Employment Law29.06.2023 Newsletter
Focus on Labour Law 2nd Quarter 2023
Since our last Newsletter, the draft law of the German Federal Ministry of Labour and Social Affairs [Bundesministerium für Arbeit und Soziales, BMAS] on the recording of working hours in Germany has become available. We had already presented the relevant details to you (cf. our article ofd 19 April 2023). Reactions from the political and business communities were not long in coming; most recently, the CDU/CSU parliamentary group voiced considerable criticism of the draft. It is expected that the draft law will undergo considerable amendments during the parliamentary procedure and that clear legal requirements for recording working hours will be even longer in coming. Naturally, we will report on this. The German Whistleblower Protection Act [Hinweisgeberschutzgesetz, HinSchG] will (partially) come into force on 2 July 2023 and will oblige companies with more than 249 employees to establish and operate an internal whistleblower system. From 17 December 2023 onwards this obligation will also apply to companies with at least 50 employees. In this Focus on Labour Law, we inform you about the ECJ’s new case law on the forfeiture of holiday claims and on damage claims in the event of a breach of the duty to inform pursuant to Art. 15 of the GDPR, in addition to news on other current rulings of the labour courts. You will also find important information on mass redundancies and the European Pay Transparency Directive.
In the next edition of our new web seminar series "Focus on Labour Law - LIVE!" on 12 July 2023 we will be presenting the topic "New rules for trust-based working time". Register for the web-seminar here.
1. New case law
1.1 No forfeiture of holiday claims in the event of illness during partial retirement
1.3 (No) equal pay for temporary agency workers - deviation by collective agreement still possible
1.4 Business reintegration measure without employees' consent under data protection law?
1.5 Works council chairperson cannot be a data protection officer
1.6 A business trip by train can be working time
1.8 Salary reduction of a works council chairperson is not subject to co-determination
1.10 News on the group privilege in case of temporary employment pursuant to Sec. 1 (3) AÜG
2. Legal developments
2.1 The mass dismissal notification procedure under scrutiny - is relief for companies coming soon?
2.2 Entry into force of the European Pay Transparency Directive
1. New case law
1.1 No forfeiture of holiday claims in the event of illness during partial retirement
If an employee is unable to take their holiday before transitioning to the release phase of partial retirement due to an even brief incapacity for work, the holiday claim does not expire after 15 months. This was recently decided by the ECJ (ECJ of 27 April 2023 - C-192/22).
In the referral proceedings to the ECJ, the contracting parties agreed on partial retirement in the block model with an active phase from 1 February 2013 to 31 May 2016 and a passive phase from 1 June 2016 to 30 September 2019. The plaintiff took his remaining annual holiday for the calendar year 2016 from 4 May to 25 May 2016. However, due to an illness during this period, he was unable to take 2 2/3 actual days of holiday before transitioning to the release phase of his partial retirement. In 2019, he sued for compensation for the holiday not taken, as illness had prevented him from taking his holiday before transitioning to the passive phase. The first two instances dismissed the action on the grounds that the holiday claim for 2016 had expired at the end of 31 March 2018 at the latest ("15-month period"). The German Federal Labour Court [Bundesarbeitsgericht, BAG] suspended the proceedings and referred two questions to the ECJ for a preliminary ruling: Firstly, the BAG wanted to know whether Art. 7 of Directive 2003/88 or Art. 31 (2) of the Charter precludes a national provision (in this case: Sec. 7 (3) of the German Holiday Entitlement Act [Bundesurlaubsgesetz, BUrlG]) according to which paid annual leave days acquired but not taken during the work phase during the partial retirement arrangement can expire because they cannot be taken during the release period. The ECJ answered this question in the affirmative, with the result that it no longer had to answer the BAG's second alternative question.
This makes German holiday entitlement law increasingly more difficult. Whilst the ECJ, in an earlier decision from 2011, had still deemed the forfeiture of holiday in the case of long-term illness after a carry-over period of 15 months to be in conformity with European law, it assessed this case differently. The reasons for this are, first of all, that the acquired holiday could not be taken in full because the employer had released the employee from his obligation to perform work himself during the passive phase of the partial retirement, which meant that - in the absence of the obligation to work, (substitute) holiday could no longer be granted. Secondly, the employee had only been absent from work due to illness for a short period in just one reference period as opposed to having been ill in the long term, which meant that there was no comparability with the case from 2011. Furthermore, according to the ECJ, the risk of not being able to grant holiday at a later date is recognisable for the employer if it grants the holiday only shortly before the employee’s transition to the passive phase of the partial retirement.
