A1-form required for business trips abroad – significant fines may apply

From January 2019, employees will now generally need to carry an A1 form whenever they are normally working in, or posted to, other EEA countries in order to avoid liability for social security contributions and potential fines.

In general, an employee pays social security contributions to the country they are working in. However, employees from an EEA country working in another EEA country may continue paying social security contributions in their home country and will be exempt from paying contributions in the other countries where either:

  • the work abroad is not expected to be for more than 24 months; or
  • they normally work in 2 or more EEA countries (multi-state workers)

The EEA includes all countries in the European Union (EU) and Norway, Iceland and Liechtenstein. Switzerland is not an EEA member but an agreement between Switzerland and the EU means that the same rules also apply there.

Workers can prove that they pay social security contributions in another EEA country and cannot be required to pay social security contributions in the country where they are working by presenting a Form A1 to the competent authorities.  The employer can obtain a Form A1 from the home country social security authorities which will keep the employee with the ambit of their home country social security and will absolve both the employer and employee from making any social security contributions in the host country for the period covered by the certificate.

The requirement to have a Form A1 when working in the EEA has been in place for many years,  even in the case of short business trips to another country. Legislation and case law do currently not provide for a minimum time or differentiation between short-term business travel and fixed-term transfers with a longer  duration. In general, employers try to comply with existing legislation. However, some employers send their employees on short business trips without the A1 and, if authorities in the host Member State require presentation of a Form A1, apply for a certificate retroactively.

However, the authorities in a number of EEA countries have increased their scrutiny over the past weeks and months. France and Austria in particular have tightened up the relevant regulations and increased controls in the past months. In Germany, the Federal Ministry of Labour and Social Affairs previously considered it appropriate to refrain from applying for the A1 in advance in cases where international meetings were planned at short notice or for a planned duration of up to one week, with the option to apply retrospectively for the A1. A corresponding bulletin had been provided to the employers` associations. However, due to the increased scrutiny in France and Austria the Federal Ministry of Labour and Social Affairs has taken the bulletin off their website. While we believe that in substance not every crossing of the border to a Member State qualifies as working in that Member State, the current administrative practice of many EEA countries makes it advisable  that employers apply for the A1 even in cases of very short transfers.

If a Form A1 is not obtained from the home country authorities or the period covered by the Form A1 lapses, social security contributions will potentially be payable in both the home country and the host country and there can be significant fines. If an employee travels and gets caught without such certificate, he would be sent home by the authorities and a fine of could be imposed upon the employer (up to EUR 10,000 per violation in Germany). It may also be necessary to repay social security contributions if authorities take the view that the employee should have been subject to the social security system of the other EU member state.

How to apply for Form A1

Generally, the individual employee`s health insurance provider is competent for issuing the Form A1. In case the employee is insured with a private health care provider, the application needs to be filed with the Public Pension Insurance Fund. The application should be filed electronically.

How to apply for Form A1 in case of multi-state workers

There are special forms available for so called multi-state workers, i.e. employees who “normally work” in several Member States. This is the case if they regularly work in another Member State for at least one day per month or for at least five days per quarter. The respective period to be viewed is the upcoming next 12 months, to the best of the employer’s and employee’s knowledge. If the work situation for the next 12 months is not certain, the past 12 months may be used as experience value.

The Member State in which the employee lives (State of residence) is responsible for determining the applicable legislation in each individual case. In Germany, the authority to determine the applicable legislation for employees that are normally working in several Member States lies with the National Association of Statutory Health Insurance Funds – German Liaison Office Health Insurance Abroad  (Spitzenverband der gesetzlichen Krankenversicherungen – Deutsche Verbindungsstelle Krankenversicheung Ausland, “DVKA”).

