Demonstrating readiness to work every three minutes is unreasonable

On 10 August 2017 the Labour Court of Berlin stated that it is unreasonable to require a taxi driver to press a button at short intervals of time in order to control the employee’s readiness to work (judgement of the Berlin Labour Court dated 10 August 2017, docket number 41 Ca 12115/16).

The employee works as a taxi driver for a taxi company. During those periods of time when he was not driving the taxi but waiting for the next fare, he was instructed by his employer to press a button every three minutes after the occurrence of a certain sound to demonstrate his readiness to work. If he missed pressing the button during ten seconds after the sound occurred, the following three minutes were counted as an unpaid break instead of working hours.

The employee claimed remuneration in the amount of the statutory minimum wage for times waiting for the next fare. He found the time tracking system of the employer unreasonable and from time to time not even possible to keep to. The Labour Court of Berlin (Arbeitsgericht Berlin, ArbG Berlin) mainly agreed to his opinion and decided that the employer’s time tracking system infringes the German Federal Data Protection Act (BDSG). The BDSG only allows an appropriate recording of employee’s data. The employer’s interest in controlling the readiness to work of his employees is generally legitimate. However, according to the Court’s decision there are more moderate methods of monitoring readiness to work. In particular such a permanent temporal observation does not seems necessary. Therefore, times spent waiting for the next driving job has to be considered as working hours, which have to be remunerated.

No codetermination regarding a customer feedback function within a smartphone app

On 8 June 2017 the Labour Court of Heilbronn decided that a smartphone application, provided and operated by an employer, allowing customers to share their feedback including statements about the performance and the behaviour of certain employees is not a surveillance tool according to § 87 I Nr. 6 BetrVG, if the employer does not ask for this kind of feedback and does not process the information further (judgement of the Heilbronn Labour Court dated 8 June 2017, docket number 8 BV 6/16).

The employer, a company operating in the food retail business, runs an application that offers the possibility to give feedback to the individual branches of the employer. The app is available in common app stores and the feedback can be given as a free text that is delivered to an external service provider that views, collates and sorts the messages according to each branch and then sends it back to each store manager on a weekly basis.

The works council argues that this feedback operation infringes its right to co-determination according to § 87 I Nr. 6 BetrVG and requested the omission of using the feedback function or at least the omission of the collection, storage and use of the data that is included in the customers’ feedback messages.

The labour court did not rule in favour of the works council.

Although the app may be a technical device within in the meaning of § 87 I Nr. 6 BetrVG, it does not cause any employee supervision. The app cannot carry out the supervision on its own because it just passes on the messages it receives from the customers but does not collect any data independently. Furthermore the information about the individual employees is not processed automatically by the app itself but by an external service provider. A collection of data however requires a proactive approach that targets the collection of data. In this current case the employer does not ask the customer proactively to share their feedback. The app rather passively accepts the feedback messages. In consequence the app is not a surveillance tool according to § 87 I Nr. 6 BetrVG, hence the works council’s co-determination right according to § 87 I Nr. 6 BetrVG is not infringed.

Occupational Pensions: “Split pension formula” and pro-rata reduction of pension entitlements in accordance with European law

By judgment of 13.07.2017 (C 354/16) the European Court of Justice has ruled that a “split pension formula” and a pro-rata reduction of pension entitlements do not constitute discrimination against part-time employees or age discrimination.

The employer granted to his employees a pension promise, according to which salary components above the German Social Security Contribution Ceiling and salary components below are treated differently and those above have a larger impact on the calculation of the pension entitlements than those below (so called “split pension formula”). The chargeable period of service was limited to 35 years. In the case of part-time employees the calculation of the pension entitlements was based on an average degree of employment. In the event of early departure a pro-rata reduction according to Section 2 of German Occupational Pension Act was made. The plaintiff was a part-time employee and claimed for higher pension entitlements, arguing that the calculation (“split pension formula” and a pro-rata reduction) would constitute an inadmissible discrimination.

