Stricter notification obligations in employment relationships

Almost 2 years ago, on 31 July 2019, the European Directive (EU) 2019/1152 on transparent and predictable working conditions in the European Union came into force, which must be transposed into national law by 31 July 2022. The core aim of this directive is to promote "more transparent and predictable employment" while ensuring the adaptability of the labour market. Just in time, on 23 June 2022, the German parliament (Bundestag) passed an act to transpose Directive (EU) 2019/1152 into national law, which will enter into force very soon, on 1 August 2022. The parliament’s resolution has the greatest impact on a law that so far has not been particularly relevant in practice, the German Act on Notification of Conditions of Employment (Notification Act – Nachweisgesetz). This has far-reaching consequences for drafting employment contracts, especially since a violation of the Notification Act will soon even constitute an administrative offence punishable by a fine. This calls for swift action.

I. Current legal situation

In its current version, the Notification Act already provides for a number of obligations on the part of employers to notify their employees of their working conditions, although these have not been very prominent in labour law practice to date. For example, an employer has been obliged to document the essential contractual conditions in writing no later than one month after the agreed commencement of the employment relationship, to sign the document and to hand it over to the employee.

• These conditions included those that are usually found in written employment contracts: the name and address of the contracting parties, the commencement date of the employment relationship, the foreseeable duration of the employment relationship in the case of fixed-term employment relationships, the workplace and working hours, a brief characterisation or description of the work as well as the components and amount of the remuneration, the amount of annual leave and the termination notice period.
  
  
• There were also special obligations for notification of employees to be sent on foreign assignments. Before departing, such an employee had to be notified in writing of not only the information required under the general notification obligations but also how long the assignment abroad was to last, the currency in which the remuneration was to be paid, additional remuneration and benefits in kind associated with the assignment abroad as well as the conditions under which the employee would return.

The purpose of the notification obligations is to provide employees with reliable information on the content of their employment contracts.

However, the notification obligations under the Notification Act are not constitutive; as protection for the employee, the employment relationship enters into effect even if the employer does not provide the notification in time.

Up to now, if an employer has not complied with its obligations under the Notification Act, an employee could assert a claim for performance against the employer, i.e. demand that the employer provide a written document of the essential conditions of the contract as required under the Notification Act. Some employees have also been able to claim damages if they have suffered financial loss as a direct result of the employer's breach of its obligations under the Notification Act, although this has been extremely rare in practice. Until now, employers who violated the Notification Act have not been subject to a fine.

II. What will be different now

The amendments to the Notification Act that have been adopted and will come into force on 1 August 2022 will expand and supplement existing notification obligations and set down further minimum requirements for certain working conditions. The previously applicable deadlines for providing proof will be shortened. Employers that do not meet the deadlines or provide the evidence correctly will now face severe penalties. Violations of the notification obligations may result in a fine of up to EUR 2,000 per violation.

1. Additional notification obligations

 

In addition to the previously applicable obligations to notify employees of their essential working conditions, new obligations have been added to the list.

• For example, in addition to the essential terms and conditions of employment previously provided for in the Notification Act, either the ending date or the foreseeable duration of a fixed-term employment relationship and the duration of any agreed probationary period must be documented.
  
  
• Likewise, the components and amount of remuneration, including overtime pay, supplements, allowances and bonuses, as well as any special payments, must be stated separately. The type and due date of each payment must also be included.
  
  
• Breaks and time between working days as well as any shift system, the shift rhythm and the prerequisites for shift changes are also components of the notification obligation.

Another significant change is that the required notification regarding notice of termination, which already includes notice periods, must now also include documentation of the procedure to be followed (by both employer and employee) when giving notice of termination.

• In future, the documentation of the essential contractual conditions must therefore contain at least information on the written form requirement for termination as well as the notice periods applicable to the parties by law, collective agreement or individual contract. In the case of a probationary period, the length of the shortened notice period must also be documented.
  
  
• But that is not all. Employers must also inform employees that, if they are dismissed, they have three weeks in which to bring any action for unfair dismissal according to section 4 of the German Act on protection against dismissal (Kündigungsschutzgesetz). However, the legislator correctly clarifies in the explanatory memorandum to the law that a dismissal by an employer is not invalidated by an incorrect or omitted reference to the time limit for bringing an action. Instead, the preclusive effect of section 7 of the Act on protection against dismissal is to apply even in the case of omitted or incorrect notification, which means that the three-week period for bringing an action for protection against unfair dismissal continues to apply.

Now it will also be compulsory to provide notification of

• the scope of the employee’s right to participate in training provided by the employer,
  
  
• whether overtime can be required; and
  
  
• the pension fund or provider if there is a company pension commitment.

If an employee works abroad for more than four consecutive weeks, the notification obligations are extended further and made more detailed. The employer must also document in writing

• the country or countries in which the work abroad is to be performed,
  
  
• the planned duration of the assignment,
  
  
• if agreed, any cash or non-cash benefits associated with the stay abroad, in particular reimbursable secondment allowances and travel, food and accommodation expenses,
  
  
• whether the employee is to return and
  
  
• if so, the conditions of the employee’s return.