In order to enable the DVKA to determine the applicable legislation, the DVKA provides questionnaires to be filled out and sent to the DVKA. The questionnaire for employers based in Germany (GME1 questionnaire, in German) can be downloaded at:

https://www.dvka.de/media/dokumente/antraege_av_gme/gewoehnliche_erwerbstaetigkeit/GME_13_1_dt_AG_Online.pdf

Step Plan A1 form:

 

  • Determine, whether employees are “normally working” in several Member States

 

  • Fill out the GME1 questionnaire (use fillable form fields to ensure readability and avoid a prolonged process)

 

  • Both, employer and respective employee, need to sign the questionnaire

 

  • Submit the questionnaire to the DVKA

 

  • The DVKA will usually issue a statement of receipt of the questionnaire within a couple of weeks.

 

  • The A1 form will then be sent to the employee.

 

The timing of the final issuing cannot be foreseen. Currently, there are quite a lot of applications filed with the DVKA, which leads to a slowed down process. Additionally, the number of Member States the application is filed for, also plays an important role regarding the time the DVKA will need to issue the A1 form. Nevertheless, employees may generally already be able to work in the respective Member States prior to being issued the final A1 form. In order to do so, employees would need to carry with them the filled out questionnaire GME1 (application for A1 form) and an up-to-date pay slip. Those documents are then to be presented in case of inspection. After the statement of receipt has been issued by the DVKA, the statement of receipt may instead be carried and presented in case of inspection.

Unpaid leave allows for reduced vacation entitlement

In its recent decision dated 19 March 2019 the Federal Labour Court ruled that periods of unpaid leave will not be taken into consideration when calculating statutory vacation entitlements (docket number 9 AZR 315/17).

In the case at hand, the employee had taken unpaid leave from 1 September 2013 until 31 August 2015. Upon returning to work, she requested statutory vacation days for 2014.

Under statutory law, employees are entitled to 24 days of paid vacation based on a 6 day work week. If the employee works fewer than 6 days, the entitlement is calculated pro rata based on the number of days worked per week.

Until this recent decision, the Federal Labour Court had not extended this pro-rated calculation to periods of unpaid leave. Consequently an employee who was on a sabbatical was able to request vacation days for the time he was away. The Federal Labour Court has now expressly distanced itself from its previous judgment.

If an employee is away on unpaid leave, the obligation to work is suspended. Therefore the employee is not entitled to statutory vacation for such periods of time. If an employee is on unpaid leave for a whole year, s/he is therefore not entitled to any vacation for this calendar year.

Termination agreements: Employees have no right of withdrawal

On February 7, 2019 the Federal Labour Court (docket number 6 AZR 75/18) ruled that employees cannot withdraw a termination agreement even if it was concluded in the private apartment of the employee. In the case at hand, however, the termination agreement might be void if the fundamentals of fair negotiation (Gebot des fairen Verhandelns) have been ignored.

The parties agreed to a termination agreement in the apartment of the plaintiff. The termination agreement comprised immediate termination of the employment without any severance. The reasons and the process leading to the agreement are contested. The plaintiff argued that she was sick and on medicine (and asleep) at the conclusion of the termination agreement. Therefore, she challenged the agreement due to a mistake, intentional deception and illegal coercion; alternatively she withdrew the termination agreement.

The Higher Labour Court of Niedersachsen (docket number 10 Sa 1159/16) dismissed the claim. On appeal, the Federal Labour Court reversed the ruling and referred the case back to the lower court.

According to its press release the Federal Labour Court confirmed that the plaintiff has no grounds to challenge the agreement. Furthermore, there is no legal basis to withdraw it. In general, consumers have a right of withdrawal if the agreement was concluded outside of the business premises. Employees are consumers. But, and this shall be decisive, the legislative authority made crystal clear, that termination agreements are not in the scope of this right of withdrawal, which is based on the European directive 85/577/EWG focussing on the supply of products and services.

In the case at hand, however, the Higher Labour Court did not consider if the fundamentals of fair negotiation were met. These fundamentals are a collateral duty of the employer. They are infringed if one party creates mental pressure limiting freedom of decision, especially if the other party is suffering weakness due to sickness. If the defendant abused the sickness of the plaintiff intentionally pressuring her into the termination agreement, the plaintiff would be entitled to a damages claim. This claim would lead to continued employment. The Higher Labour Court will therefore need to consider the effectiveness of the termination agreement again. So far, it had only stated that the plaintiff was not in a temporary state of mental disturbance (otherwise, her acceptance would have been already void by law).

