New requirements for employment Contracts and verification obligations – what employers need to know now
In brief
Last Thursday, the German Bundestag passed a bill to implement the Working Conditions Directive (EU) 2019/1152. The aim is to create more transparency and predictability of working conditions and to improve them overall. Previously, the bill had been heavily criticized by employers and associations, as well as legal literature – but without success. Now it is up to the German Bundesrat. If the Bundesrat does not have any objections, the new law will come into force as of 1 August 2022. Companies will then not have much time to implement the changes.
To prepare for this, we have summarized the most important changes that are to be expected under the current draft.
Contents
What is changing?
- Adaptation of contract templates
The bill expands the minimum content that must be regulated in the employment contract in the future. Especially the procedure to be followed in the event of termination must be described. However, the level of detail is still unclear. The only thing that is clear is that reference must be made to the written form for notices of termination, the notice period, and the three-week period for legal actions for protection against dismissal. Prospectively, a reference to agreed rest breaks, rest periods and shift work must also be made. If these and other minimum contents are not regulated in the employment contract, they must be summarized in a separate letter handed out to the employees.
- Adaption of processes
For new hires, a written form requirement applies; the electronic form is not sufficient. Accordingly, either the employment contract or the separate letter must be signed by the employer (wet signature). Although this was already the case under the previous legal situation, in practice, little attention was paid to it because there was no threat of sanctions. Only in the case of individual provisions (fixed-term contract or post-contractual non-competition clause), the violation lead to invalidity. This will not change in the future, but now fines will apply. In addition, shorter time limits will apply for the hand-over of the contract or letter to the employee in the future. In any case, salary and working hours must be documented in writing on the day the employee starts work.
- Adaption of working conditions
In some cases, the bill provides for minimum working conditions. For example, the probationary period for fixed-term contracts must, in the future, be in proportion to the duration of the fixed-term and the type of activity. The bill does not provide any guidance on appropriateness.
- (No) Adaption of existing contracts, but obligation to provide documentation for changes
Contracts concluded before 1 August 2022 do not have to be adapted for the time being. However, employees have the right to request an adjustment to the new standard. Furthermore, changes to the essential working conditions must be documented in writing. Again, the electronic form is not sufficient.
- Expanded and new obligations to react and give information
The aim is to make it easier for part-time employees, fixed-term employees and temporary workers to be employed on a full-time and permanent basis. To this end, employers or hirers will, in the future, be obliged to react to a corresponding request from (temporary) employees. If the request is rejected, employers and hirers must justify why the change in working hours is not possible for part-time employees or why fixed-term employees or temporary workers cannot be employed on a permanent basis. However, the text form is sufficient for this. Electronic form (e.g., email) is therefore sufficient.
What sanctions apply?
If companies fail to comply with these obligations or fail to do so in good time, the question arises as to what the legal consequences will be. This is clearly regulated for violations in the case of new hires and changes to existing employment contracts: A fine of up to EUR 2,000 may be imposed. This applies both to violations of the written form and the minimum content requirements. It remains to be seen whether the authorities will focus on the minimum content requirements or the – rather regressive – strict written form requirement. However, the violation does not lead to the invalidity of individual provisions or the entire contract – as under the previous legal situation. However, the exceptions mentioned above continue to apply (fixed-term contract or post-contractual non-competition clause).
If companies fail to inform of the deadline for legal actions for protection against dismissal, this does not lead to the invalidity of possible dismissal. A probationary period that is too long in the case of temporary employees also does not lead to the immediate application of the German Dismissal Protection Act. There is still a waiting period of six months. However, the shortened notice period of only two weeks does not apply in this case.
With regard to other points, such as violations of the duties to react and give information and provide information to existing employees, no explicit legal consequences are regulated. Nevertheless, companies are strongly recommended to address these points.
What is next?
The German Bundesrat, being the second of the two legislative chambers in Germany, will now decide on the bill – probably on 8 July 2022. If the Bundesrat has no objections to the bill, the law will enter into force on 1 August 2022. If it has objections, the matter will be referred to the Mediation Committee of both legislative chambers. Amendments would then also be conceivable again. However, this is not expected. At most, there is still some (very!) faint hope that the question of the written form and information on the procedure to be followed in the event of termination will be resolved. However, companies should not rely on changes being made in this area.
What needs to be done and when?
The time until 1 August 2022 is short and the summer vacations are just around the corner. Against this background, prioritization is advisable, even though the law has not yet been finally passed. We recommend prioritizing the upcoming To-Dos as follows:
- To-Dos until 1 August 2022
Changes to contract templates and processes for new hires should be implemented by 1 August 2022. For the vast majority, if not all, companies, this will require a revision of the standard employment contracts.
Employment contracts can still be concluded electronically. However, it must then be ensured afterwards that the contracts are either additionally signed in writing at the start of work or that the employees receive a letter signed in writing by the employer as proof of their working conditions.
The amended requirements for probationary period agreements for fixed-term contracts should also be implemented in the standard employment contracts by 1 August 2022.
- To-Dos from 1 August 2022
For any changes to existing employment contracts, standard templates and processes should be adopted no later than 1 August 2022. This also applies to handling requests from employees with existing contracts for proof of their existing employment conditions, as well as requests from part-time and fixed-term employees or temporary workers seeking permanent or full-time employment.
We are happy to provide support in this regard.