In the corporate practice of partial retirement, employees often schedule their remaining holiday at the end of the active employment phase. In view of this new decision, however, employers should in future endeavour to agree with employees that they take their holiday in such good time that, in the event of their illness, substitute holiday can still be granted to them during the remaining active phase in order to avoid claims to payment in lieu of holiday. However, this will only be possible by mutual agreement or within the framework of a shop agreement regulating holidays, as employees' holiday requests may only be rejected for urgent operational reasons. However, the mere fear of claims to payment in lieu of holiday is not sufficient as a basis for such operational reasons.
Isabel Hexel
1.2 Mere breach of the duty to provide information under data protection law does not (yet) constitute grounds for a damage claim
The series of court decisions on the right to information under data protection law pursuant to Art. 15 of the GDPR is never-ending. In its ruling of 25 January 2023 - 4 Sa 201/22, the Regional Labour Court [Landesarbeitsgericht, LAG] of Nuremberg also confirmed that a mere breach of the obligation to inform under data protection law does not necessarily lead to an obligation to pay damages under Art. 82 of the GDPR. Although this has now essentially been confirmed by the ECJ (judgement of 4 May 2023 - C300/21), an implementing decision by the BAG is still pending.
In the case to be decided by the LAG Nuremberg, an employee asserted her right to information pursuant to Art. 15 of the GDPR in the context of the negotiation of a termination agreement. The defendant employer refused to provide any information and referred the employee to the possibility of taking legal action. Following the employee’s own termination of her employment relationship, the employee insisted - now judicially - on her right to information. She also claimed damages for pain and suffering of at least EUR 5,000.00 on grounds of her employer’s failure to provide information.
The Labour Court [Arbeitsgericht, ArbG] of Bamberg upheld the claim and awarded the plaintiff damages for pain and suffering in the amount of EUR 4,000.00. The defendant’s subsequent appeal was successful, however. The court based its decision on the fact that recital 146 of the GDPR, which provides interpretation guidance, states that the damage claim is limited to breaches of unlawful data processing within the meaning of Art. 4 No. 2 of the GDPR and that the late, incorrect or even completely omitted provision of information to a person pursuant to Art. 15 (1) of the GDPR does not trigger liability. Rather, this would require the assertion of a concrete damage.
This has now also been confirmed by the ECJ in its ruling of 4 May 2023 - C-300/21 (cf. our article of 5 May 2023). Up to now, the case law of the regional labour courts and regional courts has been inconsistent. Already in 2021, the BAG had also initiated another preliminary ruling procedure (BAG, decision dated 26 August 2021 - 8 AZR 253/20) to obtain clarification as to whether the right to information is of a special or general preventive nature and whether fault should be taken into account when assessing damages (C-667/21). The preliminary legal view held by the BAG to date is that the mere violation of the GDPR itself already leads to non-material damages that have to be compensated and that the existence of actual damage is not relevant (BAG, judgement dated 5 May 2022 - 2 AZR 363/21). Since the decision of the ECJ in May 2023 was based on an Austrian referral, it remains to be seen how the ECJ will respond to the question referred by the BAG. Fact is, however, that the mere violation of the right to information does not justify a damage claim by employees. However, since the question of whether fault on the part of the company should be taken into account is still pending, companies are still well advised to comply with employees' requests for information in a timely manner
Annabelle Marceau
1.3 (No) equal pay for temporary agency workers - deviation by collective agreement still possible
The principle that temporary agency workers must receive the same remuneration as comparable permanent employees of the user company can be deviated from "downwards" by collective agreement in accordance with Sec. 8 (2) German Temporary Employment Act [Arbeitnehmerüberlassungsgesetz, AÜG]. According to the BAG ruling of 31 May 2023 - 5 AZR 143/19, however, the unequal treatment must be compensated by other advantages in the collective agreement. According to the BAG, this can be assumed, for example, if the collectively agreed remuneration also continues to be paid during periods without a work assignment.
The plaintiff was employed as a temporary worker by the defendant, which commercially operates a temporary employment agency, and was hired out to a retail company as an order picker from January to April 2017. The collective bargaining agreement of the Association of German Temporary Employment Agencies [Interessenverband Deutscher Zeitarbeitsunternehmen, iGZ] and the United Services Trade Union [Vereinte Dienstleistungsgewerkschaft, ver.di] applied to the temporary employment relationship, according to which the plaintiff received an hourly wage of EUR 9.23. However, the plaintiff claimed that comparable permanent employees of the hiring company were paid EUR 13.64 per hour. In her action, the plaintiff then demanded payment of the difference in the total amount of EUR 1,296.72, invoking the principle of equality under Sec. 8 (1) AÜG / Sec. 10 (4) sentence 1 AÜG (old version).
