short of
The term of office of the representative body for severely disabled persons does not end prematurely if the number of severely disabled persons in a company falls below five at a later date. The decisive factor is only the number of severely disabled persons at the time of the election, according to the BAG in its ruling dated 19 October 2022 - 7 ABR 27/21.
The parties disputed the continuation of the representative body for severely disabled persons. One year after its election, the number of severely disabled employees in the company fell to less than five. The company then declared the term of office of the representative body for severely disabled employees to have ended. The representative body subsequently demanded that the company recognises its continued existence until the end of the ordinary term of office. The company rejected this demand.
After both the Labour Court [Arbeitsgericht, ArbG] and the Regional Labour Court [Landesarbeitsgericht, LAG] of Cologne had rejected the motion of the representative directed against this, the representative was successful with their appeal before the BAG. The law does not contain a provision according to which the reduction of the number of severely disabled persons below the threshold value of Sec. 177 (1) sentence 1 German Social Code Book IX [Sozialgesetzbuch IX, SGB IX] leads to the expiry of the office of the representative body for severely disabled persons. The premature termination of the office was also not required on grounds of the systematics of the law or the meaning and purpose of the threshold value.
The - surprisingly late - legal certainty gained is welcome in practical terms. Although the office expires prematurely pursuant to Sec. 177 (1) sentence 3 SGB IX if the representative resigns from office, leaves the employment relationship or loses eligibility, lacking an explicit provision on cases where the threshold value is subsequently fallen short of, the legal consequence has been disputed for some considerable time. In contrast to the previous instances, the BAG did not apply to the representative body for severely disabled employees the principle applicable to the works council under shop constitution law, according to which the term of office ends during the election period if the number of employees entitled to vote falls below five. Only the press release is available to date; the reasons for the decision are eagerly awaited.
For companies, the following applies with immediate effect: The representative body for severely disabled employees are be involved for the entire four-year term of office, regardless of the (subsequently changed) number of severely disabled employees in the company. If the number does not increase to at least five severely disabled employees by the time of the regular (new) election, no such election may be held.
Finally, please note that, once elected, the representative enjoys special protection against dismissal under Sec. 15 of the German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG] for the duration of the four-year term of office and for one year thereafter.
Dr. Johannes Kaesbach
1.2 Operational integration of a manager in the matrix structure
Whether a manager is integrated into a business does not depend on whether he or she has the authority to admonish, warn or dismiss employees belonging to the business. Rather, the decisive factor is whether he or she is actually integrated into the work organisation of the business. This requires an overall assessment in the individual case. According to the decision of the BAG dated 14 June 2022 - 1 ABR 13/21, physical presence "on site" is not relevant.
The subject of the dispute between the company and a works council was the latter's participation in the context of a transfer pursuant to Sec. 99 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG]. As a private railroad company, the company operates rail services in the federal states of North Rhine-Westphalia (NRW) and Lower Saxony and Bremen (NDS/HB), among others.
The applicant was the works council elected at the NRW business. In addition, there was also a works council for the company's business in NDS/HB. A manager at a site in Lower Saxony was appointed Head of Operations Management with effect from 01 February 2020, with the approval of the works council established for the NDS/HB business. In this position, she was the supervisor of the long-term planners employed in both NRW and NDS/HB, for whom she prepared annual plans. On the basis of these annual plans, the long-term planner working at the NRW business (also) specifically determined the deployment of the personnel employed there in terms of location and time.
The applicant works council NRW was of the opinion that its approval pursuant to Sec. 99 (1) sentence 1 BetrVG had been required when the manager was transferred to the position of Head of Operations Management, as she had also been integrated into the NRW business.
The BAG did not share this opinion. The manager had not been integrated into the NRW business. Her actual physical presence "on site" was not decisive for this. At best, this could serve as a strong indication. Rather, an overall assessment of the circumstances is important. The manager's authority to issue instructions would have to lead to the manager being integrated in the operational tasks of the business or in the work processes there. There must be actual cooperation with the employees at the business. This had not been the case with the manager with regard to the NRW business. Whether disciplinary powers existed or not was irrelevant to the question of integration into a business.