The European Court of Justice rejected the plaintiff’s arguments and remitted the lawsuit back to the initial German court, pointing out that the “split pension formula” does not give rise to a claim. Though women are at a disadvantage, as women are often part-time employees and the salary for part-time work rarely exceeds the German Social Security Contribution Ceiling, the calculation of the pension entitlements in such a way that prior to using the “split pension formula” the average degree of employment is determined – and not in reverse order which would lead to higher pension entitlements as claimed by the plaintiff – does not constitute inadmissible discrimination since salary components above the German Social Security Contribution Ceiling are not taken into account for state pension entitlements and therefore may be taken into account more strongly for company pension entitlements. Since there is no such supply gap and therefore no disadvantage for employees whose salary is below the German Social Security Contribution Ceiling – as is often the case with part-time employees – it is permissible to differentiate and to calculate in such a way. There is no discrimination against part-time employees. Furthermore, the Court stated that the pro-rata reduction according to Section 2 of German Occupational Pension Act does not constitute age discrimination. The calculation according to Section 2 of German Occupational Pension Act may lead to the result that younger employees receive a lower pension than those employees who have passed the same period of service at a higher age. However, the pro-rata reduction is to be considered appropriate since there is no better and equally effective calculation method.

The European Court of Justice has decided on two topics of high practical relevance. With regard to both the “split pension formula” and the pro-rata reduction according to Section 2 of German Occupational Pension Act the European Court of Justice followed the German Federal Labour Court’s view or the experts’ prevailing view.

Occupational Pensions: No right of segregation under Section 47 of the German Insolvency Act for contributions to a captive pension insurance

By judgment of 21.03.2017 (3 AZR 718/15) the Federal Labor Court has ruled that a right of segregation under Section 47 of the German Insolvency Act generally does not exist in the event that an employer ceased contribution payments to a captive pension insurance and later became insolvent. Such a right only exists if the contributions were separated from the employer’s other assets.

The employee was granted a pension promise in the form of a captive pension insurance, obliging the employer to pay contributions to that external pension carrier. Some months prior to opening bankruptcy proceedings the employer ceased paying contributions. The suing employee claimed the payout of the retained contributions to himself or, alternatively, to the captive pension insurance.

The Federal Labor Court dismissed the employee’s claims, pointing out that the requirements of Section 47 of the German Insolvency Act are not fulfilled. According to Section 47 of the German Insolvency Act, a person who can assert on the basis of a right in rem or a personal right that an object does not belong to the insolvency estate is not an insolvency creditor. The right of segregation is determined by the laws which apply outside the insolvency proceedings. A claim that is not a claim in rem may also entitle to segregation, if the object the claim relates to is not a part of the insolvency estate. As a further requirement the segregating object must be a determined or determinable part of the insolvency estate. This requirement was not fulfilled in the present case since the contributions had not been kept in a separate bank account and therefore had not been separated from the employer’s other assets. Furthermore, the Federal Labor Court pointed out that European law does not lead to another conclusion. According to directive 2008/94 /EG the Member States are obliged to take the necessary measures to protect the interests of workers in respect of their acquired rights or entitlements to occupational pension payments. However, directive 2008/94 /EG cannot be interpreted in such way that a right of segregation exists in the event that an employer has ceased contribution payments to a captive pension insurance.

By its decision, the Federal Labor Court confirms its established jurisprudence on the interpretation of Section 47 of the German Insolvency Act and rejects the attempt to remove these principles of German insolvency law through European law.

Age 60 as a legitimate reason to terminate a service relationship with a managing director

The attainment of age 60 can be agreed as an age limit in a service agreement allowing for the termination of the contract. This was decided by the Hamm Higher Regional Court in a judgment dated 19 June 2017, docket number 8 U 18/17. Such an age limit does not violate the General Equal Treatment Act, at least as long as the managing director is entitled to a pension payment thereafter.

The plaintiff, born in 1955, had been the managing director of the company since 2005. The service contract was last renewed up to 31 August 2018. However, the contract also included a provision allowing both parties to terminate the contract with a notice period of six months “upon entering the 61st year of life”. In June 2016, the company terminated the contract effective as of 31 December 2016. The plaintiff challenged the termination and, inter alia, argued that the termination was discriminatory.

