Focus on Labour Law - 1st quarter 2025

Labour law continues to evolve and the ongoing coalition negotiations between the CDU/CSU and SPD promise further exciting developments. The first key points for labour law are already identifiable: The flexibilisation of working hours, a possible increase in the minimum wage and measures to strengthen collective bargaining coverage are central points of discussion. However, it remains to be seen what will ultimately end up in the coalition agreement - and more importantly, what will actually be implemented.

The digitisation of the world of work is also progressing. The processing of personal data during HR processes remains a key issue, especially in light of the increased use of artificial intelligence. The first court rulings in this respect are increasingly revealing the legal framework conditions that will have to be observed.

In the first issue of this year's Focus on Labour Law, we are presenting, as always, the most practice-relevant labour law decisions. In addition, our new section “Rethinking HR!” offers practical ideas for modern HR work. We are kicking off with a highly relevant topic: the legally compliant delivery of a notice of termination.

1. New case law

1.1 Evidential value of a certificate of incapacity for work issued in a non-EU country

1.2 Remuneration claim of an employee released from work during the notice period

1.3 Damages for late target setting

1.4 GDPR-compliant data processing: shop agreements under scrutiny

1.5 ​Strengthening of collective bargaining autonomy: unequal night bonuses not per se contrary to equality

1.6 Group-wide questionnaire to identify conflicts of interest

1.7 Digital payroll accounting - Federal Labour Court provides clarity

2.Rethinking HR! - Receipt of the notice of termination – a stumbling block

1. New case law

1.1 ​Evidential value of a certificate of incapacity for work issued in a non-EU country

The fundamentally high evidential value of a certificate of incapacity for work [Arbeitsunfähigkeitsbescheinigung, “AUB"] issued abroad is weakened if, in the context of the required overall assessment, aspects that are innocuous per se give rise to serious doubts as to the evidential value of the AUB (Federal Labour Court [Bundesarbeitsgericht, “BAG”], judgement of 15 January 2025 - 5 AZR 284/24).

The plaintiff employee spent his holiday in Tunisia. Two days before the end of his holiday, he informed his employer by e-mail dated 7 September 2022 that he had been written off sick until 30 September 2022 and submitted an AUB issued by a Tunisian doctor. The AUB prescribed 24 days of strict rest at home due to "severe sciatica", meaning that the employee was not allowed to either move or travel. On 8 September 2022, the employee already booked his return trip to Germany for 29 September 2022. The employee had already submitted AUBs in previous years directly following his annual holiday in Tunisia. The employer refused to continue to pay the salary.

Following an overall assessment of all aspects, the Federal Labour Court considered the evidential value of the AUB to be weakened and referred the case back to the Munich Regional Labour Court for the determination of further findings on the incapacity for work due to illness.

The AUB has high evidential value due to the normative requirements of the German Act on the Continued Payment of Remuneration [Entgeltfortzahlungsgesetz, “EFZG”]. According to Section 7 (1) no. 1 EFZG, the submission of a medical certificate within the meaning of Section 5 (1) sentence 2 EFZG is sufficient to deprive the employer of the right to withhold the remuneration. This legislative value decision has an impact on the legal assessment of the evidence. This fundamentally also applies to certificates issued outside the EU if the foreign doctor distinguishes between merely an illness and an inability to work as a result of the illness.

When assessing the disputed factual circumstances, the lower court had only considered the individual aspects in isolation and had failed to make the legally required overall assessment. Here, it was imperative to take into account the fact that the Tunisian doctor had written the employee off sick for more than three weeks without a return appointment, that the employee had already planned his return journey for 29 September 2022 just one day after the certified need for rest at home, and that he had also taken this return journey. What is more, the employee had already submitted an AUB three times in the years 2017 to 2020 immediately following his holiday. All in all, this cast considerable doubt about the employee's incapacity for work, thus weakening the evidential value of the foreign AUB. Consequently, the employee bears the full burden of representation and proof of the existence of the incapacity for work due to illness.