The plaintiff based her application, among other things, on the fact that the applied collective bargaining agreement and regulations of the AÜG were not compatible with the preservation of the overall protection of temporary workers under Art. 5 (3) of the Temporary Agency Work Directive (2008/104/EC) and thus violated Union law. The lower courts had dismissed the case and the BAG now had to decide on the plaintiff's appeal on points of law.
In order to clarify questions of Union law, the BAG initially referred the matter to the ECJ in a preliminary ruling procedure. The ECJ ruled that a collective agreement providing for the lower remuneration of temporary workers is compatible with Union law if the unequal treatment is compensated for by other compensation claims in the collective agreement.
The BAG then concluded that the action was unfounded. According to the BAG, the applied collective agreement in conjunction with the statutory provisions provided sufficient compensation for the lower remuneration: first of all, the collective agreement also provided for the continued payment of remuneration for periods without a work assignment. Secondly, Sec. 11 (4) sentence 2 AÜG mandatorily ensures that the hirer bears the economic and operational risk for periods of non-assignment. Furthermore, according to Sec. 8 (4) AÜG, the lower remuneration of temporary workers could only be limited to a maximum of nine months, with wage floors and the statutory minimum wage providing sufficient safeguards for an appropriate level of remuneration. The plaintiff was therefore only entitled to the collectively agreed remuneration.
The BAG's decision can be welcomed by companies in that it provides legal certainty for collective bargaining in the temporary employment sector and confirms previous practice. However, temporary work remains a legally exciting area. Additional legal questions relating to the conformity of the AÜG with the EU are currently still up for review by the ECJ. Among other things, the ECJ recently ruled that the provision of personnel to public employers pursuant to Sec. 4 (3) of the German Public Services Wage Agreement [Tarifvertrag des öffentlichen Dienstes, TVöD] does not constitute temporary employment within the meaning of the Temporary Agency Work Directive, which means that the sectoral exception of Sec. 1 (3) No. 2b AÜG can still be used for the public sector (22 June 2023 -C-427/21 - ALB FILS KLINIKEN).
Fatouma Kaba
1.4 Business reintegration measure without employees' consent under data protection law?
It is a well-known fact that a failure to carry out a so-called “business reintegration measure” (betriebliche Eingliederungsmaßnahme, “BEM”] or a faulty BEM has a considerable impact on the chances of success of a dismissal due to illness. At the same time, the requirements for a properly implemented or at least properly offered BEM are constantly being increased by the BAG. One company's efforts to comply with data protection law have now been its undoing.
In light of the fact that the plaintiff had already been incapacitated for work for several years, the defendant company had invited the plaintiff, who was classed equivalent to a severely disabled person, to participate in a BEM. The plaintiff wanted to participate in the BEM, but refused to sign the data protection consent to the processing of personal data and health data that the company had submitted to her in this context. The company pointed out to the plaintiff on several occasions that a BEM could not be carried out without this consent. No BEM was carried out. After the company had successfully applied to the Integration Office for consent to the intended dismissal due to illness, it terminated the employment relationship with the plaintiff.
The BAG assessed the termination as invalid, as a BEM had been wrongfully not been conducted (BAG dated 15 December 2022 - 2 AZR 162/22). The company should certainly not have made the implementation of the BEM dependent on the prior signing of a data protection consent. This is not a prerequisite for a BEM listed in Sec. 167 (2) of the German Social Code Book IX [Sozialgesetzbuch IX, SGB IX]. It would have been possible and reasonable for the company to have commenced a BEM even without the consent under data protection law and to have discussed with the plaintiff the possible course of proceedings in order to dispel any reservations. Only in the event that the possibilities of reducing the plaintiff's individual sick leave had to be discussed in the further course of the proceedings would it have been necessary to decide on the legally compliant collection and processing of the health data of the plaintiff possibly required in the form of diagnoses and doctors' reports. A continued lack of cooperation on the part of the plaintiff could have entitled the company to terminate the proceedings. In addition, the company had been unable to demonstrate that a BEM would objectively have been useless, i.e. would not have had a positive result for the plaintiff even if it had been carried out. The existing consent of the Integration Office changed nothing in this respect, since the consent procedure in accordance with Secs. 168 et seq. SGB IX differs from the BEM in terms of objective, procedure and participants. Thus, milder means than the termination of employment could not be ruled out and the dismissal was invalid due to a violation of the principle of proportionality.
This decision is of considerable importance for the structuring of the employer's BEM procedure. In the future, there needs to be a preceding "general part" of the BEM procedure, which only contains information about the BEM and its implementation, but in which the employee’s individual situation and thus any health data are not yet addressed. Only in a subsequent "individual part" of the BEM should the discussion of the employee’s individual situation then take place. Health data is likely to come up regularly during the process. A special legal basis, for example in the form of consent, is required for their processing, as the general view is that Sec. 167 (2) SGB IX is not sufficient for this. However, if the employee has not given their consent to the processing of the data by this time at the latest, the BEM can legitimately be terminated by the employer.