The Higher Regional Court ruled in favour of the company and confirmed the validity of the termination based on the contractual provision. While it left open the question whether managing directors are protected by the General Equal Treatment Act, it held that even if it did apply the termination was valid. The court stated that a termination based on age could be justified as the job requirements for a managing director were high and that a company could have a legitimate interest to install a successor. If the managing director was sure to receive pension benefits following his termination, termination due to age – even below the statutory retirement age – could be in compliance with anti-discrimination laws.

Employees exempted from their duties are allowed to take part in a corporate event

On 22 June 2017 (docket number 8 CA 5233/16) the labour court in Cologne found that an employee is allowed to take part in company outings and events although he is on garden leave.

The employee and subsequently plaintiff had been working for the employer, an association that operates retirement homes, for almost three decades. Triggered by a change in the employer’s executive board, the employee agreed to be on garden leave for the last two years prior to his pension start date. Although on garden leave, he was still initially invited to the employer’s events, e.g. the Christmas party. Following another change in the employer’s executive board, the new chairman subsequently denied the employee any access to upcoming company outings or events.

The employee sued his employer and claimed to have a right to participate in company outings until his actual pension start date, even though he was on garden leave. He asserted that he had been orally granted an invitation to the upcoming events. Furthermore, the employee claimed that the General Principle of Equal Treatment would not allow the employer to exclude him from attending those events.

The labour court found that the employee had a right to participate in company outings on two different grounds – based on the General Principle of Equal Treatment and additionally based on an invitation that was made orally. The court ruled that, as long as company outings are generally held open to all employees, this constitutes a benefit on collective grounds. In such a case, an employer can only deny attendance to an individual employee based on an objective reason. Additionally, the court clearly stated that an employee might have the right to attend company outings, if this was granted to him individually.

The court stated that limiting access to company outings only to “active” employees could be seen as an objective reason for not inviting employees on garden leave. The court also made clear that an individual employee might be excluded from company outings if this employee had severely disturbed past events. However, as neither was the case here, the court ruled that there was no objective reason for excluding the employee from participating in the event. It emphasized that being on garden leave itself does not establish an objective reason on its own for an employee to be excluded from company events.

Employers should be aware of the fact that they are not able to exclude individual employees from generally open company outings or events, unless they can present an objective reason. According to the labour court in Cologne an option to prevent employees on garden leave from attending company outings or events could be to limit access to such events only to “active” employees. However, the decision can still be appealed and it has yet to be seen whether courts of a higher instance share the point of view of the labour court in Cologne.

Discriminatory job advertisement – No claim for damages if applicant was not “seriously” applying for the job

If an applicant applies for a job solely to bring a claim then he will have no claim for damages, even if the job advertisement violates the General Act on Equal Treatment (judgement of the Munich labour court dated 24 November 2016, docket number 173 C 8860/16).

A company advertised a voluntary job at a marketing agency in a local newspaper. The role required the employee to have frequent conversations with customers over the phone. The advertisement read, inter alia, “We are looking for a female employee with a friendly voice.”

The male applicant (and later plaintiff), who had an education as a banker, called the company to ask for an e-mail address for the application. He told the company on the phone that a female friend wanted to apply for the job. Subsequently, he applied for the job himself via e-mail. The company refused the application on the grounds that they had already selected “another male applicant” for the role.

The applicant sued the company for damages under the General Act on Equal Treatment on grounds that the employment advertisement was discriminatory. The company argued that the applicant was overqualified for the job and his application was not serious.

The labour court ruled in favour of the company. It argued that there was no need to determine whether the job was suitable for the applicant (although this was doubtful as he was clearly “overqualified” for the job). According to the labour court, the deciding factor was the fact that the applicant could not demonstrate a legitimate interest in the job and the application did not seem to be serious. In particular, it did not have sufficient references to the specific job offered. Rather, the e-mail sent by the applicant included unstructured text modules which indicated that it was used to apply for a number of different jobs without being modified accordingly.