The BAG thus clearly rejects the view that disciplinary authority to issue instructions is the decisive criterion for the question of the operational integration of a manager within a matrix structure. In practice, therefore, there will be no avoiding the question of the type and extent of the manager's actual operational cooperation with (instruction-bound) employees.
In practice, this is not always an easy criterion to deal with. Personnel measures regarding a manager are often sensitive in terms of corporate policy. It therefore remains doubtful whether all works councils coming into consideration should be involved in the future as a precautionary measure.
Kathrin Vossen
1.3 Central works council: delegation of non-company employees also permissible
The works council of a joint establishment [Gemeinschaftsbetrieb] may also delegate to the central works council of a participating company works council members who are not in an employment relationship with such participating company. This was confirmed by the BAG in a judgement on 01 June 2022 - 7 ABR 41/20. When a joint establishment is formed, non-company employees may therefore also participate and have a say at company level.
The parties disputed whether a central works council had been effectively established. The employer, a drugstore chain, ran a distribution centre as a joint establishment together with an external company. The chair of the associated joint works council at the drugstore chain was an employee of the external company. The works council of the drugstore chain claimed that representation within the central works council by non-company employees was not permissible and that the central works council had therefore not been effectively established.
The BAG ruled that there was no obligation on the part of the works council of the joint establishment to delegate only works council members belonging to the company to the central works council of the participating companies. In addition, an erroneous delegation of a works council member to the central works council does not affect the existence of the central works council as a body under shop constitution law.
In the opinion of the BAG, the interests of the employees at the joint establishment are safeguarded by all members of the joint works council regardless of their company affiliation. Pursuant to Sec. 47 (2) sentence 1 BetrVG, delegation to the central works council is only linked to membership of the local works council. The legislator had recognised the possibility of a delegation from a joint works council to a central works council and had seen a need for regulation only in Sec. 47 (9) BetrVG. The possibility of central works council membership of non-company works council members of a joint establishment corresponded precisely to the principle of forming a central works council. Accordingly, the central works council is legitimised by members who were elected by general works council elections.
With this, the BAG has decided for the first time with respect to the central works council that which has already been decided by the highest court for non-company members of a group works council. When a company operates a joint establishment with another company, it accepts the possibility of non-company employee representatives in both the local joint works council and at company level in the central works council.
Dr. Alexander Willemsen
1.4 Internal data privacy officers enjoy special protection against dismissal
The existing special protection against dismissal of an internal data protection officer under the German Federal Data Protection Act [Bundesdatenschutzgesetz, BDSG] is compatible with both Union law and the protection of national fundamental rights (BAG dated 25 August 2022 - 2 AZR 225/20). Even during an agreed probationary period, an internally appointed data privacy officer may only be dismissed for good cause. Restructuring measures do not constitute a sufficient good cause.
The defendant hired the plaintiff as "Team Leader Legal" as of 15 January 2018, and subsequently appointed her as the company data protection officer. On 13 July 2018, the defendant dismissed the plaintiff before the end of the probationary period with due notice as per 15 August 2018, citing a restructuring measure. The function of the data protection officer was to be outsourced to an external party.
The plaintiff brought an unfair dismissal action. She objected that, as data protection officer, she enjoyed special protection against dismissal under the BDSG and could therefore only be dismissed for good cause without observance of a notice period. The defendant objected that the special protection against dismissal of the internal data protection officer under the BDSG was not compatible with the GDPR and also violated its fundamental rights.
In a reference for a preliminary ruling from the BAG decided by the ECJ, the ECJ deemed the company data protection officer’s special protection against dismissal enshrined in the BDSG to be in conformity with EU law (ruling of 22 June 2022 - C-534/20). The BAG has now declared the plaintiff's dismissal to be invalid. The purpose of the special protection against dismissal was to guarantee the data protection officer’s complete independence, which meant that the plaintiff could only have been dismissed for good cause even during the probationary period. Restructuring measures did not meet this requirement.
This did not constitute a violation of the defendant’s occupational freedom under Article 12 (1) of the German Constitution [Grundgesetz, GG] with regard to its employment and service activities, since this was opposed by the fundamental right to protection of natural persons in the processing of personal data. Rather, the special protection against dismissal is identical to that for comparable functions such as the Emissions Control Officer.
