Information right of the works council independent of employee consent

According to a recent judgment by the Higher Regional Labour Court in Munich (docket number 11 TaBV 36/17) of 27 September 2017, the works council is entitled to receive information regarding the existence of pregnant employees in the operation.

In the case at hand, the employer had provided employees with a right to “opt out” from forwarding the employer notification about their pregnancy to the works council. If employees objected to their information being forwarded, the works council did not receive such information due to privacy concerns. The works council argued that in order to be able to verify whether the employer complied with employee protection rights, and in particular provisions protecting expectant mothers, it was entitled to receive such information even if the employee had objected.

The Higher Regional Labour Court confirmed that the works council was entitled to receive information on pregnant employees within the operation. It stated that works council information rights were not subject to employee consent, and that the works council was only able to monitor compliance or inform employees about special rights and entitlements if it had complete information about relevant employee data, such as an employee’s pregnancy.

Employer’s financial risks in the event of not granting annual leave

I. Holiday right: Germany and Europe

In principle, every employee is entitled to annual leave – as emphasized by German law as well as EU law (Art. 7 (1) and (2) directive 2003/88/EC. In addition, the holiday must be taken during the current year (sec. 7 (3) Federal leave Act (“Bundesurlaubsgesetz – BUrlG”). A transfer to subsequent years is generally inadmissible (sec. 7 (3) BUrlG). Holiday can only be transferred to the following year in special cases and then only to be used within three months. However, employment contracts or collective agreements often provide for the possibility of a longer transfer period into the next year.
The problem of transferring the leave entitlement to subsequent years, however, is only dealt with in German law, not in European law. Here, therefore, national law still seems to be relevant.

II. The judgments of the ECJ, esp. judgment of 29 November 2017

Nevertheless, the ECJ has decided to the contrary in several judgments: In the Schultz-Hoff case in 2009 (docket number C-350/06), the ECJ emphasized,

“Article 7(2) of Directive 2003/88 must be interpreted as precluding national legislation or practices which provide that, on termination of the employment relationship, no allowance in lieu of paid annual leave not taken is to be paid to a worker who has been on sick leave for the whole or part of the leave year and/or of a carry-over period, which was the reason why he could not exercise his right to paid annual leave”.

Shortly thereafter, the ECJ was forced to modify its decision, stressing:

“Article 7(1) of Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time must be interpreted as not precluding national provisions or practices, such as collective agreements, which limit, by a carry-over period of 15 months on the expiry of which the right to paid annual leave lapses, the accumulation of entitlement to such leave of a worker who is unfit for work for several consecutive reference periods”. (judgment from 22. November 2011, KHS, docket number C-214/10).

It is clear: The ECJ also decides on the transfer period for annual leave, which – so they thought so far – is limited in time. German law had to react to this and interpret sec. 7 (3) BUrlG in accordance with European law.
Surprisingly, the ECJ seems to change its position in a recent decision of 29 November 2017 (docket number C-214/16). A so-called bogus self-employed person – a worker who worked on the basis of a ‘self-employed commission-only contract’ not being entitled to the rights a worker gets (such as paid annual leave) – had sued for compensation in respect of the leave not granted to him from 1999 till 2012. It would have been expected, according to the above, that the ECJ limited the compensation. But this did not happen here. The ECJ emphasized:

“Article 7 of Directive 2003/88 must be interpreted as precluding national provisions or practices that prevent a worker from carrying over and, where appropriate, accumulating, until termination of his employment relationship, paid annual leave rights not exercised in respect of several consecutive reference periods because his employer refused to remunerate that leave.”

The result is that the employer has to financially compensate the 13 years of annual leave (ie at least 13 x 20 = 260 days). A time limit was denied. However, this does not mean that the ECJ now completely abandons its previous case-law. The ECJ wants in most cases to maintain the previous case law and to limit the accumulation of the holiday entitlement and the allowance in lieu. In particular, the judgment expressly recognizes that employers should be protected against excessive financial burden (recital 55). However, this protection is only granted if the employer really needs it. In this specific case the ECJ acknowledges, that “protection of the employer’s interests does not seem strictly necessary” (recital 59). It was only the employer to be blamed for not granting the bogus self-employed person leave. For this particular reason alone there is no time limit.