Kathrin Vossen
1.5 Works council chairperson cannot be a data protection officer
Chairmanship of the works council precludes performance of the duties of a person typically entrusted with operational data protection and generally entitles the company to revoke the appointment. This was confirmed by the BAG in a ruling of 06 June 2023 - 9 AZR 383/19.
The plaintiff was chairman of the works council at the defendant and was also appointed data protection officer at the defendant and other group companies. At the instigation of the Thuringian State Commissioner for Data Protection and Freedom of Information, the plaintiff's appointment was revoked with immediate effect due to an incompatibility of offices. The plaintiff took legal action against this.
While the lower courts all upheld the claim, the BAG took a different view of the legal situation: the revocation of the appointment was justified for good cause, as a works council chairman was not sufficient reliable for this function.
Such reliability may be in question if there is a threat of a conflict of interest. A conflict of interest of relevance for a dismissal from office can be assumed if the data protection officer holds a position within an institution which has as its object the determination of the purposes and means of the processing of personal data. The BAG considered such a conflict of interest to exist: personal data may only be made available to the works council for purposes expressly provided for in the German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG]. The works council decides by council resolution under which specific circumstances it requests which personal data from the employer when exercising its statutory duties and in which way it subsequently processes this data. Within this framework, it determines the purposes and means of processing the personal data. This is incompatible with the simultaneous function of a person entrusted with operational data protection.
Following the BAG's decision, there is now no longer any room for a "bundling" of the tasks relating to shop constitution and data protection law within the works council. Although the decision was issued under "old" data protection law (the German Federal Data Protection Act [Bundesdatenschutzgesetz, BDSG] in the version valid until 24 May 2018), the BAG's considerations regarding the conflict of interest are likely to be applicable to the new legal situation without change. The BAG left open whether a conflict of interest only exists in the case of chairmanship of the works council, due to the prominent position, or whether this conflict also applies to a "simple" works council member - which is probable. Companies are therefore well advised to look outside the works council in the future for suitable corporate data protection officers.
Dr. Alexander Willemsen
1.6 A business trip by train can be working time
Despite the fact that employees are free in what they do with their time during a train journey, this is to count as working time within the meaning of the German Working Hours Act [Arbeitszeitgesetz, ArbZG]. Contrary to the stress theory conceived by the BAG, according to the definition under European law the decisive factor is whether the employees are available to the company and carry out their activities or perform tasks. This would render many business trips obsolete in their current form.
The plaintiff, a forwarding company specialising in the transfer of commercial vehicles, used its employees in such a way that they drove by cab or train to the respective pick-up location of the vehicle, took over the vehicle there and then transferred the vehicle to the destination. From the respective destination, the employees then travelled back to their individual place of residence by train. The German Trade Supervisory Office [Gewerbeaufsichtsamt] was of the opinion that the maximum working hours permitted under the ArbZG were not complied with in this case, since in particular the rail travel times in connection with transferring the vehicles were to be regarded as working time within the meaning of the ArbZG. The plaintiff challenged this with its legal action.
In its ruling of 02 May 2023 - 3 A 146/22, the Administrative Court [Verwaltungsgericht, VG] of Lüneburg decided that working time according to Sec. 2 ArbZG had to be interpreted in the light of the Working Time Directive and, according to this, the rail travel of the employees to transfer the vehicles had to be considered as working time. According to the BAG, travel time for the use of public transport is not to be classified as working time if no other tasks are performed for the company during this time. In accordance with the so-called stress theory of the BAG (ruling of 11 July 2006 - 9 AZR 519/05), the employees' rail travel is not associated with any stress that is contrary to the protection of health. However, the European requirements from the Working Time Directive lead to the assessment that this does constitute working time in the sense of occupational health and safety law. According to this, the decisive factor is that employees are available to the company and carry out their activities or duties. If employees do not have a fixed place of work and perform tasks while driving to or from a customer, they are working during such drive.
The ruling is not yet legally binding, but would mean that, after 10 hours of business travel, a trip would have to be interrupted and the rest period of 11 hours observed before continuing the trip. A trip from Frankfurt am Main to San Francisco, USA, for example, would not be possible without a special permit under occupational health and safety law in accordance with Sec. 14 ArbZG. Against the background of the risk of penalties and fines for companies in the event of violations of the Working Hours Act, the decision is thus of considerable significance. However, it also shows yet again the discrepancy between the BAG's definition of working time and the requirements of Union law. Especially against the background of the obligation to record working time, it cannot be ruled out that the BAG will also adopt this view at the next opportunity and might thus abandon the stress theory that has been developed. In any case, the ruling by the VG Lüneburg has certainly brought renewed momentum to the issue of working hours.
