Germany: Newsletter Employment Law

In the 3rd quarter of 2012 the labour courts of first and second instance passed a multitude of decisions regulating issues that were still unresolved at the practical level. One of these decisions is that of the Regional Court [Landesarbeitsgericht, LAG] of Hamm described below on the use of chat protocols during unfair dismissal proceedings. The Federal Labour Court [Bundesarbeitsgericht, BAG], in contrast, has had to decide on "evergreens" such as the settlement of holiday claims in the event of an employee's long-term illness or the agreement of fixed remuneration.

1. Current case law

1.1. Works council activities during holiday - no claim to new holiday entitlement

Amongst a number of recent judgements on the rights and obligations of works council members, a decision has been pronounced by the Labour Court [Arbeitsgericht, ArbG] of Cottbus dated 15 August 2012 (2 Ca 147/12) clarifying that works council activities during holiday do not give rise to the need to grant the works council member new holiday.

The situation underlying the decision was that, having given notice to the group works council chairman, the works council member attended a works council meeting during his holiday. In the legal action brought by him he demanded that the Defendant grant him a new day of holiday. He argued that works council members have to interrupt their holiday or - as in the case here - are unable to even go on holiday, if they exercise works council activities and notify this in good time to the (group) works council chairman. The complaint was justly dismissed.

The Labour Court decided that works council members are suspended from all official duties during their holiday and are temporarily hindered within the meaning of Sec. 25 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG]. They can cancel such temporary hindrance by giving timely notice to the works council chairman; the legal consequence hereof, however, is not the interruption of the granted holiday.
Rather, in such a case the works council member voluntarily sacrifices a day of holiday for the works council activities. He does so on personal grounds and not for operational reasons which interrupt the granted holiday.

The decision can also be transferred to cases in which works council members exercise a works council activity despite having previously applied for and been granted time-off in compensation for overtime. If the works council member conducts works council activities during this time, then this is purely a leisure activity and cannot lead to the new accrual of the claim to time-off.

1.2. Use of chat protocols in court - admissibility of evidence not prohibited

Many enterprises use instant-messaging programmes to make it easier for their employees to keep communication channels and times to a minimum. In business practice, for a variety of reasons employers are frequently keen to inspect and use chat protocols in court in unfair dismissal proceedings based on an employee's conduct. Because of the criminal legal relevance of accessing chat protocols, this will hardly be possible.

The Regional Labour Court of Hamm has now ruled by judgement dated 10 July 2012 (14 Sa 1711/10), however, that chat protocols are not prohibited from being admitted as evidence in unfair dismissal proceedings even if the chat protocols stored on a works computer have been unlawfully obtained. In the underlying case, employees had sold company property on the internet. This act could exclusively be proven through the chat protocols. The decisive factor for the Regional Court of Hamm in its decision whether or not to admit the evidence was the manner in which the enterprise had permitted its employees to use the instant-messaging service. In this connection, the enterprise had inter alia always pointed out that employees could not expect the confidential treatment of their personal affairs.

If evidence supporting contract-breaching conduct can be elicited via chat protocols, then guidelines for the use of instant-messaging services need to be reviewed on the basis of the decision of the Regional Labour Court of Hamm. However, one should not forget in this connection that the collection of data is still generally prohibited.

1.3. Cut in social plan benefits for employees approaching pension age

In a judgement dated 6 July 2012 the Regional Labour Court of Düsseldorf(10 Sa 866/11) permitted social plan provisions which envisage lower social plan benefits for employees approaching pension age.

The claimant contested a clause in a social plan pursuant to which the individual points value would be reduced by 1/48 per month for employees who entitled to a statutory retirement pension within 48 months as of the date of the legal end of their employment relationship. In the claimant's case, this meant a reduction of his redundancy pay by about €9,600 to about €28,800. His claim to payment of the balance was unsuccessful before the Labour Court. The Regional Labour Court of Düsseldorfalso rejected the claim, albeit that it permitted the appeal on points of law before the Federal Labour Court [Bundesarbeitsgericht, BAG].