The Federal Labour Court is consistent in its case law on the evidential value of an AUB and attaches great importance to the temporal coincidence between holiday and a subsequent incapacity for work (see already BAG, judgement of 20 February 1985 - 5 AZR 180/83). However, these principles are not confined to the "arbitrary extension" of the holiday. Most recently, the Federal Labour Court also had serious doubts about the existence of an illness in a case where the duration of an AUB (incl. follow-up certificates) covered the precise period leading up to the end of the employment relationship (BAG, judgement of 13 December 2023 - 5 AZR 137/23).

Employers should therefore urgently check AUBs for a close temporal connection to periods of absence. Serious doubts about an illness can arise if employees - in addition to the temporal coincidence take days off sick in connection with holidays, bridging days or public holidays repeatedly within a short period of time.

Moritz Coché und Marko Vraetz

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1.2 ​​​​​​Remuneration claim of an employee released from work during the notice period

Employees released from their work duties do not always have to try to find new employment within the notice period in order to secure their remuneration claim. This was recently decided by the Federal Labour Court in its ruling of 12 February 2025 - 5 AZR 127/24. The dispute over the question of what effort employers must make in order to be able to offset maliciously omitted earnings of the employee is thus entering the next round.

In the underlying case, the defendant had irrevocably released the plaintiff from his duties. Doubtlessly with the aim of saving wages for default of acceptance during the notice period, the defendant sent the plaintiff 43 job offers within two months for jobs that had been posted online by job portals or companies and which the defendant considered to be suitable for the plaintiff. The Federal Labour Court held that the plaintiff was not obliged to enter into another employment relationship before the end of the notice period and to earn money from it in order to relieve the defendant financially. In the Federal Labour Court’s view, it would not have been unreasonable for the defendant to employ the plaintiff during the notice period. Therefore, if there are no compelling reasons for the release from duties, the employee does not have to make any increased efforts to earn money elsewhere.

With this decision, the Federal Labour Court has provided more clarity in a problem frequently arising in connection with the release of dismissed employees from their duties. The peculiarity in this case, however, was that it concerned an employee's claim to remuneration within the ordinary notice period. The Federal Labour Court made it clear that, in this case, maliciously omitted earnings can only be taken into account in cases where the employee is not to be employed during the notice period (e.g. this would be conceivable in the case of an ordinary dismissal for conduct-related reasons).

In contrast, once the notice period has expired, other rules will apply. A year earlier, the Federal Labour Court had given clear indications as to the conditions under which maliciously omitted earnings can be offset in case of long-term releases from duty (see BAG of 24 January 2024 - 5 AZR 331/22). Among other things, employees must show a certain degree of initiative and willingness to seriously consider job offers.

In future, employers will therefore have to differentiate between the current notice period and the period "thereafter": During the notice period, it will only be possible to create circumstances for offsetting maliciously omitted earnings in exceptional cases. What happens after this period remains to be seen: particularly in the case of longer-term dismissal protection processes it is worth analysing the labour market and not only documenting potential jobs, but also actively sending job offers to the employee. Employees should also be asked to provide information about their endeavours to find employment.

Either way, it is clear that offsetting maliciously omitted earnings is and remains a "laborious task" for employers, which requires an auspicious labour market, complete documentation and a great deal of care. The Federal Labour Court’s judgement has also made it clear that, in future practice, such offsetting of maliciously omitted earnings is only likely to have prospects of success after the end of the termination notice period.

Dr. Alexander Willemsen

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1.3 Damages for late target setting

Variable remuneration systems are a popular way of incentivising the performance and motivation of employees and are regularly based on targets that are set by the employer at the beginning of the year. But what happens if the employer sets the targets belatedly? The long-awaited judgement of the Federal Labour Court shows the risks this poses for employers and what you should look out for.