It remains to be seen if the Federal Labour Court clarifies the requirements of the fundamentals of fair negotiation in its reasoning, in particular which party has the burden of proof etc. The clarification, however, that employees have no right to withdraw a termination agreement is very welcome.

Post-contractual non-compete obligation must not cover all activities for a competitor

In an indicative ruling dated August 02, 2018, the Higher Regional Court Munich (docket number 7 U 2107/18) has found that a post-contractual restraint which prohibited a managing director from working for a competitor in any way was invalid due to the lack of legitimate interests of the company. The managing director was therefore able to legitimately claim the invalidity of the non-compete obligation in the form of a preliminary injunction.

The indicative ruling is based on the following facts: The claimant worked for several years as managing director of the defendant. Following the termination of the contract by the defendant, the claimant started working for a competitor, also as managing director. His service contract contained a post-contractual non-compete obligation for one year following the termination of the contract, prohibiting any activity for a competitor, without being limited to senior roles. The claimant applied for a preliminary injunction arguing the invalidity of the post-contractual non-compete obligation.

The Higher Regional Court of Munich stated that the company’s legitimate interest in preventing a managing director from working for a competitor is proportional to the former managing director’s new position at the competitor. The lower the new position, the lower the company’s interests in preventing the activity for the competitor. Consequently, a post-contractual non-compete obligation must not cover any activity for a competitor, but only those activities where the company’s interest in preventing the activity outweighs the managing director’s interest in having a free choice of occupation.

In the present case, as the post-contractual non-compete obligation covered any activity for a competitor, it was deemed too broad and therefore ineffective in its entirety. The Higher Regional Court of Munich also denied a finding of partial validity, arguing such a decision would exceed the judicial scope of judgment.

The indicative ruling results in higher protection for managing directors compared to regular employees with regard to post-contractual non-compete obligations. For regular employees, § 74 para. 1 Commercial Code (HGB) enables a restraint to be found to be partially valid while the Higher Regional Court of Munich has now excluded such partial validity if the post-contractual non-compete obligation is agreed with a managing director.

Mass redundancies: A compensation of disadvantage could be offset by a social plan severance

On 12 February 2019 the Federal Labour Court (docket number 1 AZR 279/17) ruled that a social plan severance and a compensation of disadvantage (Nachteilsausgleich) need to be offset.

In March 2014, the employer took the decision to shut down its operation which the plaintiff was employed in. The employer informed the works council about the mass redundancy and tried – at least for a short period – to reach a balance of interest (Interessenausgleich). Before both proceedings were completed properly the employer terminated all the employees for operational reasons. Subsequently, the employer and works council concluded a social plan, which remains silent on offsetting a potential compensation of disadvantage.

Based on the failure to truly attempt to find a balance of interest prior to issuing the termination letters the plaintiff was awarded a compensation of disadvantage in the amount of 16.307.20 Euro by a Labour Court.

In the case at hand, the plaintiff claimed another 9,000.00 Euro severance on the basis of the social plan arguing that offsetting of both compensation payments would infringe the European Council Directive 98/59/EC on mass redundancy.

The courts of lower instance dismissed the claim. On appeal, the Federal Labour Court confirmed their dismissals.

Severances on the basis of a social plan and compensations of disadvantages cannot be claimed accumulatively, since the purpose of both payments is more or less identical. Offsetting both claims does not violate the Directive. Article 6 of the Directive obliges the member states to provide a possibility of judicial or administrative action, but does not name concrete sanctions. In March 2013, the Federal Labour Court (docket number 2 AZR 60/12) ruled that a breach of the information requirements on mass redundancies will lead to legally void terminations. This must be deemed a sufficient sanction in the meaning of the Directive. An additional sanction in form of an additional compensation is not demanded by the Directive.