The Regional Labour Court of Düsseldorfdid not deem this provision on the cut in redundancy pay to violate any higher ranking right. It was of the opinion that a distinction in the social plan between employees close to pension age and employees not close to pension age - also pursuant to the case law of the Federal Labour Court - is covered by Sec. 10 sentence 3 no. 6 German Labour Courts Act [Arbeitsgerichtsgesetz, ArbGG] and does not violate the EU directives on protection against age discrimination. In the opinion of the Regional Labour Court of Düsseldorf, the business partners have duly accounted for the essentially age-based chances on the employment market by putting a proportionately strong emphasis on age. The manner in which this was accounted for was, in the opinion of the Regional Court of Düsseldorf, not objectionable either because the reference basis was the regular age limit within the meaning of Sec. 235 German Social Code Book IV [Sozialgesetzbuch IV, SGB IV], hardship cases were avoided through the gradation as opposed to a strict qualifying date clause, and the cut in redundancy pay is minimal in relation to the overall sum.

The judgement confirms the structuring possibilities open to the business partners when regulating social plan provisions which are oriented on employees' chances on the employment market. Even though the Regional Court of Düsseldorfhas admitted the appeal on points of law before the Federal Labour Court, the Federal Labour Court is expected to deem such clause admissible in conformity with its previous case law on the distinction between employees approaching pension age and employees not approaching pension age in social plans.

1.4. Loss of holiday claim in case of long-term illness

Following several cases before the ECJ which have given German holiday entitlement law an impulse in a new direction, the Federal Labour Court has ruled in a further decision (dated 7 August 2012; 9 AZR 353/10), which accounted for the requirements of European law, that the loss of the holiday claim in case of an employee's long-term illness is lawful upon the expiry of 15 months after the end of the year in which the holiday accrued.

The Federal Labour Court's decision was based on the appeal on points of law by the sued employer, whose employee - after having left the employment relationship in 2009 following a long-term illness - sued for €18,841.05 in remuneration for 149 days of holiday from the years 2005 to 2009. The previous instances had always ruled in the claimant's favour, albeit that the courts had limited the remuneration of the statutory holiday entitlement by reducing the amount of the claim to about €13,500.

The Federal Labour Court exclusively acknowledged the remuneration of the holiday for the years 2008 and 2009 and explicitly stated that in cases of employees incapacitated from work on grounds of a long-term illness, Sec. 7 para. 3 sentence 3 German Federal Holiday Entitlement Act [Bundesurlaubsgesetz, BUrlG] - pursuant to which a transferred holiday entitlement must be granted and taken during the first three months of the following calendar year - must be interpreted in conformity with Union law to the effect that the holiday claim expires 15 months after the expiry of the year in which the holiday accrued. With this, the financial risk - particularly with a view to reserves - has finally become terminable.

1.5. Orally agreed fixed remuneration of overtime is valid; effects upon contract structuring of the latest Federal Labour Court case law on overtime clauses

By judgement dated 16 May 2012 (5 AZR 331/11) the Federal Labour Court affirmed the validity of an oral agreement between an employer and employee, pursuant to which the first 20 hours of overtime per month are already remunerated with the monthly fixed salary. In particular, it did not consider such an agreement to be either non-transparent or surprising. Nor is it subject to any requirement to have its contents further examined pursuant to Sec. 307 para. 1 sentence 1 German Civil Code [Bürgerliches Gesetzbuch, BGB], as a clause in general terms and conditions which exclusively regulates the remuneration of overtime as opposed to the employer's power to order overtime work constitutes an agreement on a principal service which solely concerns the employer's consideration for services rendered and is therewith not subject to the examination of its contents.