Although the BAG's ruling is hardly surprising, it does provide the clarity that has long been sought in practice. In conclusion, the BAG confirms that companies should well consider the decision in favour of an internal or external data protection officer. An internal data protection officer is entitled to special protection against dismissal on the basis of Sec. 4 (6) BDSG, which means that a dismissal is generally only possible in the event of gross misconduct.
The BAG does emphasise that extraordinary dismissal for operational reasons may be possible. However, this is subject to extensive requirements. Accordingly, the bar for the unreasonableness threshold is very high. If the external appointment of the data protection officer is not an option, a temporary appointment as internal data protection officer should also be considered. The prerequisite for this is a material reason.
Alexandra Groth
1.5 An executive position per se is not a reason for a fixed-term contract
In top-level sport, case law recognises that the limitation of the term of employment contracts may be justified for material reasons due to the specific nature of the work performed. However, the expected top performance from executives is not suitable to justify a limitation of the term of the contract in the same way.
Top athletes are typically unable to deliver the contractually owed maximum performance on a sustained basis. This establishes a legitimate interest of the parties in a fixed-term employment relationship. Large international corporations often use this as justification for their assumption that managers cannot guarantee the required high level of performance and an "alert entrepreneurial spirit" over a long period of time. Such considerations have now been clearly rejected by the BAG: Activities as a manager or in executive positions do not justify the limitation of the term of the employment contract due to the specific nature of the work performance (BAG dated 01 June 2022 - 7 AZR 151/21).
The parties disputed the validity of the fixed-term nature of the plaintiff’s employment contract as managing and commercial director of a hospital. The plaintiff was initially employed on the basis of a fixed-term employment contract until June 2018. By amendment agreement, the parties agreed in June 2015 on a fixed term until 31 December 2019 and an increase in the remuneration. The plaintiff judicially asserted the invalidity of the limitation of the term agreed in the amendment agreement.
The BAG confirmed that the material reason of the specific nature of the work performance pursuant to Sec. 14 (1) sentence 2 No. 4 of the German Act on Part-Time and Fixed-Term Employment Contracts [Teilzeit- und Befristungsgesetz, TzBfG] primarily justifies the limitation of the term of employment relationships characterised by constitutional law, for example in the area of freedom of broadcasting or freedom of the arts. The scope of application of the norm is not limited to these cases. However, the material reason presupposes that the work performance has special features which give rise to a justified interest, in particular on the part of the company, in concluding only a fixed-term employment relationship instead of an unlimited one. This requires a weighing of the mutual interests in the individual case.
In the present case, the BAG did not consider the structure of the employment relationship and the nature of the work performance to give rise to any overriding interests of the defendant in a limitation of the contractual term. For this reason, neither a far-reaching "freedom to issue instructions" on the part of the plaintiff nor a position as "counter-body to the management board" accompanying her position as director or even a position similar to that of a managing director was sufficient. The mere fact that an employee is an executive officer [leitender Angestellter] within the meaning of Sec. 14 (2) KSchG does not constitute a material reason justifying the limitation of the contractual term. Rather, the BAG emphasises that the same standards for assessing the existence of a material reason apply to executive officers as to other employees.
The decision comes as little surprise. The BAG once again shows that the limitation of the term of an employment contract for a material reason as an exception to the statutory rule of an unlimited employment relationship is subject to strict requirements. The statutory material reasons in the catalogue in Sec. 14 (1) TzBfG therefore require narrow interpretation. For companies, this clear decision leaves little scope for fixed-term contracts in management positions.
1.6 Transfer abroad: How far does the employer's right to issue instructions under Sec. 106 of the German Industrial Code extend?
Companies may also transfer employees abroad if nothing to the contrary has been agreed in the employment contract or implied by the circumstances. Sec. 106 of the German Industrial Code [Gewerbeordnung, GewO] does not limit the company's right to issue instructions to the territory of the Federal Republic of Germany. This was recently decided by the Federal Labour Court in its ruling of 30 November 2022 - 5 AZR 336/21, thus confirming the ruling of the LAG Nuremberg of 23 April 2021 - 8 Sa 450/20.