In the case to be decided by the Federal Labour Court, an employee had a contractual claim to variable remuneration, the calculation of which depended on an annual target stipulation. According to the shop agreement, the targets were to be set by 1 March of each year. However, the employer did not inform the employee of the company targets until October. Individual targets were not defined at all. In this respect, the employer had merely informed managers - including the employee – in September that the basis for the individual targets would be an average target achievement rate of 142%. The employee sued for damages after he considered the variable remuneration paid to him to be too low.

The Federal Labour Court awarded the employee the damages he was seeking and clarified that the employer had culpably breached its duty to set targets in good time (BAG of 19 February 2025 - 10 AZR 57/24). In cases where the calendar year is so far advanced, a delayed target can no longer fulfil its motivational and incentive function. Accordingly, a subsequent judicial determination of performance can be ruled out and only a claim to damages by the employee can come into consideration. Furthermore, there was no contributory negligence on the part of the employee, as the burden of initiating the stipulation of a target lay exclusively with the employer. For the damage claim, the amount of damages was to be estimated in accordance with Section 287 (1) of the German Code of Civil Procedure [Zivilprozessordnung, “ZPO”]. In this respect, the Federal Labour Court assumed that, had the targets had been set in good time, the plaintiff would have achieved 100% of the company targets and the individual targets corresponding to the average value of 142%.

The Federal Labour Court’s decision shows in particular that the late notification of not just individual targets, but also of company targets, can justify a damage claim. Accordingly, the employer cannot generally claim that, in cases of doubt, the employee would have had no influence on the fulfilment of the target anyway.

The following points should be taken into account when setting targets:

• Employers should not put off setting targets.
• A structured and timely approach minimises the risk of expensive damage claims. With this in mind, the targets should be defined as early as possible.
• If the employer has set a specific deadline for setting targets, adequate monitoring mechanisms should be in place to ensure this is observed.
• Employers must ensure that targets are clearly communicated and formulated and must adequately document the notification.
• The fact that, in cases of doubt when targets have been set belatedly, the Federal Labour Court assumes that such targets have been achieved in full and that the employee is entitled to corresponding damages, is also cause to make adjustments to the variable remuneration systems. For example, one could consider adjusting the target achievement values accordingly in order to prevent owing a target achievement of 142%, as in this case.

Katharina Schäffer & Fatoumata Kaba

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1.4 GDPR-compliant data processing: shop agreements under scrutiny

At the end of last year, the ECJ dealt with the question of whether employee data may be processed solely on the basis of shop agreements. In its ruling, the ECJ sent a clear signal in favour of data protection - the requirements of the GDPR must be complied with in all cases. The judgement places further strict requirements on the processing of personal data in an employment context.

In its judgement of 19 December 2024 - C-65/23, the ECJ ruled on the requirements for the processing of personal employee data on the basis of a shop agreement. An employee had brought an action against his employer for transferring data to a cloud-based system. The employee argued that this processing was neither necessary nor covered by the shop agreement.

The ECJ clarified that national provisions that permit data processing on the basis of collective agreements (e.g. Section 26 (4) of the German Data Protection Act [Bundesdatenschutzgesetz, “BDSG”]) must not only fulfil the requirements of Art. 88 (2) GDPR, but also the general data protection principles of the GDPR, in particular Art. 5 - Principles governing the processing of personal data, Art. 6 - Lawfulness of the processing and Art. 9 - Processing of special categories of personal data.

The ECJ also emphasised that, although the collective bargaining parties have a certain amount of leeway when determining the "necessity" of processing personal data, this is subject to comprehensive judicial review. A collective agreement cannot circumvent the strict requirements of the GDPR.

At first glance, the decision comes as no great surprise. The ECJ had also stated in an earlier decision that the GDPR is the measure of all things (see ECJ of 30 March 2023, case no. C-34/21 on the unlawfulness under European law of Section 23 (1) sentence 1 of the Hessian Data Protection and Freedom of Information Act [Hessisches Datenschutz- und Informationsfreiheitsgesetz, “HDSIG”], which is identical in wording to Section 26 (1) sentence 1 BDSG). In practice, it is also sufficiently clear in most shop agreements containing provisions on the processing of personal data that such processing is necessary to establish, implement and terminate employment relationships and is therefore lawful under Art. 6 (1) b) GDPR. In general: data processing in shop agreements on HR management systems, Office products, etc.