III. Consequences for the employer

The employer should therefore be “punished” for having violated regulations. In principle, he cannot therefore rely on the fact that the holiday and thus also the compensation claim cannot be accrued indefinitely. It is only important that he gives the worker the possibility to take annual leave. It is also important to check exactly whether there is bogus self-employment. Creative constructions for bypassing the rights of workers are strongly discouraged. Employers should always be advised to ensure that employees complete their vacation within one year. This minimizes the risks of – possibly even unlimited – compensation when leaving employment.

Minimum wage also applies to public holidays and night work premiums

Remuneration on public holidays, as well as night work premiums, which are based on the actual hourly earnings must be calculated at least on the basis of the minimum wage. This is the result of a new judgment by the Federal Labour Court dated 20 September 2017 (docket number 10 AZR 171/16).

In the case at hand, the collective bargaining agreement provided for a night work premium amounting to 25% of the actual hourly earnings, and remuneration for holidays amounting to 1.5 times the average earnings of the employees. On 1 January 2015, when the Minimum Wage Act (Mindestlohngesetz, MiLoG) came into force, the defendant paid a “Minimum Wage Act allowance” in addition to the contractual hourly earnings of  € 7.00 or € 7.15 for the month, but continued to calculate remuneration for public holidays and holidays as well as the night work premium for five hours from the lower contractual hourly remuneration. In addition, he credited a paid holiday allowance against the minimum wage. In her complaint the plaintiff successfully – apart from a small difference in calculation – appealed against this behaviour.

Although the Minimum Wage Act only grants entitlements for hours actually worked, the employer also has to pay the statutory minimum wage for remuneration on public holidays. This is a consequence of the German “loss of earnings principle”, which says that the employer has to pay the amount of remuneration the employee would have received without the loss of work for working time which is cancelled due to a public holiday. Since the collective bargaining agreement refers to the “actual hourly earnings” for a night work premium and for remuneration on holidays, they also have to be calculated at least on the basis of the statutory minimum wage. However, the paid holiday allowance cannot be credited against minimum wage entitlements, because it is not payment in return for the hours worked, unlike a Sunday and public holiday premium or overtime premiums, due to former judgments.

With this further fundamental judgment, the Federal Labour Court is continuing its case law on the Minimum Wage Act and strengthening the rights of employees.

The sweet sorrow of parting – 3 year long termination notice period puts employee at disadvantage

German employment law allows the parties to an employment contract to agree a specific notice period in derogation from the statutory standard period as set out in § 622 para. 1 German Civil Code (Bürgerliches Gesetzbuch, BGB), as long as the notice period for an employee does not exceed the notice period for the employer. However, the German Federal Labour Court (Bundesarbeitsgericht, BAG) recently ruled (26 October 2017; docket number: 6 AZR 158/16) that significantly extending the termination notice period for an employee by general terms and conditions might not be in good faith and therefore lead to an unreasonable disadvantage, even if the notice period for the employer is extended in the same way.

In the case at hand the Defendant had been employed by the Plaintiff since 2009 and worked 45 hours per week for a monthly gross income of €1,400. In 2012, the parties agreed upon an extended notice period of three years to the end of a month for both parties as well as a wage increase to €2,400 or €2,800 in case of monthly net proceeds of €20,000. They also stipulated that the income should not be raised again before 30 May 2015. After a colleague discovered that the Plaintiff had installed a programme capable of monitoring work behaviour on the employees’ computers, the Defendant gave notice on 27 December 2014 effective to 31 January 2015. The Plaintiff requested to ascertain that the employment relationship with the Defendant continued to exist until 31 December 2017.

The Federal Labour Court rejected the Plaintiff’s request as it held the general terms and conditions to be void due to putting the Defendant at an unreasonable disadvantage against good faith. Even if a pre-formulated notice period that significantly exceeds the statutory standard period meets the legal requirements of § 622 para. 6 Civil Code and § 15 para. 4 Part-Time and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz, TzBfG), it might inadequately interfere with the freedom of occupation guaranteed by the German constitution, which has to be assessed by taking into account all circumstances of the individual case. The court held the arrangement to be unbalanced with regard to these principles even though both notice periods – for the employee and the employer – were extended. The disadvantage resulting from the agreement for the Defendant could not be balanced out by the intended raise, especially as the agreement itself prevented any other raise as it froze the remuneration level on a long-term basis.