Alexandra Groth
1.7 Works council election possible in the German part of the company, even if the main company is located abroad
Employees of a company headquartered abroad can elect a works council in the German part of the company. According to a decision of the LAG Berlin-Brandenburg dated 22 February 2023 - 4 TaBVGa 1301/22, the election is definitely not null and void from the outset, even if the question remains open as to whether a part of the company located in Germany can even be eligible for works council representation if the main company is located abroad. With its decision, the LAG once again emphasised the high requirements for the temporary prohibition of preparatory measures for a works council election.
A Maltese airline, whose head office, including its personnel department and management apparatus, was located outside the Federal Republic of Germany, maintained so-called bases at individual airports in Germany, including Berlin's BER airport, in order to organise flight operations to and from Germany. Employed at the base were, among others, base captains who participated in the organisation of flight operations and used premises at the airports for administrative tasks.
The trade union represented in the company initiated works council elections, whereupon the company applied for a temporary injunction against the election of an election committee. It argued that the structures existing at German airports did not constitute a qualified operating unit in which a separate works council could be elected.
The LAG Berlin-Brandenburg rejected the injunction prohibiting the election of the election committee. A claim to an injunction prohibiting the election only came into consideration if the preparatory measures for the election were null and void. For this to be the case, there had to be an obvious and particularly serious violation of the election regulations. This was not the case here. In the court's view, it was at least not obvious and recognisable at first glance that the base at BER airport did not have the required minimum level of organisational autonomy, since management powers of the employees, albeit minor, existed there. That Supreme Court clarification is still outstanding as to whether a part of a company can have a works council if its headquarters are outside Germany also does not lead to an obvious violation of the election regulations. In the case of a foreign main establishment, a corresponding application of Sec. 4 (1) BetrVG is at least arguable.
The LAG's decision is in line with the established case law of the BAG, according to which the prohibition of a works council election can only come into consideration if "the nullity is blatantly obvious " (BAG dated 30 June 2021 - docket No. 7 ABR 24/20). However, the LAG does not answer the important question of whether a business unit located in Germany is only capable of forming a works council if the headquarters are also located in Germany as a point of reference, and refers the company to the main proceedings insofar. It is unlikely that the company will now push this issue through three instances. Foreign companies must therefore increasingly expect works council elections to also be held in smaller organisational units in Germany, as only minor requirements are placed on the organisation of the domestic establishment.
Anja Dombrowsky
1.8 Salary reduction of a works council chairperson is not subject to co-determination
When the employer determines the comparative remuneration for a works council member released from duties, this does not constitute a grouping or regrouping that is subject to co-determination within the meaning of Sec. 99 (1) sentence 1 BetrVG. This also applies if the remuneration is paid in accordance with a collectively agreed remuneration group as a result of the remuneration provision, according to the LAG Baden-Württemberg (decision dated 26 May 2023 - 12 TaBV 1/23).
The metalworker, who had been employed with the company for many years, had been a works council member since 1994. Until his release from duties in 1998, he had been grouped and remunerated in accordance with the existing company collective agreement. He took office as chairman of the works council in 2002. His collectively agreed basic salary at that time was EUR 4,207.35 gross. Since 2006, he has been listed and remunerated as a non-tariff employee. As of March 2011, the company provided him with a company car with permitted private use.
In 2022, the company reduced the total remuneration, which had in the meantime increased to EUR 13,576.63 gross, to the basic remuneration of the pay scale group considered applicable by the company in the amount of EUR 6,338.56 gross ("comparative remuneration"). It also withdrew the private use of the company car.
The works council was of the opinion that the salary reduction was a regrouping that is subject to co-determination within the meaning of the BetrVG. Both the labour court and regional labour court did not follow the argumentation in the decision proceedings. The determination of the remuneration of a works council chairman released from duties is "merely" an application of the law pursuant to Sec. 37 ( 4) BetrVG. This does not constitute a grouping or regrouping pursuant to Sec. 99 BetrVG. The purpose of the works council's right of co-determination is to ensure that the assessment of the employee's activity and its allocation to the pay group are as accurate as possible. However, there was no such activity to be evaluated due to the release from duties. However, not up for decision by the LAG was the question of whether the company was entitled to reduce the remuneration of the works council chairman or whether the comparative remuneration had been calculated correctly.
At the latest since the BGH ruling (ruling of 10 January 2023 - 6 StR 133/22) on the - excessive - works council salaries paid at Volkswagen, the remuneration of works council members who have been released from duties (for many years) should in any case be scrutinised from a compliance perspective. The background to this is that excessive remuneration of works council members violates the prohibition of favouritism under shop council constitution law and can give rise to accusations of breach of trust.
