Boon and bane of social media

Employers often encourage their employees to create social media profiles with platforms like XING or LinkedIn since they will also benefit from the marketing effects. However, using social media may also cause substantial internal conflicts. Such a conflict was recently subject to a ruling by the Regional Labor Court of Cologne (Landesarbeitsgericht Köln, LAG) on 7 February 2017 (docket number: 12 Sa 745/16). The court ruled that the fact of changing your occupational status to “freelancer” in your XING profile alone, may not justify a termination without cause due to unauthorized competitive business activities.

 

The plaintiff and defendant – a tax consultancy firm – mutually agreed a termination agreement with several months of a phasing-out period (Auslauffrist). Just before the end of the employment relationship the defendant noticed that the plaintiff had changed the occupational status of his private XING profile to “freelancer”. The defendant saw this as an unauthorized competitive business activity and therefore issued a termination without cause. Since the social network XING is predominately used for business purposes, the defendant assumed that the plaintiff was actively promoting his freelance activity in competition to the defendant and wanted to steal clients.

 

The court found that the termination was void. Although employees are principally prohibited from acting in competition to the employer during the entire time the employment relationship is in place, they are allowed to take actions that enable them to compete with the employer once the employment relationship has ended. Therefore, activities are only considered as prohibited competitive behavior if the employee actively promotes his competitive occupation towards the outside world. According to the court, the mere incorrect statement of being currently occupied as “freelancer” without any additional special circumstances, was insufficient to cross the line to prohibited competitive behavior. Another decisive factor was that the name of the defendant was still listed as current activity and that the plaintiff did not state that he was looking for any freelancing clients on his profile.

Federal Labor Court has tightened legal requirements concerning a special procedure regarding the calculation of vested pension entitlements (so-called “insurance contract solution” (“versicherungsvertragliche Lösung”))

By judgment of 19 Mai 2016 (BAG, docket number 3 AZR 794/14), the Federal Labor Court has ruled that an employer’s choice in favor of the so-called “insurance contract solution” – which is a special procedure for calculating vested pension entitlements – requires in every single case a new corresponding declaration to the employee and the insurance company, regardless of whether such declarations have already been made in the past on the basis of a works agreement or a collective insurance contract.

When granting a pension promise through a direct life insurance (Direktversicherung) or a captive pension insurance (Pensionskasse), an employer can choose the so-called “insurance contract solution” according to the German Occupational Pension Act (Betriebsrentengesetz). By doing so, a future pension payment arising from a vested pension entitlement can be limited to a certain amount (= pension payment claimable on the basis of the life insurance contract). This requires a corresponding declaration to both the employee and the insurance company (at the latest within 3 month following termination of employment). An employer’s choice in favor of the “insurance contract solution” used to be a part of the pension scheme/promise itself and as such did not have to be declared again at the time of termination of employment. In the present case the Federal Labor Court had to determine whether this was sufficient.

The Federal Labor Court declared the previous practice inadmissible. An employer’s choice in favor of the “insurance contract solution” can still be made prior to termination of employment, but this requires a close/specific factual and temporal relation between the employer’s declaration and the imminent termination of employment. In addition, it is necessary for the employer to make his declaration on an individual basis and not – as in this case – on the basis of a works agreement. The judgement has far-reaching consequences and will give rise to the need for action by all employers concerned.

No discrimination of disabled people in case of reduction of occupational pensions because of prematurely claiming

By judgment of 13 October 2016 (BAG, docket number 3 AZR 439/15), the Federal Labour Court ruled that a reduction of occupational pension payments due to prematurely claiming prior to reaching the fixed retirement age as provided for in the pension plan does not constitute discrimination on grounds of disability according to the German General Law on equal treatment (Allgemeines Gleichbehandlungsgesetzt – AGG). 

The employee, classified as disabled, was in an employment relationship until April 2013. From May 2013, the employee received both a statutory old age pension payment for disabled people from the German Statutory Pension Insurance and an occupational pension payment from the employer. The occupational pension payment was subject to a reduction, which was a result of an amendment of the pension plan, according to which an employee’s occupational pension payment is reduced by 0.4 percent for every month of claiming prematurely.

The Federal Labour Court ruled that there is no discrimination against the employee linked to his disability, because the fixed retirement age and the corresponding provisions in the pension plan concerning a reduction of occupational pension payments have been introduced for all employees, not differentiating between disabled employees and non-disabled employees. The employee is treated in the same way as each employee in a comparable case, regardless of his disability. The occupational pension payments of non-disabled people will also be reduced when claiming prematurely. The employee also cannot rely on the fact that from experience disabled employees tend to retire earlier than non-disabled employees, because the longer an employee works, the higher is their performance. Considering an occupational pension payment as a benefit for an employee’s performance, the situations differ significantly from one another and therefore cannot be subject to discrimination.