The plaintiff, a pilot of the Irish airline Ryanair stationed at Nuremberg Airport, had objected to a transfer to Bologna Airport at significantly lower pay. He had most recently earned just under 12,000 euros gross per month under a collective pay agreement concluded by the defendant with the Vereinigung Cockpit (VC) union. An annual salary of just over 75,000 euros and the possibility of transfer to any other company location had been agreed in the employment contract. It also stated that the remuneration would then be based on the system applicable there.
The BAG ruled that the employer's right to issue instructions pursuant to Sec. 106 GewO also includes the transfer to a foreign place of work. This applies if, as in the case in dispute, a specific domestic place of work is not firmly agreed in the employment contract, whereas a company-wide transfer option is expressly provided for. A territorial limitation could not be inferred from Sec. 106 GewO.
However, the federal judges did draw a line: the exercise of the right to issue instructions in individual cases is subject to an equitable review. This means that the employer must have a material reason and the transfer must be reasonable for the employee. The LAG Nuremberg was correct in assuming that the present measure was in accordance with equitable discretion. The transfer was a consequence of the corporate decision to give up the home base at Nuremberg Airport. There had been no other domestic vacancies. That the plaintiff would lose his entitlement to the higher pay under the collective agreement was due to the fact that the scope of the collective agreement was limited to pilots stationed in Germany.
This decision by the BAG opens up new opportunities, but also risks, for international companies with sites in Germany. Companies should now examine in detail which formulations regarding the place of work and the transfer clause are contained in the employment contracts and what consequences this may have.
The desire for the greatest possible flexibility in working conditions, which also allows transfers abroad, must be weighed against the difficulty of declaring terminations for operational reasons that this may entail. Employers should always keep this interaction in mind when drafting employment contracts and create a balance that is tailored to the company's individual structure and HR policy.
Anja Dombrowsky
1.7 Deployment of external personnel - limits on informing the works council
The works council's right to be informed about the external personnel deployed in a company gives the works council a sharp sword that can strike companies hard during their busiest months. It is therefore all the more gratifying that the LAG Baden-Württemberg has clarified in its decision of 12 October 2022 - 4 TaBV 3/21 - that the works council's right to information pursuant to Sec. 80 (2) sentence 1 half-sentence 2 BetrVG presupposes that the works council presents a connection to its duties. The company is not mandatorily obligated to disclose the names of the external personnel.
At appeal instance, the parties last disputed whether and to what extent the company is obligated to inform the works council about the deployment of external personnel of affiliated service companies. The company had outsourced work and services and had them performed by group-owned service companies and their employees. In the appeal proceedings, the LAG Baden-Württemberg confirmed the first-instance decision insofar as the works council must be informed about the deployment of external personnel in accordance with the wording of Sec. 80 (2) sentence 1 half-sentence 2 BetrVG ("the time scope of the assignment, the assignment location and the work tasks"). However, it rejected the extended motions of the works council in the appeal proceedings, stating that the company was not obliged to individually name the external personnel used.
Furthermore, initially in accordance with the case law of the BAG, the LAG Baden-Württemberg emphasised that a right to information with regard to external personnel deployed in the company presupposes that the works council demonstrates the possibility of a right of co-determination. For this, it is sufficient if the works council, on the basis of an established operational situation, requests clarification as to whether external personnel are possibly integrated into the company and whether, for example, personnel co-determination rights exist on the basis of an unauthorised supply of temporary workers. In addition, the LAG Baden-Württemberg specified the requirements for informing the works council pursuant to Sec. 80 (2) sentence 1 half-sentence 2 BetrVG: neither the wording of the norm nor a connection to duties under shop constitution law require that external personnel be named. The wording speaks of the "employment of persons" and does not require any individualisation by name, which means that the notification could just as well be fulfilled by stating the number of external personnel. In addition, notification by name is not necessary to enable the works council to exercise its participation rights of co-determination in personnel matters. If the company properly involves the works council in the hiring process pursuant to Sec. 99 BetrVG, the company informs the works council of the person's name in any case. If the company violates the co-determination right during the hiring process, the works council can take legal action under Sec. 101 BetrVG to have the hiring cancelled and specify the motion on the basis of the third-party company, the department and the activity performed by the person.