However, there are two crucial points that companies will have to address following this decision:

• When processing special categories of personal data (e.g. biometric data, severe disability), a shop agreement has so far been the "easier way" to justify the processing of such data. The regulation in a shop agreement with the coverage of Section 26 (4) BDSG was often considered simpler. Here, the stricter standards of Art. 9 GDPR now apply. In this respect, companies that currently process special categories of personal data exclusively on the basis of shop agreements must check the requirements under data protection law. This applies, for example, to shop agreements on biometric access control systems.
• Negotiations on the conclusion of shop agreements on data processing IT systems will require even more time. Works councils will not accept general data protection representations. In order for data processing to be lawful under data protection law, in addition to presenting a legal basis, a specific purpose limitation of the data and a dedicated deletion concept will also have to be presented.

Annabelle Marceau und Jörn Kuhn

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1.5 ​​​​​Strengthening of collective bargaining autonomy: unequal night bonuses not per se contrary to equality

The Federal Constitutional Court [Bundesverfassungsgericht, “BVerfG”] decisively rejects the opinion of the Federal Labour Court that the differentiation between different types of bonuses for night work violates the general principle of equality. The decision sets clear limits to judicial examinations in the area of collective bargaining autonomy and thus sustainably strengthens the scope of the collective bargaining parties.

In its ruling of 11 December 2024 - 1 BvR 1109/21, 1 BvR 1422/23 - the Federal Constitutional Court had to rule on the constitutionality of collectively agreed night bonuses. At issue were the differently determined bonuses for (sporadic) night work in the amount of 50 % and (regular) night-shift work in the amount of 25 %. The Federal Labour Court saw this differentiation as a violation of the general principle of equal treatment under Art. 3 (1) of the German Constitution [Grundgesetz, “GG”].

The Federal Constitutional Court initially also stated that the parties to collective bargaining agreements must observe the principle of equal treatment under Art. 3 (1) 1 GG when setting collective bargaining standards. At the same time, the Federal Constitutional Court emphasises the importance of collective bargaining autonomy, which is also protected by constitutional law, as part of the freedom of association guaranteed under Art. 9 (3) GG. In its core area, the collective bargaining parties have a margin of discretion, evaluation and design. The protection of this requires a limitation of the judicial review to checking for arbitrariness. Collective bargaining standards that regulate the core area of working and economic conditions and do not show any obvious discrimination against minorities are therefore only subject to this limited judicial review.

Applying this criterion, the Federal Constitutional Court did not consider the bonus regulations at issue to be arbitrary. The distinction between night work and night-shift work is based on objectively plausible reasons, in particular the different social burdens, the additional financial burden for the employer and the collective bargaining policy objective of creating incentives for night work.

The Federal Constitutional Court also clarified that the "upward adjustment" of night bonuses reflexively assumed by the Federal Labour Court constitutes an encroachment on the autonomy of collective bargaining protected by Art. 9 (3) GG. Even in the event of an assumed violation of equality, the parties to the collective agreement would be responsible for rectifying this. Both for future collective bargaining regulations and for the retroactive correction of existing agreements, the parties to the collective bargaining agreement should first have been given the opportunity to find a mutually agreeable solution.

The Federal Constitutional Court’s decision significantly strengthens collective bargaining autonomy and is a landmark decision for future collective bargaining. Collective bargaining parties have broad, but not unlimited, room for manoeuvre when structuring bonus regulations.

For employers, this means greater legal certainty when implementing collectively agreed regulations. This gives companies more flexibility when organising working time models and managing additional costs. Having said that, the decision shows that a check for arbitrariness remains a critical boundary for such a review. Obviously unjustified or discriminatory regulations would continue to be criticised. Employers should therefore ensure that differentiations in collective agreements are always supported by objective and plausible reasons.