The office of works council member is an unpaid honorary office. If released from their duties, works council members may therefore only earn as much as would have been the case had they not been released from duties - e.g. as a metalworker. In the case of a long-term releases from duties, the remuneration must be based on the development of comparable employees; a "hypothetical career analysis" therefore has to be carried out in order to determine the appropriate comparative salary. The example of Volkswagen shows that companies also tend to reflect the degree of responsibility of the works council members released from duties in monetary terms. This is not compatible with the concept of the BetrVG. Rather, excessive works council remuneration must be adjusted downward - without co-determination.
The LAG has allowed the appeal because of the matter’s fundamental importance. It remains to be seen whether the BAG will also deny the scope of application of Sec. 99 BetrVG.
Dr. Johannes Kaesbach
1.9 No risk of default of acceptance in case of a company’s contradictory behaviour after extraordinary termination
When a company terminates an employment relationship without notice and offers the terminated party continued employment on unchanged terms in the proceedings for protection against unfair dismissal in order to "avoid default of acceptance", it is acting inconsistently. According to the decision of the BAG dated 29 March 2023 - 5 AZR 255/22, there is a rebuttable presumption that the company's offer of employment is not serious. However, this presumption may be invalidated by the reasons for the dismissal to the court’s conviction or by corresponding explanations by the company.
In December 2019, the defendant gave the plaintiff notice of his extraordinary dismissal pending a change of contract. It offered the plaintiff a new employment contract as a software developer in return for a lower gross monthly salary. As the plaintiff rejected the offer of changed employment and also failed to show up for work, the defendant terminated the employment relationship without notice for good cause. At the same time, the defendant informed the plaintiff in the termination letter that it expected the plaintiff to take up work on 17 December 2019, at no later than 12:00 p.m., in the event of his rejection of this extraordinary conduct-based dismissal. The plaintiff again did not turn up for work. For December 2019, the defendant paid a pro rata remuneration. Since the plaintiff did not find new employment until 1 April 2020, he took legal action to claim the pro rata remuneration for the month of December 2019 and the total remuneration for the months of January to March 2020 on the grounds of default in acceptance.
Contrary to the previous instances, the BAG ruled in the plaintiff’s favour, according to the decision which is thus far only available as a press release, and ordered the defendant to pay the default of acceptance wage. The defendant had been in default of acceptance due to its invalid extraordinary terminations. In the opinion of the BAG, by declaring the extraordinary termination, the defendant itself had proceeded on the basis that it could not reasonably be expected to continue employing the plaintiff. In fact, a factual presumption indicated that the defendant did not make the plaintiff a serious offer of provisional employment during the legal proceedings. However, the company could refute this presumption and it could be invalidated either by an unconvincing justification of the dismissal to the court’s conviction or by corresponding explanations by the company.
The BAG’s decision is convincing and unobjectionable. In the event of an unjustified termination, the company enters into default of acceptance if it does not continue to employ employees in a case of ordinary termination after expiry of the notice period, or in a case of extraordinary termination after receipt of the notice. In this case, companies are obliged in the event of an invalid termination to continue to pay the wages to the wrongfully dismissed employees for the period in which no work was performed as a result of the termination. It is a well-known fact that this risk can be countered with so-called provisional employment during legal proceedings (“Prozessbeschäftigung"). However, at the latest following the recent BAG ruling, it is now certain that the offer of continued employment cannot be made merely "pro forma" in order to relieve the company of the risk of default of acceptance. Especially in the case of an extraordinary termination, which presupposes that continued employment is unreasonable, reducing the risk of default of acceptance by offering continued employment is a difficult issue. Moreover, one should not underestimate the effects of offering provisional employment during legal proceedings on the justification and thus on the validity of the extraordinary termination itself. The standards to be used to measure the seriousness of an offer of provisional employment during legal proceedings or the rebuttal of the factual presumption will hopefully emerge from the more detailed reasons for the judgement.
Cornelia-Cristina Scupra
1.10 News on the group privilege in case of temporary employment pursuant to Sec. 1 (3) AÜG
The provision of employees is subject to the strict regulations of the AÜG. In the case of the transfer of employees between group companies within the meaning of Sec. 18 of the German Stock Corporation Act [Aktiengesetz, AktG], the AÜG applies only to a limited extent pursuant to Sec. 1 (3) No. 2 of the AÜG, with the result that the intragroup assignment of workers continues to enjoy great popularity. Nevertheless, there are a number of critical voices that doubt the conformity of the provision with European law, creating legal uncertainty in practice. The LAG Lower Saxony recently addressed a case of intragroup personnel assignments and has now paved the way for a clarification of this exciting and ever controversial legal issue.