The decision offers great added value, as it sets a clear limit to the right to information with regard to the use of external personnel, which companies can directly invoke. This applies in particular to companies that regularly use external personnel during the Christmas and Easter business and wish to deploy their resources without unnecessary disputes with the works council.
Moritz Coché
1.8 Dismissal without prior consultation of the works council is a gross breach of duty
If an employer terminates an employment relationship without first consulting the works council, this may constitute a gross breach of duty, according to the LAG Hesse in a recent decision dated 08 August 2022 - 16 TaBV 191/21.
In February 2019, the employer gave notice of termination to an employee without first consulting the works council in accordance with Sec. 102 (1) BetrVG. The employer justified this on the grounds that the notice of termination had been given in consultation with the employee in order to turn a termination agreement into a settlement agreement. In September 2020, the employer had declared six terminations due to illness. Also in this case, without prior consultation of the works council. The omitted consultation had likely been due to an oversight by a clerk in the personnel department. However, the employer had assured the works council that it would be consulted on every termination in the future, with the exception of those cases in which the termination was to be declared at the employee's request.
The works council initiated labour court order proceedings for the following: The employer is to be obliged to refrain from issuing notices of termination without prior involvement of the works council in accordance with Sec. 102 BetrVG.
The LAG Hesse ordered the employer to cease and desist in accordance with the motion. In addition, it based its decision on the existence of a gross violation within the meaning of Sec. 23 (3) BetrVG. Furthermore, with reference to the applicable case law of the BAG, the LAG Hesse stated that no cases are conceivable in which terminations are possible without prior consultation of the works council. In particular, a consultation duty pursuant to Sec. 102 BetrVG could not be denied for cases in which the parties to the employment contract had already fully agreed in advance on a termination of the employment relationship by settlement agreement and the employer was nevertheless to declare a termination.
In its reasoning, the decision of the LAG Hesse confirms the BAG’s decision of 28 June 2005 - 1 ABR 25/04 on a so-called "agreed termination". Accordingly, consultation with the works council is also required in cases of "agreed terminations". This means: The company and the employee agree verbally in a meeting that the employer will issue a termination and that a settlement agreement will then be concluded.
Practical implications: Not only does the works council have to be consulted in accordance with Sec. 102 BetrVG prior to any termination, it also has to be duly informed of the reasons for the planned termination. Otherwise, employers will have to expect consequences under shop constitution law in addition to those under individual contracts if the works council initiates cease-and-desist proceedings against the employer for a gross breach of duty pursuant to Sec. 23 (3) BetrVG. And it is a well-known fact that, in such cases, the employer may, at the request of the works council, also face an administrative fine of 10,000 euros for each case of infringement due to the failure to consult or properly consult the works council in accordance with the criteria of Sec. 102 BetrVG.
Cornelia-Cristina Scupra
1.9 Video surveillance system not suited to monitor hours worked
In its ruling of 06 July 2022 - 8 Sa 1148/20, the LAG Lower Saxony decided that a video surveillance system is neither suitable nor necessary for monitoring hours worked. In concrete terms, however, this statement only applies to the permissibility of the collection of data under the BDSG, but not to the fundamental choice of an objective, reliable and accessible system for recording working time within the meaning of ECJ and BAG case law.
In the case up for decision by the LAG Lower Saxony, a company accused one of its employees of working-time fraud and for this reason issued both a dismissal on grounds of suspicion and an actual dismissal. The background to this was that the employee had received full remuneration for shift work performed, despite the fact that a video recording showed that the employee had left the plant premises during his shift without clocking out at the turnstile provided for this purpose.
The LAG Lower Saxony deemed the dismissals to be invalid, as it had not been proven that the employee had committed the alleged breach of duty or that there was no sufficiently urgent suspicion of working-time fraud. Although the alleged conduct was fundamentally suitable to justify an extraordinary termination, in the specific case this breach of duty could not be proven by the company. On the one hand there was the ban on use as evidence regarding data obtained with the aid of electronic attendance recording through the use of card readers. This is because it was agreed in the shop agreement concluded for this purpose that no personal evaluation of data would take place. On the other hand, however, the video recordings taken at the plant entrance were also subject to a ban on use as evidence, since it had been pointed out that the video recordings would be deleted after a certain period of time and this period had already expired.