Reform of the German Occupational Pension Act (“Betriebsrentengesetz”)

Effective January 1, 2018, the German Occupational Pension Act will be reformed by the Act to Strengthen Occupational Pensions (“Betriebsrentenstärkungsgesetz“), adopted by the German Parliament on 1 June 2017.

In 2002, the German legislator issued a difficult challenge to the area of occupational pension provision with the introduction of the so-called “Riester Reform”. Together with the subsidised private “Riester pension”, occupational pensions were intended to compensate for the cuts to state pensions that had already been decided. The rationale was to keep the pension levels of future generations of pensioners stable. However, take-up of both the “Riester pension” and occupational pension provision has been insufficient and remains so.

The Act to Strengthen Occupational Pensions constitutes a renewed, concerted effort to swiftly facilitate, with the help of the so-called social partners, i.e., trade unions and works councils, widespread and efficient occupational pension schemes in those workplaces where take-up has thus far been traditionally low, namely in small and medium-sized enterprises (SMEs).

The new Act, with its so-called “social partner model”, creates exclusive flexibility for signatories to collective agreements. The introduction of a pure defined-contribution scheme enables employers to have, for the first time, limited liability and absolute cost certainty with regard to occupational pensions. Moreover, in future it will be possible to include entire workforces in an automatic salary sacrifice or deferred compensation pension plan without the express written consent of each individual employee (“auto-enrolment with the right to opt-out”).

Overall, this results in remarkable flexibility for the companies in question, though it also requires intelligent consideration of any pension arrangements that may already be in place.

Temporary workers and thresholds – When does a temporary worker count as a normal employee?

Temporary work is a hybrid in employment law and thus leads to many problems: Although there is an employment contract with the leasing company, the employee works for another company. The question of assignment to one of these companies arises in many aspects of German labor law. In particular, where the number of employees is decisive for legal standards, it must be clarified whether only “normal” employees or also temporary workers are covered.

Often, the law links legal consequences to a minimum number of employees in a company:

  • For example, in companies with more than ten employees, special protection against dismissal applies (sec 23 law against unfair dismissals (“Kündigungsschutzgesetz” – KSchG)). For this threshold regularly occupied temporary employment positions should be taken into account.
  • In companies with more than 20 employees, there are also special rights of participation in serious company changes (sec. 111 Works Constitution Act (“Betriebsverfassungsgesetz” – BetrVG). For this threshold, temporary workers who have been in the company for more than three months are also to be included.
  • The size of the works council also depends on the number of employees in the company. Here, too, temporary workers who are employed for more than three months in the company are to be included in the calculation (sec. 7 (2) Works Constitution Act).
  • The regulations on employee participation in the Supervisory Board (sec. 9 Co-determination Act (Mitbestimmungsgesetz (MitBestG)) also include temporary workers for the hurdle of 8,000 employees.

The Federal Labor Court of Germany has now had to decide on another element (docket number 2 AZR 90/17 (A)). With so-called collective redundancies (“Massenentlassungen”) the sec. 17 law against unfair dismissals justifies special measures, depending on how big the enterprise concerned is. This is based on the requirements of the Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies. There are special reporting requirements for companies with 20 to 60 employees terminating more than 5 employees and 61 to 500 employees for the dismissal of 10% of the employees or more than 25 employees. In this specific case, 12 workers were dismissed. The company had less than 120 employees without temporary workers but more than 120 with temporary workers. It was therefore necessary to decide whether or not temporary workers should be taken into account. Here it would be in the interest of the employer to include temporary workers, since less than 10% would have been affected and there would be no reporting requirements. This question has been very controversial in Germany so far because there has not yet been a leading case on this point.

The Federal Labor Court of Germany has now ruled that the decisions on the other laws cannot be transferred to this case, since the specific purpose of the regulation must be upheld in each case. For this reason, the Federal Labor Court was unsure how to interpret the sec. 17 law against unfair dismissals. A definitive clarification cannot be taken by the Federal Labor Court, as this regulation is based on the European Council Directive 98/59/EC. The Federal Labor Court therefore submitted this question to the ECJ on 16 November 2017 for a ruling. Until the ECJ has decided on this (usually this takes one to two years), the question remains unanswered. Temporary workers thus remain a big problem to consider when calculating thresholds.