Pursuant to Sec. 18 AktG, the group privilege under Sec. 1 (3) No. 2 AÜG allows companies affiliated with each other within a group to deploy employees in other group companies. The advantage of this so-called intragroup deployment is that a whole series of regulations of the AÜG are not applicable, such as the obligation to obtain a permit in accordance with Sec. 1 AÜG, the maximum temporary employment period of 18 months and the principle of equality. Group companies can thus respond to personnel bottlenecks with a certain degree of flexibility - subject to the admissibility of an assignment at a group company under individual and collective bargaining law.
Nevertheless, criticism exists, particularly in the legal literature, as described at the beginning, pursuant to which intragroup personnel assignments pursuant to Sec. 1 (3) No. 2 AÜG are said to be contrary to European law. Unfortunately, conclusive clarification by the Supreme Court is still outstanding. The LAG Lower Saxony has now had to deal with the possible violation of European law (LAG Lower Saxony dated 12 January 2023 - 5 Sa 212/22):
An employee of group company A was deployed to group company B on the basis of a temporary employment contract within the scope of Sec. 1 (3) No. 2 AÜG. The employee, who has now taken legal action, subsequently claimed that an employment relationship had arisen between him and the group company B, since Sec. 1 (3) AÜG was contrary to European law and the intragroup assignment had therefore been inadmissible. Directive (RL) 2008/104/EC ("Temporary Agency Work Directive") aims to protect temporary workers by ensuring the principle of equal treatment. However, the Directive does not provide for an exception to this rule, which means that there is no scope for the intragroup deployment of employees under Sec. 1 (3) No. 2 AÜG and this is therefore inadmissible.
In the opinion of the LAG Lower Saxony, it is not important whether Sec. 1 (3) AÜG is contrary to European law. The provision had to be applied because the Temporary Agency Work Directive is not directly applicable in national law. Since the group privilege under Sec. 1 (3) AÜG is also unambiguous in its wording, an interpretation in conformity with European law is also out of the question. The German legislator had provided a clear exception for group companies in the AÜG, meaning that this clear provision cannot be interpreted to the contrary. The LAG Lower Saxony therefore proceeded on the basis that the provision of Sec. 1 (3) AÜG applies and rejected the employee's appeal.
An appeal on points of law has been lodged against the judgement with the BAG, which was also expressly permitted by the LAG of Lower Saxony. The BAG will presumably submit the question of the illegality of Sec. 1 (3) AÜG under European law to the ECJ. We will report on the proceedings. Until then, intragroup employee deployment remains a permissible option. However, when legally structuring the assignment of an employee within a group, it is advisable to "keep an eye" on the appeal proceedings pending before the BAG.
Daniel Gorks
2. Legal developments
2.1 The mass dismissal notification procedure under scrutiny - is relief for companies coming soon?
Case law on the mass dismissal notice has faltered considerably in the recent past. Until now, errors in the mass dismissal procedure vis-à-vis the Employment Agency pursuant to Sec. 17 German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG] generally led without mercy to the invalidity of the notice of termination issued. This principle, which has always been applied by the BAG up to now, could now be dropped.
Against the backdrop of currently pending proceedings before the ECJ (C-134/22 - preliminary ruling of the BAG dated 27 January 2022 - 6 AZR 155/21) on the question of whether a violation of the regulations on mass dismissals must always result in the invalidity of a termination, the BAG suspended several proceedings in a decision dated 11 May 2023 (including docket No. 6 AZR 157/22) and called into question the specially developed sanction system for incorrect or omitted mass dismissal notices.
Based on the opinion of the Advocate General at the ECJ, who rejects an effect of the Mass Dismissals Directive on individual law, the BAG appears to have doubts about its own developed sanctions system. It might not be in line with the system of mass dismissal protection as conveyed by the Mass Dismissals Directive and could therefore be disproportionate.
It remains to be seen whether actual errors in the consultation or notification procedure will no longer lead to the invalidity of a termination in the future. It seems possible, but not very realistic, that the entire sanction system of the BAG will be overturned. It is more likely that individual violations will not lead to the invalidity of the termination in the future. This, in turn, is unlikely to make life any easier in HR departments in the context of mass dismissals. What the ECJ and the BAG will make of this remains to be seen.
Alexandra Groth
2.2 Entry into force of the European Pay Transparency Directive
2.2.1 Introduction
The European Pay Transparency Directive (EU/2023/970) was published on 17 May 2023 and came into force on 06 June 2023. The aim of the Pay Transparency Directive is to reduce the gender pay gap. It is based on the EU Strategy for Gender Equality 2020-2025.