The decision of the LAG Lower Saxony once again demonstrates that the content of shop agreements is closely analysed, particularly in the case of disputes under individual law. When agreeing on electronic attendance recording, it should therefore be agreed that an evaluation of the data obtained is generally permissible. If the works council does not accept such an evaluation - even with appropriate participation in the specific individual case – we recommend recourse to the conciliation board.
The misleading wording of one of the guiding principles of the decision of the LAG Lower Saxony also requires clarification: Hence, the adjudicating chamber precisely determined from this that video surveillance was not suitable for monitoring hours worked. From this, some derive that video surveillance is not an objective, reliable and accessible system for recording working time within the meaning of ECJ and BAG case law (cf. in this regard ECJ of 14 May 2019 - C-55/18, BAG of 13 September 2022 - 1 ABR 22/21). In fact, however, the LAG Lower Saxony only made this statement in connection with the admissibility of collecting video recordings under data protection law. Whether a video recording can be used as a means of recording working time is basically up to the decision-making authority of each company - in compliance with data protection law.
Annabelle Marceau
1.10 Right to (digital) unavailability?
According to the decision of the LAG Schleswig-Holstein (ruling dated 27 September 2022 - 1 Sa 39/22), an employee has a right to be (digitally) unavailable during his or her free time. Theminimal time required to retrieve and read an SMS does not oppose this.
In the case in question, the employer sent a text message to an employee during his free time informing him of a change in the duty roster. The employee did not take note of the message and subsequently received a warning from the employer. The employee took legal action against this before the LAG Schleswig-Holstein.
The LAG upheld the complaint. The employer exercises its right of direction when it changes a duty roster. If such an instruction is sent to the employee by SMS during the latter’s free time and he does not take note of it, the change is not received until the start of work. The employee is fundamentally not obliged to inquire during his free time as to whether the duty roster has been changed. This is also not contradicted by the fact that retrieval and reading of an SMS only requires a small amount of time. In this context, the LAG emphasised that employees have a right "to be unavailable" during their free time. It is one of the most important personal rights of a person to decide for whom he wants to be reachable in his free time. The warning was therefore unlawful.
The ruling is particularly of practical relevance in industries in which changes to duty rosters are often published at very short notice, such as in the retail or catering sectors. In addition, WhatsApp has already replaced e-mail in many areas, which means that people are communicating at ever shorter notice. At the latest in the wake of this decision, employers would therefore be well advised to create clarity about (digital) availability at the company or on an individual contractual level. In order to ensure the effectiveness of corresponding regulations, the regulations of the German Working Hours Act [Arbeitszeitgesetz, ArbZG] should always be taken into account.
In the future, action by the European legislator could also be expected. The European Parliament had already called for a "right to be unavailable" at the beginning of 2021 and issued a recommendation to the European Commission to initiate a legislative procedure. However, it is currently impossible to predict how and when an EU-wide regulation can actually be expected.
Isabel Hexel
2. Legal developments
2.1 News from Europe: Directive on adequate minimum wages
On 14 November 2022 the Directive on Adequate Minimum Wages in the European Union (RL EU 2022/2041) came into force. As already mentioned in the 2nd Focus Newsletter Focus on Labour Law - 2nd Quarter 2022 - Oppenhoff, the EU worked on this at full speed. Notwithstanding the existing minimum wage law in Germany, the directive will lead to far-reaching consequences, as it effectively forces companies to be bound by collective agreements. The German Federal Ministry of Labour and Social Affairs [Bundesministerium für Arbeit und Soziales, BMAS] has already announced its intention to follow this path.
The directive contains three aspects in particular that should lead to an improvement in working conditions:
- Assured adequacy of the minimum wages: Member states with statutory minimum wages must establish a framework for determining and updating minimum wages according to clear criteria. The minimum wages in the member states are to be updated at least every two years. However, the directive did not set a specific predetermined minimum wage level. Similarly, there is no obligation to introduce a minimum wage in those countries where none exists (Denmark, Finland, Sweden, Austria, Italy and Cyprus).