In the case to be decided by the Federal Labour Court the claimant worked at the defendant, an automobile supplier not bound by a collective bargaining agreement, in the stock management department and, with a regular working week of 40 hours, earned a fixed gross salary of €2,184.84. The employment contract had only been concluded orally. The defendant's personnel manager had also orally informed the claimant that the first 20 hours of overtime per months were "included in this". Accordingly, in the past the defendant had only remunerated overtime as of the 21st hour of overtime worked in the month, and then with a 25% bonus. The claimant retroactively demanded inter alia remuneration of the first 20 hours of overtime, which was in turn rejected by the defendant on grounds of the orally agreed fixed overtime agreement.

The complaint was unsuccessful in all three instances. In the opinion of the Federal Labour Court the said oral agreement constituted a general term and condition as it was used by the defendant in a multitude of employment contracts. In particular, the lack of written employment agreement did not exclude the acceptance of general terms and conditions. However, being an agreement concerning a principal service, it was not subject to any further-reaching examination of its content (Sec. 307 para. 3 sentence 1 BGB). Moreover, the Federal Labour Court did not consider the clause to be surprising either, for fixed overtime remuneration clauses are broadly used in the employment sector and, additionally, the oral notification of this clause to the employee and therewith its agreement as an integral part of the employment contract also did not suffice to constitute a "blindsiding" of the employee. Otherwise, oral general terms and conditions would always be surprising and could never become integral parts of a contract. Finally, the clause was also not invalid on grounds of a lack of clarity, as it clearly and comprehensibly regulates in which temporal scope the employment services of the claimant are to be covered by the agreed salary.

The decision does not comment on whether or not a comparable clause would be subject to an examination of its contents if the employment contract simultaneously contained the employer's power to order overtime work. For purposes of future contract structuring, however, the most recently pronounced decisions of the Federal Labour Court concerning overtime clauses are of considerable relevance. Accordingly, in summary, the following can be established:

  • A clause on the fixed remuneration of all overtime worked is non-transparent and therefore invalid (BAG, NZA 2011, 575).
  • Even in the event of the invalidity of such a clause, however, the employee only has a claim to remuneration if, pursuant to objective criteria, such remuneration could be expected; this is regularly not the case with a salary above the social security contribution ceiling in the statutory pension insurance scheme or in case of senior

In contrast, a clause on the remuneration of a specific number of overtime hours is fundamentally valid up to the limit of unconscionability. Not clarified to date, however, is when the said limit is deemed specifically exceeded in this connection. In the aforesaid configuration of the Federal Labour Court decision dated 16 May 2012 (without examination of contents), the Federal Labour Court certainly accepted fixed remuneration for about 12.5%. In a decision dated 1 September 2010 (5 AZR 517/09) the Federal Labour Court did not comment on a desired fixed remuneration for about 18.5% (although the remuneration clause in this case was already deemed invalid on grounds of its non-transparency). Moreover, if one compares this with the previous case law of the Federal Labour Court on reservations of revocation, there are several indications to the effect that in case of a fixed remuneration agreement, as much as 25% of the regular working hours certainly can be validly "flexibilised".

However, until supreme court clarification of this matter, caution should still be applied when structuring contracts and employers should consider whether they ought to dispense with a clause regarding the ordering of overtime in order to avoid a further-reaching examination of its contents and therewith be able to have as many overtime hours as possible remunerated with the monthly salary.

2. 4th Employment Law Day 15 November 2012

On 15 November 2012 Oppenhoff & Partner is to hold its 4th Employment Law Day with a focus on European law, occupational health management and matrix structures within corporate groups. We are pleased to be able to once again welcome Prof. Dr. Gregor Thüsing (University of Bonn) as a renowned speaker from the research and academic sectors.

Prof. Dr. Thüsing will explain the most important decisions of the ECJ over the past year and the most significant projects of the EU Commission, as well as their effects upon business practice.

The legal framework of occupational health management as well as the employer's pertinent obligations and structuring possibilities will subsequently be introduced by Kathrin Vossen and JörnKuhn.

Dr. Gilbert Wurth and Dr. Alexander Willemsen will answer topical questions on matrix structures within corporate groups, in particular concerning the problem areas of business-wide and company-wide collaborations within the group.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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