Suspicion of pretended sickness and activities for a competing company generally justified surveillance by a detective and immediate termination for cause

A new judgment of the Federal Labour Court (dated 29.6.2017, docket number 2 AZR 597/16) supports previous judgments concerning termination based on suspicion of breach of duties and furthermore sheds  light on the permissibility of carrying out surveillance on employees through a detective to clarify such suspicions.

In the case at hand the employee and employer argued about the effectiveness of an extraordinary dismissal. The employee was repeatedly certified unfit to work in 2014 and continuously certified unfit to work from end of January 2015 onwards. The employer suspected that the employee was not in fact sick, but used his time off sick to work for a competing company. The employer addressed the employee, but the employee did not speak out regarding this matter. Initial ground for suspicion was laid by the presence of his car at the carpark of the competing company, which was investigated by a detective instructed by the employer. Later on the employer learned of an email from the competing company addressed to a client of the employer, which again gave rise to such suspicions. Therefore the employer instructed a detective again, who, disguised as driver of a client, saw the employee conducting activities for the competing company, that were similar to those he conducted for the employer. The employer then dismissed the employee extraordinarily.

The Federal Labour Court ruled that activities for a competitor are in general an important reason for termination for cause. Also fraudulently obtaining a sick certificate is also considered an important reason to terminate extraordinarily. This does not only apply for the time period in which the employer is compelled to continue paying salaries but also afterwards.

Furthermore, the Federal Labour Court decided that the outcome of the detective’s surveillance could be used by the employer to justify the dismissal. Also, employers can generally claim compensation for the costs of legitimate detective investigations. However, the Federal Labour Court did not decide on whether or not the suspicions were sufficient for the termination for cause and the compensation of detective costs. Instead, the Federal Labour Court relegated this question back to the court previously engaged in the case.

For employers it is important to carefully assess the permissibility of detective surveillance in cases where it is suspected that employees are violating their contractual obligations. If the means of investigation are not legally permissible, this can render a termination null and void. It is good news for employers that with the present decision the Federal Labour Court emphasizes the legitimate interests of employers to investigate contractual violations of employees. The previous instance had considered these investigations illegal in the present case but are now overruled.

Occupational Pensions: Free bus ticket for wife to be considered as pension

By judgment of 23.06.2017 (6 Sa 173/17) the Regional Labour Court of Düsseldorf has ruled that with regard to the period from which the employee receives a pension, a free bus ticket provided by the employer to the employee’s wife is to be considered to be an occupational pension and therefore cannot be revoked.

The employer, a transport company, granted his employees and their husbands/wives a free bus ticket both for the period of employment and the period of retirement. The basis for these benefits was (inter alia) a works agreement of 1991. In 2016, the employer concluded a new works agreement, which was intended to replace all previous company provisions and works agreements regarding the free bus ticket, and according to which employees’ husbands and wives should no longer be granted a free bus ticket. The employee filed a suit against that.

The suit was only partly successful. In the opinion of the Regional Labour Court of Düsseldorf, the works agreement of 2016 could replace the provisions regarding the free bus tickets with effect from January 2016, since the previous provisions are of a collective nature and, therefore, according to the Federal Labor Court’s settled case law, could be subject to modification or cancellation by a subsequent works agreement. As a result, the plaintiff could not request a free bus ticket for his wife during his active period as an employee. However, the Regional Labour Court of Düsseldorf has ruled that the cancellation of the previous provisions by the works agreement of 2016 is ineffective insofar as it applies to the employee’s wife’s entitlement to a free bus ticket during the employee’s period of retirement. The Court pointed out that for the employee’s period of retirement the wife’s entitlement to a free bus ticket is to be considered to be an occupational pension, since the benefit is granted due to an insured event (the employee’s retirement age) and will be granted for the purposes of securing the employee’s standard of living in old age by saving costs within a joint family household. An intervention in occupational pensions is only possible under very strict conditions (due to the principles of the protection of legitimate expectations), which were not fulfilled the present case.

The decision shows that not only cash payments, but also benefits in kind, usage possibilities and discounts provided during retirement can be considered as an occupational pension. It does not matter whether such benefits are also granted to active employees.

