Does your organisation have employees based-in Germany? If so, action is required.

The international market is assuming greater importance in today's business world. As legal systems and cultures differ markedly in different parts of the world, getting local advice that is focused, precise and relevant is increasingly important. At Foot Anstey, we have a carefully selected group of "best friend" law firms from across the world to assist our clients in any particular jurisdiction.

This month, our "best friend" law firm in Germany, Greenfort, has prepared an employment summary highlighting the latest legal developments which require attention for employers who have employees based in this jurisdiction.

How has the employment landscape changed in Germany?

With effect as of 1 August 2022, the so-called Working Conditions Directive (Directive [EU] 2019/1152) was implemented in German law (Federal Law Gazette/BGBl. I 2022, p. 1174). The act brings changes of practical relevance to the Act on Transparent Working Conditions (Nachweisgesetz/NachwG) and other laws (including the Act on Part-Time and Fixed-Term Employment [TzBfG], the Professional Education Act [BBiG], the Act on Employee Leasing/Temporary Agency Work [AÜG], and the Trade and Industry Code [GewO]).

In particular, immediate need for employers' attention and action is triggered by the changes in the NachwG:

Changes in the Act on Transparent Working Conditions (NachwG)

As before, employers must inform their employees of the essential working conditions by means of a signed transcript/written record (so-called "obligation to provide a transcript"); in this regard, the electronic form is not sufficient. The deadlines for the fulfilment of the respective obligation to provide a signed transcript were shortened.

As a new sanction, the intentional improper fulfilment of the obligation to provide a transcript can be punished as an administrative offence (Ordnungswidrigkeit) with a fine of up to EUR 2,000 in each case. Such a sanction may in turn result in an entry in the central trade and industry register (Gewerbezentralregister; cf. Section 149 (2) No. 2 GewO) and lead to further disadvantages (e.g., in connection with public tenders).

Furthermore, the (minimum) catalogue of points to be recorded in writing sets forth in Section 2 (1) sentence 2 NachwG was extended. A new aspect (raising various questions) is, e.g., that the employer must provide a written record on "the procedure to be observed by the employer and the employee where their employment relationship is terminated, at least the written form requirement and the notice periods, as well as the deadline for bringing an action challenging the notice of termination." (cf. Section 2 (1) sentence 2 no. 14 NachwG).

For ongoing employment relationships starting before 1 August 2022 and continuing, there is an immediate need to amend the templates of German or multijurisdictional employment contracts, because in practice employers usually fulfil their obligation to provide a transcript or written record of the essential working conditions by providing a written employment contract. This possibility of recording the essential conditions remains available (cf. Section 2 (5) NachwG).

For new employment relationships starting on or after 1 August 2022, the amended law must be observed immediately. This is arguably also true for employees with whom a German or multijurisdictional employment contract had already been concluded before 1 August 2022, but who starts to work on or after 1 August 2022, because the transitional provision of Section 5 NachwG only applies if "the employment relationship has already existed before 1 August 2022".

In "old cases" – i.e., if the commencement of work and the conclusion of the employment relationship took place prior to 1 August 2022 –, the employee shall be provided with a transcript of the contractual terms to be recorded in accordance with the NachwG only upon his/her request, but no later than on the seventh day after receipt of such request by the employer (cf. Section 5 NachwG).

Changes in other laws

The Act brings about further relevant changes in other laws. One of these relevant changes relates to the probationary period of fixed-term employment relationships in Germany. In this case, the probationary period must be proportionate in relation to the expected duration of the fixed-term and the type of work, i.e., in case of short fixed-term contracts a probationary period may no longer last six months as it has been customary up to now.

Consequences for the drafting of contracts

One thing is certain: All employers with employees based in Germany must act now. In particular, new template employment/multijurisdictional contracts need to be drafted, and a transcript template for "old cases" or for cases in which the essential contractual conditions have changed in the meantime need to be prepared.

Since the outlined changes in the law implement a European directive which is based on the broad European definition of "employee", it can be assumed that the outlined changes in the law also apply to service relationships of managing directors (Geschäftsführer) of a GmbH (i.e. German limited liability company). Therefore, the comments above need to be considered also in connection with service agreements for managing directors.

It is with thanks to Greenfort for highlighting these important changes relating to German employment law. If your organization or business is likely to be affected by any of the above changes and you require local compliance advice, please do let us know. We will be able to make introductions to Greenfort and project manage your matter as little or as much as you feel is right.