When creating a pension plan, employers always have to take into consideration the prohibition on discrimination according to the German General Law on equal treatment. Regarding this, there are many questions still open and unclear, for example whether it is possible to exclude employees from pension entitlements because of disability in certain cases. Relevant jurisdiction has to be monitored carefully.

An incapacitated employee should be given extended time to give a statement prior to a termination on spec

According to a decision of the state labour court of Berlin-Brandenburg, an employee must be given extended time to give a statement regarding a termination on spec, if they are unable to work due to ongoing sickness over a long period of time (docket number: 10 Sa 378/16).

The severely disabled employee worked as an accountant for the defendant. An accounting review highlighted inconsistencies regarding a cheque for the sum of 3,000.00 EUR, which had been cashed by the employee. This raised suspicions of embezzlement and the employee was asked to give a written statement within one week, by April 7. Due to ongoing sickness, the employee was in a rehabilitation clinic at the time of the request. On April 7, she asked for an extension of the deadline and simultaneously indicated her willingness to resolve the problem. The employer declined her request for an extension and terminated the employment agreement on spec without, alternatively with cause. Additionally he terminated without, alternatively with cause due to the employee’s actions.

According to the decision of the state labour court, the termination of the employment contract was invalid. The integration office only agreed to a termination on spec. The termination on spec was invalid as the employee had not had opportunity to give her statement, which is a prerequisite for the termination’s validity. It said that the employer does not have to prolong the timeframe for the employee’s statement, if it can be sure that there will be no statement in the near future. Here, however, the employer should have prolonged the deadline in light of the employee’s correspondence on April 7. The employer was aware of the employee’s sickness and there were no signs that she was unwilling to resolve the problem. Further, the employee was not entitled to continued remuneration and was not due to return to work imminently. Therefore, the employer had no reason to act immediately, as there was no risk of repetition.

Generally, a hearing of an employee should take place within one week after learning about any suspicious facts. However, certain situations, such as an employee’s sickness, may lead to an extension of the timeframe. The period can therefore vary from case to case, and factors to take into account include the employee’s right to remuneration, or continued remuneration, and their willingness to resolve the problem.

New Law on Pay Transparency soon to be adopted by German Bundestag

At the beginning of this week (13 February 2017), the German government introduced the bill on pay transparency (which was adopted before by the cabinet on 11 January 2017) to the German Bundestag. The German federal assembly was asked beforehand for its opinion and did not raise any concerns. The draft bill will be debated in parliament in the upcoming weeks. The Bundestag may amend or change parts of the draft bill. However, it is not likely that there will be major changes. The new Remuneration Transparency Act is planned to enter into force on 1 July 2017 although that date may still change.

New employers’ obligations as to equal pay and transparency:

There will be three new obligations on employers:

First of all, there is the employee’s individual right to be informed about remuneration within the operation if the employer employs regularly more than 200 employees.

The information must be provided within three months of the request. The information right covers the average remuneration of all employees of the opposite sex performing the same or the same type of work. It includes information about two further salary components at the employee’s option. If there are fewer than six employees of the opposite sex performing the same or the same type of work, the average remuneration must not be disclosed. If a difference in remuneration is found, the employee is entitled to payment of the amount of remuneration that would have to be paid if there had not been an unlawful discrimination based on sex. This comprises a claim for compensation for past differences in remuneration for up to three years (the statutory period of limitation) and salary adjustment for the future.

According to the transitional provisions, the employee may request information for the first time after six months from the entry into force of the new law.

Secondly, a non-binding request/recommendation is introduced by the new law: Employers with more than 500 employees shall ideally conduct testing procedures on the salary structure within the operation to ensure that the employer’s statutory obligation to pay equal pay is fulfilled.

Thirdly, employers with more than 500 employees that are subject to reporting obligations according to Section 246 in conjunction with Section 289 of the German Commercial Code (Handelsgesetzbuch, HGB) will have to prepare a report on equality and equal pay describing company measures to enhance and ensure (pay) equality. If no measures are taken, the report must give reasons why not. This report needs to be produced every three or five years depending on whether or not the employer is bound by collective bargaining contracts and will be attached to the status report required by Section 246 in conjunction with Section 289 of the German Commercial Code (Handelsgesetzbuch, HGB) and thus published.

According to the transitional provisions, the first report is due in the year following the year of the entry into force, in 2018.

Dismissal Protection Act not applicable to managing directors despite employee status

While recent EU law developments on the potential employee status of managing directors (cf. ECJ, June 9, 2015, docket no. C-229/14 – Balkaya) and decisions of the German Federal Labour Court regarding the procedural issue of giving managing directors access to the Labour Courts under certain circumstances have somewhat blurred the dividing lines between managing directors and employees, a recent decision of the Higher Labour Court of Berlin-Brandenburg seems to bring some clarity to the issue.