Roman Braun

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1.6 Group-wide questionnaire to identify conflicts of interest

When introducing a group-wide questionnaire, the central works council [Gesamtbetriebsrat] cannot enforce the establishment of a conciliation board with regard to the content and use of the compliance questionnaire. In the case of such cross-company measures, the competence lies with the group works council [Konzernbetriebsrat]. This was decided by the Cologne Regional Labour Court on 28 January 2025 (case no. 9 TaBV 89/24).

In the case at hand, the employer implemented a questionnaire to identify conflicts of interest as part of a compliance measure specified by the group management. The central works council saw this autonomous implementation as a violation of its right of co-determination pursuant to Section 94 (1) of the German Shop Constitution Act [Betriebsverfassungsgesetz, “BetrVG”] and applied for the judicial establishment of a conciliation board for the purpose of concluding a central shop agreement on the content and use of the questionnaire. The Cologne Labour Court rejected the application and the Cologne Regional Labour Court confirmed the decision of the court of first instance, rejecting the appeal of the central works council. The competence of the group works council extends to all matters that affect several group companies and at the same time justify the need for a cross-company regulation. Therefore, the introduction of the compliance measure at group level already determines the level of regulation for its organisation and use.

The decision of the Cologne Regional Labour Court is consistent and correctly clarifies the conflict of competence between the central works council and the group works council. The confirmation of the responsibility of the group works council supports efficient and centralised decision-making at group level and, as a result, a uniform approach, as in this case with the group-wide compliance measures to identify conflicts of interest. It also strengthens the position of the group works council and thus saves resources, as there is no need to negotiate with various works councils locally or at company level. Instead, an independent regulation at company level is subjectively impossible in such a case, as the employer is bound by the group-wide instruction.

Specifically, the decision means that it is sufficient to properly involve the group works council if a cross-company and standardised measure is introduced by the group management. However, in order for this to be assumed it is important that the exact design of the regulation is carried out by the group management itself and this therefore only concerns the pure implementation of the regulation, in which the companies have no further individual design options. In contrast, acts of implementation, such as the regulation’s translation into the national language in the case of international groups, are not relevant for categorising the competence of the group works council.

Isabel Hexel

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1.7 Digital payroll accounting - Federal Labour Court provides clarity

In future, employers may exclusively make payslips available as electronic documents for retrieval in a password-protected digital employee mailbox in order to fulfil their obligation under Section 108 (1) sentence 1 of the German Industrial Code [Gewerbeordnung, “GewO”] - this was decided by the Federal Labour Court in its ruling of 28 January 2025 (9 AZR 48/24).

The employer introduced the electronic provision of payslips. The plaintiff objected to this and demanded that she continue to be provided with the payslips in paper form. The Lower Saxony Regional Labour Court ruled in favour of the claim and considered the payslip not to have been properly issued. The Federal Labour Court disagreed with this in the context of the appeal on points of law and referred the case back to the Regional Labour Court on the grounds that the prescribed text form of Section 108 (1) sentence 1 GewO was also complied with by posting the payslip in the digital employee mailbox. Furthermore, the employee's claim to the payslip was a so-called “liability to be discharged at the debtor’s address” [Holschuld] and that its fulfilment was also possible without responsibility for its receipt, provided that the interests of the employees were taken into account.

The Federal Labour Court's decision provides clarity and promotes the further digitisation of companies. In order to implement this and at the same time fulfil the legal requirements of the obligation to provide payroll accounting in text form arising from Section 108 (1) sentence 1 GewO, companies should consider the following aspects:

• Implementation of a digital mailbox: Employers should choose a secure and data protection-compliant digital platform to provide a password-protected employee mailbox. To the extent necessary, employees can be given training or workshops to facilitate their access. In this context, it is also helpful to explain the benefits of the digital mailbox in order to increase employee acceptance of the new technology.
• Access for all employees: If there is no private access to the portal, the provision of such access for employees within the company must be ensured. This is the only way to ensure that the interests of all employees are taken into account.
• Documentation: It is advisable to keep evidence of the provision of access to the portal in order to be able to prove the proper fulfilment of the obligation under Section 108 (1) sentence 1 GewO in the event of a dispute.
• Observance of shop agreements: When introducing a digital employee mailbox, any existing shop agreements and the works council's right of co-determination with regard to the introduction of a digital employee mailbox in accordance with Section 87 (1) no. 6 BetrVG must be observed. In this respect, in the case at issue the Federal Labour Court left open the question of whether the group works council or the local works council is responsible. It remains to be seen to what extent the Regional Labour Court will take a position on this in the upcoming decision.