In order to achieve this goal, the Pay Transparency Directive contains high requirements for companies and provides for concrete claims by employees. The ball has now been placed in the member states' court and they have until 07 June 2026 to implement the requirements in national regulations. In our estimation, this will essentially result in a revision of the German Pay Transparency Act [Entgelttransparenzgesetz, EntgTranspG], which dates back to 2017.
2.2.2 Key Points
- Same work and equivalent work
Equal pay should exist for the same work and equivalent work. Although it is left to the member states to regulate this in detail, the Directive provides criteria for evaluation. For example, the Directive extends the formation of the comparison group in Art. 19(1) beyond the company boundary. Also in terms of time, it is not important for comparability that employees be employed at the same time.
- Pay transparency prior to employment
Job applicants are entitled to information about the starting salary and its basis. In addition, contrary to what is still widespread practice, it is prohibited to ask applicants about their salary development in current or previous employment relationships.
- Transparency in determining the remuneration and the policy of salary development
Companies are required to provide employees with information on the objective and gender-neutral criteria for determining pay, pay levels and salary development.
- Right to information
Employees have the right to receive information on individual pay levels and average pay levels. Companies must provide this information broken down according to gender and groups performing the same or equivalent work.
This right to information is flanked by the obligation of companies to inform employees annually of their right to information. All information must also be provided within two months.
Furthermore, employees may not be prohibited from disclosing their remuneration.
- Pay gap reporting
As of a company size of 100 employees, companies have a reporting obligation on pay gaps. Depending on the size of the company, this reporting requirement comes into effect at different times. The guideline thus supplements the corporate sustainability reporting requirements. It is therefore recommended that companies familiarise themselves with the new reporting requirements as soon as possible.
Companies that are subject to the reporting obligation are at the same time obliged to carry out a joint remuneration assessment with the employee representatives. This leads to a large number of information claims on the part of employee representatives.
- Remedies and enforcement of rights
Furthermore, the Directive contains more far-reaching provisions on the implementation of uniform remedies and on the enforcement of rights. According to Art. 15, collective actions are admissible. The provision on the claim to damages (Art. 16) is drastic: damages or compensation is to be possible in a "dissuasive and proportionate manner." Art. 23 even obliges member states to impose "effective, proportionate and dissuasive sanctions" for violations. This is a wake-up call for all compliance departments.
- Pay gap reporting
As of a company size of 100 employees, companies have a reporting obligation on pay gaps. Depending on the size of the company, this reporting requirement comes into effect at different times. The guideline thus supplements the corporate sustainability reporting requirements. It is therefore recommended that companies familiarise themselves with the new reporting requirements as soon as possible.
Companies that are subject to the reporting obligation are at the same time obliged to carry out a joint remuneration assessment with the employee representatives. This leads to a large number of information claims on the part of employee representatives.
- Remedies and enforcement of rights
Furthermore, the Directive contains more far-reaching provisions on the implementation of uniform remedies and on the enforcement of rights. According to Art. 15, collective actions are admissible. The provision on the claim to damages (Art. 16) is drastic: damages or compensation is to be possible in a "dissuasive and proportionate manner." Art. 23 even obliges member states to impose "effective, proportionate and dissuasive sanctions" for violations. This is a wake-up call for all compliance departments.
2.2.3 Outlook
The BAG recently (in a decision that attracted a great deal of attention) breathed life into the EntgTranspG, which had previously been regarded as a “paper tiger” (ruling dated 16 February 2023 - 8 AZR 450/21). In the case in question, the court granted an employee a direct claim to equal pay under Secs. 3, 7 EntgTranspG and at the same time awarded the employee a claim to compensation under Sec. 15 German Labour Courts Act [Arbeitsgerichtsgesetz, AGG]. It is surely a coincidence that the BAG's decision coincided with the final phase of voting on the Directive. The BAG nevertheless took up many points in the decision that are in line with the spirit of the Pay Transparency Directive.
Even if the objective of the Pay Transparency Directive is correct, it is without doubt a "bureaucracy monster", with a large number of legal questions that have not been clarified in Germany. The political and substantive discourse will therefore certainly take some time.
Even though it is not yet possible to predict how and when the German legislature will actually start implementing the Pay Transparency Directive, companies should keep an eye on the implementation of the Directive. It is not only salary systems that will definitely have to be adapted, but also a large number of internal processes. As we all know, these are not ad hoc decisions; experience has shown that longer periods of time have to be planned for them.
Jörn Kuhn
3. Focus on Labour Law – LIVE!
Next up in our new web seminar series "Focus on Labour Law - LIVE!":
On 12 July 2023 Cornelia-Cristina Scupra and Dr. Alexander Willemsen will be presenting you the topic "New rules for trust-based working time".
Further Information and Registration here. Please note that this web seminar will be held in German.