The Federal Labour Courts decision delivers some legal certainty. The disadvantage compensation thus remains a blunt sword. However, due to the imminent ineffectiveness of the issued terminations, employers are well advised to take seriously the obligation to consult the works council on mass redundancies and the high demands placed on a proper notice of mass redundancies. In addition, several labour courts grant the works council injunctive relief (Unterlassungsanspruch) against the employer if the employer prematurely initiates the implementation of the intended measures, eg by issuing the termination letters.

Job advertisements asking for church membership tend to be discriminatory

In a judgment dated 25 October 2018 the Federal Labour Court (docket number 8 AZR 501/14) ruled that religious employers are no longer allowed to ask all applicants for membership of a Christian church in job advertisements. Unequal treatment on grounds of religion is only permissible if, according to the nature of the activities or the circumstances of their exercise, religion constitutes a substantial, legitimate and justified work-related requirement in light of the ethos of the religious employer.

The defendant, a Protestant Church employer, had publicly advertised a temporary part-time position as a consultant for an anti-racism research project. The job advertisement explicitly stated that membership in a Christian church is required. The non-denominational plaintiff applied for this job but wasn´t invited to a job interview. The defendant filled the position with a Protestant applicant.

The plaintiff requested at least five monthly salaries as compensation according to section 15 para. 2 General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz). The defendant denied discrimination on grounds of religion; in any case, claimed that the unequal treatment is justified according to section 9 para. 1 General Equal Treatment Act.

The Labour Court granted the plaintiff a compensation of one monthly salary. The Higher Labour Court of Berlin (28 May 2014 – docket number 4 Sa 157/14, 238/14) deemed the unequal treatment justified and dismissed the compensation claim in total.

On appeal, the Federal Labour Court suspended the proceedings and referred the matter to the European Court of Justice (17 April 2018 – docket number C-414/16). As a result of this decision, the plaintiff’s appeal was then partially successful. The defendant is obliged to pay compensation in the amount of two monthly salaries.

The unequal treatment on grounds of religion was not justified by way of exception. Section 9 para. 1 alt. 1 General Equal Treatment Act, according to which Church employers could determine whether a particular religion of a candidate constitutes a substantial, legitimate and justified professional requirement, must remain unapplied since it contradicts Art. 4 para. 2 of the anti-discrimination Directive 2000/78/EC. Thus justification only takes place if the religion is a substantial, legitimate and justified work-related requirement in light of the ethos of the religious employer.

In the case at hand, the Federal Labour Court seriously questions the substantiality of the work-related requirement. However, in any case, asking for church membership is not justified. There was no probable and significant risk that the defendant’s ethos would be compromised. The applicant would be involved in an internal opinion-forming process with the defendant and thus could not act independently in questions concerning the defendant’s ethos.

The decision will lead to a reorientation and review of the recruitment and personnel policies of Church employers in Germany. The question of whether a church membership is a substantial, legitimate and justified work-related requirement for a job position will be effectively controlled by the state (labour) courts in the future.

Works Council has Right of Co-Determination Concerning Employer’s Twitter Account

On September 13, 2018 the State Labour Court Hamburg (docket number 2 TaBV 5/18) ruled that works councils have a right of co-determination concerning the employer’s Twitter account in accordance with Sec. 87 Para. 1 No. 6 Works Constitution Act as Twitter is a technical device designed to monitor the behaviour or performance of the employees.
The respondent in this trial is an employer which operates several cinemas in Germany. It created a Twitter account and tweets on a regular basis. The applicant – the established works council at the respondent – demands that the respondent refrain from using its Twitter account as long as it does not have the works council’s approval to use it.
The State Labour Court ruled that the respondent has to refrain from using its Twitter account as long as it does not have the applicant’s approval to use it since the works council has a right of co-determination concerning the respondent’s Twitter account in accordance with Sec. 87 Para. 1 No. 6 Works Constitution Act as Twitter is a technical device designed to monitor the behaviour or performance of the employees. Monitoring in this context means a process by which information about the behaviour or the performance of the employees is collected and – at least in general- recorded to make them available for later examination. In general, Sec. 87 Para. 1 No. 6 Works Constitution Act protects the employee’s general right of privacy. The employer’s Twitter account provides a platform to evaluate the employees’ behaviour and performance and it supports the employer to reach an open exchange of views with its customers. Twitter’s function called “Reply” enables any registered Twitter user to send a direct response to any of the employer’s tweets to evaluate any employee’s behaviour or performance. These replies can be seen by the employer and at least by any registered Twitter user. Depending on the content of the reply the employer can identify single employees and can use this data to evaluate this employee’s behaviour and performance. The fact that these replies are only a reaction to the employer’s tweet does not change anything since the employer does not have to intent to monitor the employees’ behaviour and performance with the provision of the technical device. Also the fact that these replies stay on the account of the repliers and cannot be deleted by the employer without the help of Twitter itself does not change anything. First, it does not matter where the actual reply is saved, it just matters who can see it. And second, the fact that the employer cannot delete the reply itself makes the interference with the employee’s general right of privacy even worse, and therefore it has to be especially protected by the works council.
After the Facebook decision of the Federal Labour Court in 2016 the State Labour Court Hamburg now decided that an employer’s Twitter account also creates a right of co-determination under the Works Constitution Act. The State Labour Court’s decision has been appealed at the Federal Labour Court. It remains to be seen if the decision will be affirmed.