However, with respect to the adequacy of minimum wages, the directive proposes that member states use the reference values of 60 percent of the gross median wage or 50 percent of the gross average wage. Research assumes these to be the minimum requirements for a living wage.
- Promotion of collective bargaining on wage determinations: The directive aims to increase the number of employees who are subject to a collective wage agreement. According to the EU, the share of low-wage earners tends to be lower in countries with high collective bargaining coverage. In these countries, minimum wages also tend to be higher than in countries with lower collective bargaining coverage.
Therefore, countries should strengthen the capacity of the social partners for collective bargaining. Members with less than 80 percent collective bargaining coverage should develop an action plan to promote collective bargaining, including a timeline and specific actions. The directive provides for various measures to promote collective bargaining: promotion of the establishment and strengthening of the capacity of the social partners for collective bargaining on wage determination, protection of the exercise of the right to collective bargaining, as well as the protection of employees and trade union representatives against discrimination, etc.
- Access to the statutory minimum wage: In addition, member states are to take measures to improve access to the statutory minimum wage. These include, among other things, inspections by labour inspectorates, providing easily accessible information on the minimum wage, as well as the development of possibilities for authorities to take action against employers who do not comply with the statutory minimum wage.
Member states are to monitor the coverage and adequacy of minimum wages and report to the Commission on this every two years.
In Germany, the proportion of employees covered by collective bargaining agreements is 44 percent, lying far below the target of 80 percent. Federal Labour Minister Heil wants to change this and has announced a new law for 2023.
One possible lever to promote collective bargaining will be to further develop the laws on adherence to collective agreements in such a way that public contracts are only awarded to companies that pay collectively agreed wages. A further lever could be the extension of the regulations on general applicability pursuant to Sec. 5 German Collective Bargaining Act [Tarifvertragsgesetz, TVG]. Theoretically, legislators could use this approach to introduce collectively agreed minimum wages in all sectors. It will be interesting to see how things develop.
Jörn Kuhn
2.2 2023 social security calculation parameters
The 2023 Social Security Calculation Parameters Ordinance [Sozialversicherungsrechengrößen-Verordnung 2023] comes into force on 01 January 2023. The most important calculation parameters for the year 2023 are, at a glance:
- Contribution assessment ceiling pension insurance
The contribution assessment ceiling in the general pension insurance scheme will rise to 7,300 euros per month from 01 January 2023 (2022: 7,050 euros/month). The contribution assessment ceiling (East) increases to 7,100 euros per month (2022: 6,750 euros/month).
- Contribution assessment ceiling health insurance
The uniform nationwide contribution assessment ceiling for statutory health insurance for 2023 will rise to 59,850 euros per year (2022: 58,050 euros) or 4,987.50 euros per month (2022: 4,837.50 euros).
- Annual earnings limit for health insurance
The compulsory insurance limit for statutory health insurance (annual earnings limit), which is also uniform throughout Germany, will rise to 66,600 euros as of January 2023 (2022: 64,350 euros).
- Reference value
The reference value, which represents the average remuneration in Germany from the calendar year before last, is important, for example, for determining the minimum contribution assessment bases for voluntary members of the statutory health insurance or for calculating the contributions of self-employed persons subject to compulsory insurance in the statutory pension insurance, will increase to 3,395 euros per month as of 01 January 2023 (2022: 3,290 euros/month). The reference value (East) increases to 3,290 euros per month as of 01 January 2023 (2022: 3,150 euros/month).
3 Legal Tech: new tool for the deployment of external staff - compliance check
The use of freelancers and employees from third-party companies is part of everyday life in many companies. However, due to unclear legal requirements, this use of external personnel is fraught with risk. The hiring of a pseudo self-employed person needs to be ruled out as does an illegal provision of temporary workers. With our new Legal Tech Tool External Personnel Compliance Check - you can perform a risk assessment based on defined questions and also find helpful explanations. Please feel free to contact us in this respect.