The Federal Labour Court's decision is to be welcomed and provides legal certainty for employers who have already converted their (digitisation) processes. By reducing the administrative burden and the (associated) cost savings, it is to be expected that companies will switch to digitisation on a larger scale.

Lisa Striegler

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2. Rethinking HR! - Receipt of the notice of termination – a stumbling block

The termination of an employment relationship regularly presents employers with legal challenges. In addition to the required content of a notice of termination, the formal requirements must also be met, as errors can lead to considerable additional costs, especially in the case of long notice periods (e.g. to the end of a quarter, end of the year). In particular, it is vital to ensure that the letter of termination is received in a legally compliant manner, as an unverifiable or incorrect delivery could lead to the termination being invalid. Employers therefore need to know exactly which method of delivery is the most reliable.

Problems when delivering by post

The postal delivery of a notice of termination poses considerable problems in terms of evidence. It is not uncommon for employees to argue in court that the letter they received had a different content. In the event of a dispute, employers must then prove that the letter sent actually contained the letter of dismissal, which is often difficult to prove.

Delivery by post also leads to further difficulties:

• If the notice is delivered by ordinary letter, it is generally not possible to prove whether the employee actually received the letter. In addition, following changes to the German Postal Act [Postgesetz, “PostG”], ordinary letters now only have to reach the recipient within three days instead of the previous two days, which means that ordinary letters are not recommended for notices of termination shortly before the end of the month due to their longer delivery times.
• If the employer sends the notice of termination by registered letter with acknowledgement of receipt [Einschreiben mit Rückschein], the letter is only deemed to have been delivered when the employee collects it from the post office. This means that the employee can delay receipt of the letter. This can have serious consequences, particularly with regard to notice periods.
• A registered letter delivered to the recipient’s letterbox [Einwurfeinschreiben], on the other hand, is deemed to have been delivered as soon as the postman drops the letter into the employee's letterbox. However, in the event of a dispute, the employee can also claim that the envelope did not contain a letter of dismissal. This is because the proof of delivery issued by the postal employee only serves as proof to the effect that a letter was delivered, but not as proof of the content of the letter of dismissal. In addition, the so-called prima facie evidence that the notice of termination was placed in the letterbox at normal postal delivery times presupposes that, in the event of a dispute, not only the proof of posting but also the reproduction of the signed delivery receipt can be presented. However, this is regularly only available for retrieval for 15 months and is regularly not retrieved.

Secure delivery of a notice of termination

The following methods can therefore be used to ensure that the notice of termination is delivered in a legally secure manner:

1. Handing it over personally

The safest method is to hand over the notice of termination directly to the employee. In order to be able to prove receipt later, the letter should be handed over in the presence of a witness who can confirm receipt.

2. Delivery by a messenger or an authorised employee 

If it is not possible to hand over the notice of termination in person, it should be delivered by a messenger or, in the case of short distances, by an employee authorised to do so. It is advisable for the messenger or authorised employee to be aware of the contents of the letter before the envelope is sealed. If the letter is delivered to the employee's letterbox, the messenger should document the posting of the letter, e.g. by means of a written delivery record and ideally a photo or video of the posting. In the event of legal proceedings, the messenger or the authorised employee can be named as a witness to the receipt. It is advisable, if possible, not to make the delivery on the last working day of the month and preferably to deliver it at the beginning of the day.

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For queries and comments, the authors can be reached directly by e-mail at [email protected].

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