Moreover, the labour court took into account the fact that the applicant had already sued several companies in the past, claiming damages for alleged violations of the General Act on Equal Treatment. In this context, the labour court referred to an e-mail from the applicant to a third party in which the applicant was talking about financing his cost of living by bringing discrimination claims to court.

The labour court concluded that the applicant was misusing the statutory provisions on discrimination in order to claim damages for financial gain. It ruled that, although the job advertisement of the company was in fact discriminatory, the applicant was not entitled to compensation under the General Act on Equal Treatment.

Penalty clause unenforceable where non-compete obligation is invalid

If a post-contractual non-compete obligation is invalid and therefore non-binding, a penalty clause intended to protect this clause is unenforceable (judgment of the Solingen labour court dated 20 June 2017, docket number 3 Ca 153/17).

The employee worked for a travel agent and had mainly sold cruises. The employee’s contract included a post-contractual non-compete obligation for the duration of three months post-termination.  After leaving the company, she joined another travel agent.

Under statutory law, a non-compete obligation is not binding insofar as it does not protect the employer’s legitimate interests. A legitimate interest can exist if the non-compete aims to protect business secrets or if it serves to protect clients. However, the mere interest of limiting competition is not protected.

In this case, the employer could not demonstrate a legitimate interest in the post-contractual non-compete. While it argued that clients in the cruise business required trusted advisors and were also attached to their respective advisors, it also stated that a three month limit was sufficient as clients would then look for other advisors. Based on this inconsistency, the court could not find that there was a legitimate interest. It even held that, typically, a short non-compete obligation may indicate that its primary goal is to limit competition rather than protect legitimate business interests.

Employee’s request for fixed-term employment narrowly interpreted

Entering into a valid fixed-term contract can be a bit of a challenge under German law. Under the Fixed Term and Part-Time Employment Act (TzBfG), one of the reasons which may be used to justify a fixed-term contract is that there are reasons relating to the circumstances of the particular employee. A recent case decided by the Federal Labour Court shows that these reasons will be narrowly interpreted (judgment dated 18 January 2017, docket number 7 AZR 236/ 15).

Originally, the employee had had a contract that limited her employment to age 65, i.e. the former statutory pension age. When revamping its company pension scheme, the employer offered employees the options to leave their employment and draw pension benefits early once they had turned 60. The employee did not immediately accept but, later on, accepted the offer. After reconsidering the early retirement option, she consequently sued and challenged the validity of the fixed-term provision.

The Federal Labour Court found the fixed-term provision to be invalid. While the employee had signed the contract, converting her previously unlimited unemployment into a fixed-term employment relationship, the court demanded objective reasons for evidencing a genuine employee interest in the fixed-term employment relationship. The standard applied by the Federal Court was whether the employee would, if an unlimited contract had been offered, have rejected that offer and only wanted to enter into a fixed-term contract. The court found that the employee would only have had a genuine choice if the employer had offered a limited as well as an unlimited contract, both with the option to draw early pension benefits. The court also held that the mere possibility of receiving company pension benefits did not qualify as a valid reason to limit the contract duration by way of a fixed-term contract.

Inadmissible evidence through installation of a keylogger

Using a software keylogger may not always be much help in supporting a termination for cause, as a recent case before the Federal Labour Court shows (judgment dated 27 July 2017, docket number 2 AZR 681/16).

The employee had worked for the employer since 2011. When opening up its network, the company informed employees that internet and software use would be monitored. The company monitored keyboard use and also produced screenshots regularly. As a result of this, the company noticed that the employee had spent considerable parts of his working time on private use of the network. The company therefore issued an immediate termination for cause and, as a precaution, also observed the regular notice period.

The employee challenged the dismissal, and it was held invalid. The evidence obtained through the use of the keylogging software was found to be inadmissible, as the company had not had the right to install this software and had violated the employees right to “informational self-determination”. As the software monitored private activities of the employee, its lawful installation would have required a suspicion based on facts that a crime was being committed or, at least, a serious breach of duties. This standard was not met.

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