ECJ Advocate General: Companies are obligated to record daily and weekly working hours

The advocate general of the European Court of Justice is of the opinion that the member states have to pass a law which obliges companies to record the daily and weekly working hours of their fulltime employees, who are not contractually obligated to work overtime hours and who are not mobile employees, employees of the merchant navy or in the railway sector, to ensure the effective implementation of European Directive 2003/88/EG(2).
The EU wants to implement daily and weekly rest times and maximum working times mainly to promote healthy and safe working place conditions. This stands in close context with Art. 1 and 31 of the European Union’s Charter of Fundamental Rights which inter alia provide respect of human dignity and the right to maximum working hours and healthy, safe and dignified working conditions, and several member states’ constitutions. This shows how important the EU considers healthy and safe working place conditions and consequently all obstacles which hinder the implementation of these purposes have to be eliminated.
According to the advocate general only a system where the employer has to record its employees’ daily and weekly working hours can serve these purposes. Since the employee is always the weaker party in the employment contract he/she has to be protected. Without such a system there is no way to keep track of the worked hours or to differentiate between regular and overtime working hours and therefore there is no way to check if the directive is being complied with or not. Also, without such a system it is almost impossible for the employee to prove his/her position during a trial since there is no written evidence and other employees can be afraid of appearing as a witness against their own employer.
The advocate general does not require a specific system but leaves this decision to the member states. As Germany does not have a general obligation to record all daily and weekly working hours, but only overtime hours, it remains to be seen how the ECJ decides.