Are workers in minor employment entitled to occupational pensions?

In an interesting appeal to the Federal Labour Court (docket number 3 AZR 83/16) the services trade union ver.di had been called upon by a female employee – who had originally been employed by the union Deutsche Postgewerkschaft since 1991 and had been working for the defendant since its merger with ver.di in 2001 – to obtain a pension. Since 2004, the applicant had been working in minor employment (a so called mini job or marginal employment with a maximum monthly income of Euro 450). The provisions of the 1995 pension scheme, which applied to the defendant, provide that all employees are to be registered with the unions’ support fund and that they are to be provided with a pension according to the applicable guidelines. However, individuals in minor employment are exempt.

Before 1 January 2013, as was the case with the appellant, contracts for mini jobs were not subject to compulsory pension insurance as a rule. This was later changed. As a result these individuals are now subject to compulsory insurance in the statutory pension insurance system as a rule. They have, however, the option to have themselves exempted on application from the obligation to pay contributions to the statutory pension system.
The employee alleged discrimination against part-time employment according to Sec. 4 para. 1 of the German Part-Time and Temporary Employment Act (Teilzeit- und Befristungsgesetz, TzBfG). Sec. 2 para. 2 of the TzBfG explicitly states that, individuals working in mini jobs are to be considered part-time employees just as employees working part-time, but above mini job remuneration level. The union considered the exclusion of marginal employees effective. It argued that the occupational retirement provision in particular served the purpose of supplementing statutory retirement provision; in view of the minor employment, the applicant under the old rules did not acquire any rights under the statutory pension scheme.

While the Labour Court of Rosenheim had dismissed the employee’s complaint, the Higher Labour Court of Munich had granted the claim (decision of 13 January 2016, docket number 10 Sa 544/15), arguing that the general non-discrimination principle not only applies to part-time employees vis-à-vis full-time employees but also to different treatment of different forms of part-time employment.
The hearing before the Third Senate of the Federal Labour Court was scheduled for 17 October. On the day before the union withdrew its appeal against this decision in favour of the employee.

Size (doesn’t) matter – Minimum size for police officers discriminates women

The ECJ ruled in a judgment on 18 October that a uniform minimum size as a requirement for men and women to get a job is inadmissible (docket number C-409/16). A Greek court had asked the ECJ whether “a height (in the case of men and women) of at least 1.70m”, is compatible with Directive 76/207/EEC which prohibits any indirect discrimination on grounds of sex as regards access to employment, vocational training and promotion, and working conditions.

“In the present case, the referring court itself found in its decision that a much larger number of women than men are of a height of less than 1.70m, such that, by the application of that law, women are very clearly at a disadvantage compared with men. It follows that the law at issue in the main proceedings constitutes indirect discrimination.”

Such an unequal treatment may be permitted if it is justified. This is the case if the unequal treatment is objectively justified by a legitimate aim, and the means of achieving that aim are appropriate and necessary. (see for a similar situation our article about age limits).

In general the ECJ has already held that the concern to ensure the operational capacity and proper functioning of the police services constitutes a legitimate aim. However, the suitability and the necessity of such a regulation are questionable, it is questionable whether it is not possible to use milder actions to achieve the goal. The ECJ points to two critical points: First, there are also police tasks where no physical force is necessary and secondly, the correlation between body size and higher assertiveness is questionable. This is also recognized by the ECJ:

“In that regard, while it is true that the exercise of police functions involving the protection of persons and goods, the arrest and custody of offenders and the conduct of crime prevention patrols may require the use of physical force requiring a particular physical aptitude, the fact remains that certain police functions, such as providing assistance to citizens or traffic control, do not clearly require the use of significant physical force. Furthermore, even if all the functions carried out by the Greek police required a particular physical aptitude, it would not appear that such an aptitude is necessarily connected with being of a certain minimum height and that shorter persons naturally lack that aptitude.”

The ECJ points in particular to lower minimum sizes for the greek army and coast guard. In this respect, a problem of coherence is again shown. Moreover, the Court emphasizes that other – more individual – selection criteria would allow a more precise and more specific differentiation.

Thus it shows again that special caution is required in case of unequal treatments. The existence of a legitimate goal does not automatically lead to justification. Rather, the concrete implementation must always be checked exactly.

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