The scope of application of the Notification Act will also be extended. The previous exception for temporary workers hired for a maximum of one month no longer applies – in future, it will apply to all employees.

2. Shortened deadlines

 

The previous deadline of one month after commencement of employment for documenting the essential terms and conditions of employment will now also be significantly shortened.

• On the first day of work at the latest, information on the name and address of the contracting parties, the components and amount of the remuneration and the agreed working hours must be documented in writing.
  
  
• No later than seven days after the work commences, conditions such as the starting date of the employment relationship, the duration of the probationary period and the agreed fixed term as well as the workplace, job description and overtime arrangements must be documented.
  
  
• For the remaining conditions, the one-month period remains in force. However, to simplify the process, it is advisable to include all the information required by the Notification Act in the written employment contract and – as is customary – to have both parties sign it by hand before the work commences and to hand an original written employment contract to the employee.

If the essential contractual conditions change in an existing employment relationship, it will no longer be sufficient to notify the employee of the change at the latest one month after the change (section 3 Notification Act, old version). In future, the changes will have to be communicated to the employee in writing on the day they become effective.

3. New: penalties for violations

 

The most noticeable change in the Notification Act is now found in the new section 4, which states that violation of an employer’s obligations under the Notification Act will constitute an administrative offence. A fine of up to EUR 2,000 may be imposed for each violation if the employer fulfils its notification obligation either

• not at all,
  
  
• incorrectly,
  
  
• in the wrong form,
  
  
• incompletely
  
  
• or not in good time.

Especially in view of the newly introduced penalties, it is advisable to comply with the shortest of the abovementioned deadlines for notification of the essential working conditions and to hand over to the employee the written essential working conditions on the first day of work at the latest.

However, it remains the case that the notification obligations are not constitutive, and a violation of the notification obligations does not affect the validity of the employment relationship as such.

4. Still no digitalisation in sight

 

Although the European Directive on transparent and foreseeable working conditions in the European Union explicitly allows for drafting working conditions and making them available to employees in electronic form, the new German law does not. Thus, as before, the Notification Act requires that the essential terms and conditions of employment be provided in written form. This means that, in order to fulfil their obligations under the Notification Act, an employer will still have to document the terms and conditions of employment on paper, sign them by hand and hand them over to the employee. It will remain insufficient to provide the signed conditions to the employee in the form of a scan or to merely sign them digitally.

5. Additional changes

 

a) German Act on Temporary Agency Work

The legislator is also amending the German Act on Temporary Agency Work (Arbeitnehmerüberlassungsgesetz). For example, the notification obligations set down in section 11 will be extended to include the obligation to notify the worker of the name of the client.

• The temporary worker must now be informed of the client’s company name and address in text form before each
  
  
• In addition, clients will be obliged to provide temporary workers who have been posted to them for at least six months and who express their wish to conclude an employment contract with a reasoned reply in text form within one month. However, the legislator leaves open the content and scope of the reasoned reply.

b) Part-Time Work and Fixed-Term Employment Act

The German Part-Time Work and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz) will also be amended as on 1 August 2022:

• Any probationary period agreed upon in a fixed-term employment relationship must now be in reasonable proportion to the duration of the fixed-term employment relationship and the type of work. This is likely to have the strongest effect on short fixed-term contracts, in which a probationary period of six months, which has been permissible up to now, may no longer be permissible in the future and may instead only be permitted to have a duration of a few weeks or months.
  
  
• Employees with fixed-term contracts who have been working for an employer for more than six months will be permitted to inform their employer of their wish to establish a permanent employment relationship. The employer will then be obliged to give the employee a reasoned reply in text form within one month. Here, too, the legislator leaves open the content and scope of the reasoned reply.

c) Trade, Commerce and Industry Regulation Act

The Trade, Commerce and Industry Regulation Act (Gewerbeordnung) has also been amended. According to its section 111, it is not permissible to charge employees for the costs of training if their employer is obliged by or on the basis of a law, collective agreement or company agreement to offer the training. Such training is to take place during working hours. If and to the extent it must take place outside of working hours, it is to be regarded as working hours.

6. Reference to collective agreements still possible

 

The notification of the essential terms and conditions of employment can still be replaced by a reference to the collective agreements applicable to the employment relationship, such as collective agreements, works agreements and service agreements. The prerequisite for this, however, is that the relevant collective agreement contains a corresponding provision on the essential terms and conditions of employment.

Employers should act now

These changes mean that there is now an urgent need to adapt any employment contract templates used by employers. When revising the templates, care should be taken – all the more than before in view of the susceptibility to fines – to ensure that all the information required by the Notification Act is included.

What is the situation for older contracts?

The good news is that contracts concluded before 1 August 2022 do not have to be amended. However, employers are obliged to provide their employees with the essential terms and conditions of their employment in writing within seven days upon request. In view of this very short time period, it is advisable to prepare for such a case by keeping on hand a corresponding template of the essential contractual conditions that meets the requirements of the amended Notification Act.