Entitlement to overtime premiums regarding part-time employment

According to a judgment of the Federal Labour Court (Bundesarbeitsgericht, BAG) dated 19 December 2018 (docket number 10 AZR 231/18), part-time employees can be entitled to the payment of overtime premiums with regard to working hours that go past the agreed part-time hours but do not exceed the working hours of full-time employment.
In the case in question, the Plaintiff was a part-time employee for the Defendant. A framework collective agreement, which contained regulations on, i.a., overtime premiums and the possibility to determine annual working hours, applied to her employment relationship. Annual working hours had been set for the Plaintiff, and the Defendant paid the respective basic remuneration. However, the Defendant did not give the Plaintiff overtime premiums for the amount of time which exceeded the agreed working time, since the overall amount of time did not exceed the working hours of full-time employment. Subsequently, the Plaintiff filed a suit, claiming respective remuneration. The 10th Senate of the Federal Labour Court ruled in favour of the Plaintiff.
What is particularly remarkable is that the 10th Senate, with this judgment, has abandoned its previous opposing view: In a judgment dated 26 April 2017 (docket number 10 AZR 589/15) the 10th Senate still ruled that it was not – forbidden – discrimination of part-time employees when their entitlement to overtime premiums was conditional on the exceeding of the working hours of full-time employees. With the judgment at hand the 10th Senate agreed with the 6th Senate of the Federal Labour Court. According to the latter, the assumption of the same threshold for both part-time and full-time employees, from which overtime premiums are granted, treats part-time employees less favourably than full-time employees and thus contradicts para. 4 (1) Part-Time and Fixed-Term Act (Teilzeit- und Befristungsgesetz, TzBfG). Para. 4 (1) Part-Time and Fixed-Term Act – roughly translated – reads:
“A part-time employee must not be treated less favourably due to his part-time work than a comparable full-time employee, unless there are objective grounds justifying different treatment. A part-time employee shall be granted remuneration or another divisible non-cash benefit at least equal to the proportion of his or her working time to the working time of a comparable full-time employee.”
According to the 6th Senate’s view – which the 10th Senate now agrees with – the comparison between full-time and part-time employees has to be drawn with regard to each remuneration component individually (cf. judgment dated 23. March 2017, docket number 6 AZR 161/16). Therefore the remuneration for regular working hours on the one hand and remuneration for overtime on the other hand has to be compared separately. The 6th Senate outlined that, in principle, shorter working time may only be remunerated differently in terms of quantity, but not quality. Part-time employees would be treated less favourably than full-time employees, if the number of working hours from which on an entitlement to overtime premiums arises, was not decreased proportionally to their working hours. In particular, it would lead to the assumption of an identical limit of workload for part-time and full-time employees, which, ultimately, would result in the assumption of a higher individual limit of workload for part-time employees. Finally, the different working hours of full-time and part-time employees cannot constitute an objective reason according to para. 4 (1) Part-Time and Fixed-Term Act for a differentiating treatment.
As a result, the 10th Senate of the Federal Labour Court joined the above outlined opinion of the 6th Senate and ruled that employees who work part-time and whose working hours go beyond their respective part-time quota do not have to exceed the working hours of a full-time employment in order to be entitled to overtime premiums. This interpretation of the framework collective agreement corresponds to higher-ranking law, and is compatible with para. 4 (1) Part-Time and Fixed-Term Act.

Occupational Pensions: Federal Labour Court confirmed its ruling with respect to so-called “age difference clauses” in pension arrangements

By judgment of 11 December 2018 (docket number: 3 400/17) the Federal Labour Court has ruled that a so-called “age difference clause” (Altersabstandsklausel) providing that a survivor’s benefit is reduced if the age difference between the spouses is more than 10 years is admissible and is not to be considered as unjustified discrimination on grounds of age.

The plaintiff was born in 1945. Her husband was born in 1930 and died in 2014. The spouses married in 1966. The plaintiff’s deceased husband was granted a survivor’s pension promise by his employer. The corresponding pension plan contained a clause according to which the survivor’s benefit is reduced by 5 % for each year that exceeds an age difference of 10 years. The plaintiff considered that clause to be inadmissible.

The Federal Labour Court ruled that the clause does not constitute inadmissible discrimination on grounds of age according to the General Law on equal treatment (Allgemeines Gleichbehandlungsgesetz) since the discrimination is justified. The employer who grants a survivor’s pension has a legitimate interest in limiting the associated financial risk. According to the Court, the age difference clause is also necessary and appropriate. It does not unduly prejudice the legitimate interests of the employees entitled to benefits who are affected by the clause. At an age difference of 11 years or more, the common standard of living of the spouses is designed in such a way that the survivor spends part of his life without the beneficiary (deceased former employee). In addition, with an age difference of 11 years or more only those spouses are excluded from benefits whose age difference from the beneficiary (deceased former employee) considerably exceeds the “usual” age difference between spouses. Moreover, the clause does not lead to a complete exclusion of benefits if the age difference is more than 10 years, but only to a moderate, gradual reduction that causes a complete exclusion only if the age difference is 30 years or more.

With this ruling the Federal Labour Court confirmed its earlier ruling of February 2018. In this previous decision, the Court also denied discrimination on grounds of age with respect to a clause providing that spouses receive a survivor’s benefit only if they are no more than 15 years younger than the deceased former employee. Until then, it had not been clarified by the highest court, whether age difference clauses with regard to survivor’s benefits are in in accordance with the General Law on equal treatment.

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