It has been a fundamental principle of German employment law that all protective laws and regulations relevant for employees do not apply to the contractual relationship between a company and a managing director. However, former managing directors have repeatedly challenged this principle, e.g. in an attempt to gain protection under the Dismissal Protection Act (Kündigungsschutzgesetz, KSchG), while Sec. 14 para. 1 of the Dismissal Protection Act expressly states that employee-specific dismissal protection does not apply to members of a representative body of the company.

In its decision of August 25, 2016 (docket number: 21 Sa 1493/15 21 Sa 575/16) the Higher Labour Court Berlin-Brandenburg clarified that Sec. 14 para. 1 of the Dismissal Protection Act refers to the formal position of managing director, irrespective of the nature of the underlying contractual situation.

The plaintiff argued that he was only formally appointed managing director but actually worked as a normal employee during the entire relationship to the defendant, so that he should benefit from the provisions of the Dismissal Protection Act which provides for strong dismissal protection after six months of employment and in operations of more than 10 employees.

The court decided that Sec. 14 para. 1 of the Dismissal Protection Act was applicable as this provision refers to the formal position of managing directors. The termination therefore did not have to be socially justified according to the strict rules of the Dismissal Protection Act. The law only refers to the function as a representative body and the legal representative power as such at the time of termination. According to the court this was not only confirmed by the wording of the provision but also by the provision’s systematic context. Also, the content and rationale of the provision indicate that only the function as a representative body is relevant as the provision aims at achieving a balance between corporate and contractual law and at making it possible to terminate representative bodies without being bound by dismissal protection.

The decision has been appealed and it remains to be seen whether the Federal Labour Court will confirm or overrule and grant more protection to (former) managing directors by applying the Dismissal Protection Act.

Increase of Working also for Disabled Employees!?

On 26 January 2017, the Federal State Labour Court (Bundesarbeitsgericht) ruled that a disabled part-time employee may not claim damages for discrimination where his employer did not offer him an increase in weekly working hours, unlike his colleagues (docket number: 8 AZR 736/15).

In the case at hand, the employer, a courier service provider, employed 16 part-time employees. Due to the acquisition of a new customer the employer was able to offer additional working hours, which the employer offered to 14 employees. He excluded a new joiner as well as the disabled plaintiff, who claimed an increase in his weekly working hours as well as a compensation due to the alleged discriminatory behaviour of his employer.

The claim for the increase in weekly working hours is not covered by the German anti-discrimination rules (AGG – Allgemeines Gleichbehandlungsgesetz). The AGG only provides financial compensation for discriminatory behaviour. Moreover, the Federal Labour Court declined the employee´s reference to the legislative evidence rules. According to sec 22 AGG the discriminating party has to refute the assumption of discriminatory behaviour if the plaintiff provided evidence which leads to a “predominant likelihood” of discrimination. From the judge´s perspective it was only “possible” that the employee had not been offered the increase in working hours for a discriminatory reason, but the causal connection between the employee´s disability and the employer´s decision was not “likely” as required by German anti-discrimination regulations.

This recent decision gives a clear signal to employers. An employee who can refer to an attribute protected by AGG cannot claim any unequal treatment only by referring to this attribute, but will need sufficient evidence which indicates a predominant likelihood that the treatment was discriminatory.

Headscarfs in Nurseries

The German Federal Constitutional Court (Bundesverfassungsgericht) ruled on 18 October 2016 that a general prohibition on wearing a headscarf which applied to a teacher in a local nursery violates the constitutional right of freedom of belief (docket number: 1 BvR 354/11).

 

The appellant wore a headscarf as a symbol of her Muslim belief during her work as a teacher in a local nursery. After refusing to take off the headscarf during her working hours, she was given a warning by her employer, based on an alleged violation of section 7 para. 6 of the local rules on nurseries (now section 7 para. 8) (Kindertagesstättengesetz). This rule prohibits teachers from making any kind of political, religious or other manifestation if they can lead to a violation of the neutrality of the institution towards parents and their children or a violation of the general peace in the institution.

 

The Federal Constitutional Court decided that there is no violation of the institution’s or the state’s neutrality if a teacher wears a headscarf typical for her religious belief. The wearing of such religious symbols is protected under the constitutional right of freedom of belief and there is no constitutional protection whatsoever for being spared from other peoples’ religious manifestations. In Germany, an “Islamic headscarf” is not rare and its wearing does not lead to the impression of the state or the state’s institutions also being Islamic. It is the state’s duty of neutrality to treat each religion equally.

 

The obligation of the state to be neutral differentiates between schools and nurseries. Parents have more than one option for childcare and there is also no obligation for parents to send their children to nursery. It is therefore the parents’ decision whether or not to let their children be looked after by teachers wearing an Islamic headscarf.

