Legal changes in Germany - companies with employees in Germany must adjust their employment contract templates

On 23 June 2022, the German legislator passed a law with far-reaching amendments to the Act on Proof of the Existence of an Employment Relationship (Nachweisgesetz). It thus implements the Directive (EU) 2019/1152 on transparent and predictable working conditions in the European Union ("Working Conditions Directive"). The law only has to pass the German Bundesrat and is expected to come into force on 1 August.International companies with employees in Germany are now faced with some additional challenges: They have to adjust their German employment contract templates by 1 August 2022, to comply with future evidence requirements under the NachwG. Failure to comply with the evidence requirements may result in a fine. Also, in the case of employment relationships already in existence before 1 August 2022, they are obligated to provide written information about the essential contractual terms of the employment relationship within short deadlines when asked by employees.

Extension of the existing evidence requirements

The NachwG obligates the employer to record the essential terms of the contract in writing and to hand them over to the employee. In this context, “in writing” means that the record must be signed by the employer's own hand. In practice, employers comply with this obligation when they conclude the employment contract containing the essential contractual terms. This obligation to provide proof applies vis-à-vis to all employees, regardless of the duration of their employment. What is new is that the employment contract must now contain some new mandatory information. In addition, a violation of this can trigger a fine.

The following contractual conditions must be included from 1 August 2022, in addition to the contractual conditions already specified in Sec. 2 Act on Proof of the Existence of an Employment Relationship (NachwG):

• the possibility for the employee to freely choose their workplace, if agreed;
• the duration of the probationary period, if agreed;
• the remuneration of overtime;
• separate indication of the components of remuneration and the respective method of payment;
•  agreed breaks and rest periods, in the case of agreed shift work: the shift system, shift schedule, and prerequisites for shift changes;
•  details of work on call, if agreed;
•  the possibility of ordering overtime and its conditions, if agreed;
•  any entitlement to training provided by the employer;
•  in principle: name and address of the pension provider of the company pension scheme if provided, unless the pension provider itself is obliged to provide this information;
•  and finally (and particularly tricky) the procedure to be followed when terminating the employment relationship. This includes (in addition to the notice period, which must already be specified) at least the written form requirement for termination and the period for filing an action for protection against dismissal in accordance with Sec. 4 German Employment Protection Act (KSchG). However, if the information is missing, the termination shall not be invalid for that reason. The employee must also file an action within three weeks of receipt of the notice of termination despite the lack of information.

In addition, the already existing information requirements are extended in case work is provided from abroad for more than four weeks. Further, the information obligations for assignments within the meaning of the amended Posting of Workers Directive have now also been regulated here.

• Impact on practice: Many employment contracts will already contain some of the new contractual terms. However, employers will not be able to avoid reviewing the existing employment contract templates. Employment contracts do not or rarely contain provisions such as the period for filing an action for protection against dismissal or rest periods. Employers must therefore adapt the employment contract templates and implement the new contractual terms.
  It is still uncertain how the labor courts will interpret the new requirements. The German Bundesrat considers it necessary for the Federal Government to develop templates with regard to the proof obligation. Hopefully the Federal Government will comply with this request and thus create some certainty with regard to the draft.

Tighter deadlines for proof

It will also be more difficult to prove the obligations. For employment relationships commencing on or after 1 August 2022, the amendment to the law provides for different deadlines for handing over the essential terms of the contract (from the first day of work performance to no later than one month after the agreed start of the employment relationship).

• Impact on practice: However, this will not have any major impact on practice as the contractual conditions requiring proof are usually already agreed in advance in the employment contract and the employee thus has the required documentation.

Notification obligation in the event of changes to the terms of the contract

If one of the contractual conditions requiring proof changes in the course of the employment relationship, the employee shall be notified thereof in writing no later than on the day on which the change becomes effective. This does not apply to changes in statutory provisions, collective agreements, works agreements, or service agreements.

• Impact on practice: Most employment relationships already stipulate that amendments to the contractual terms are subject to the written form requirement. This obligation should therefore only become relevant if a written form requirement is not regulated or the parties have not observed this.

Fine

From 1 August 2022, the failure to comply with the obligation to provide evidence, will for the first time be treated as administrative offenses, each of which can be punished with a fine of up to EUR 2,000. If, for example, the written form is not observed and the employer "only" records the essential working conditions with DocuSign or similar, this may lead to a fine.

Obligation to provide evidence for "old" employment relationships

The new obligations to provide evidence also apply to employment relationships concluded before 1 August 2022. Employees may request that the employer provide them with the essential contractual conditions listed in the NachwG in writing no later than seven days after receipt of the request. A longer period of one month applies only to the obligation to provide proof with regard to the training provided by the employer, the information on the pension provider of a company pension plan, if agreed, and the termination procedure to be followed. However, an offence here is not subject to a fine.

If you have any questions on this topic, please contact us at any time. We will also be happy to help you revise your employment contracts as well as provide follow-up information for existing employment relationships.