 

With this decision, a general prohibition on headscarves in institutions other than those with a religious ethos becomes almost impossible. The differentiation made by the German Federal Labour Court (Bundesarbeitsgericht) between younger children in nurseries who are more easily influenced and children of school age is thus invalid.

 

Two decisions by the European Court of Justice (Europäischer Gerichtshof) are coming up soon in this context, in which the two Advocates-General gave different opinions.

Revision of the Law on Temporary Work from 1 April 2017

The German Parliament (Bundestag), with the approval of the Federal Council (Bundesrat), has passed amendments to the “Law on Temporary Work”. The new rules will enter into force on 1 April 2017 and do not only have impact on leasing personnel but also on work and service contracts.

The key changes introduced by the reform are summarized as follows:

The deployment of temporary workers to the same hirer is limited to a maximum duration of 18 consecutive months. The calculation of the period is linked to the individual temporary worker and not to the respective position. Periods of interruption of work of less than 3 months must be added to the calculation. Exemptions to the maximum duration period can be agreed by means of a collective bargaining agreement (CBA).

The new provisions legally allow to permanently fill a position with temporary workers. After the expiry of the 18 month period, the hirer may engage another temporary worker to the same position. The original temporary worker may also be engaged again after a three month period of interruption in his engagement.

The current law already entitles temporary workers to equal pay. However, the new provisions restrict the ability of the collective bargaining parties to deviate from this principle. Exemptions may only be agreed for the first 9 months. Branch surcharge wage agreements (Branchenzuschlagstarifverträge) may provide a longer derogation of up to 15 months if, at the end of this period, the temporary worker will be entitled to remuneration comparable with the standard tariff wage of comparable employees in the respective industry. The agreement must also provide a gradual increase in pay, starting no later than 6 weeks after the beginning of the temporary worker’s engagement.

The employee leasing agreement between the lender and the hirer must specify the supply of temporary workers as the subject matter. Before the supply of a temporary worker, the contractual parties must name the temporary worker with reference to the agreement. These new regulatory provisions have profound effects as they aim to tackle the improper use of (fictitious) work or service contracts. Under the current law it is possible to hold a “precautionary” license to lease temporary workers although not using it because of having agreed on a work or service contract. If it subsequently turns out that the supposed work or service contract should be classified as a temporary employment contract, the mere presence of the license retrospectively legalizes the incorrect contractual situation without any sanctions. From the perspective of the legislator, the parties agree upon the supposed work or service contracts to evade the strict legal framework of temporary work. In practice, this approach has also been adopted in situations of uncertainty about how the contract should be correctly classified.

From April, this situation will no longer be possible because of the duty to state in the contract that the agreement is for the supply of temporary workers. The new laws also introduce administrative fines for the lender and the hirer in the event of infringements. In addition, the laws provide that the employment relationship between the “lender” and the “temporary worker” is void. Instead an employment relationship will be deemed to exist between the “hirer” and the “temporary worker”. These sanctions have so far only been applied to the supply of temporary workers without possessing a license.

The legal consequence of a void employment relationship not only occurs in the event of not specifying the nature of the contract, and where there has been an unauthorized supply of temporary workers, but also in the case of exceeding the duration of 18 months. The law introduces a new provision allowing temporary workers to declare their wish to remain employed by the lender within one month. However, this option is subject to strict bureaucratic procedures.

The Works Council’s right of co-determination regarding the Employer’s Facebook presence

The German Federal Labour Court (Bundesarbeitsgericht) decided on 13 December 2016 that the Works Council has a right of co-determination when the employer’s Facebook page allows other users to post comments, which are related to the behaviour and performance of the employees.

The employer operates a blood donor service. The doctors working at the blood donation events and all other employees wear name tags during their work. The employer’s Facebook page was established as a marketing strategy and gives users the option of posting comments. Some comments were made in relation to the staff’s behaviour and performance.

The Works Council feared that the employer could be looking specifically for employee misbehaviour and therefore requested a right of co-determination. The employer might be able to control and monitor the employees by reading the evaluations made by the Facebook users, which could then lead to high monitoring pressure for the affected employees. The employer considered that it could unilaterally set up the Facebook page. The comments made by Facebook users would not lead to the collection or use of data or to any other kind of performance control.

The German Federal Labour Court ruled that the Works Council has a right of co-determination as far as the direct publication of posts is concerned. Any comment which is directed towards the evaluation of an employee’s behaviour or performance is to be equated with monitoring employees using a technical device in the meaning of section 87 para. 1 number 6 of the Works Constitution Act (Betriebsverfassungsgesetz).

The Works Council’s right of co-determination always applies when personal data comes into play and makes it objectively possible for the employer to monitor his staff. It is irrelevant whether the employer actually does use the data. The option to comment on staff on an employer’s public Facebook page might influence the employer as well as the employee himself. To be on the safe side, employers should include the Works Council in the setup of their Facebook page.

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