Will working time soon have to be recorded electronically?

The eagerly awaited draft bill from the German Federal Ministry of Labour and Social Affairs (“Labour Ministry”), which was announced for the first quarter of 2023, is now finally available. The draft points out the direction in which a law on the (already existing) obligation to record working time could go.

What is the background of the new law?

As we reported in our news article on the German Federal Labour Court’s (“Federal Labour Court”) “timekeeping decision” of 7 December 2022 (link), all employers are obliged, at the latest since the Federal Labour Court’s ruling of 13 September 2022 (case no. 1 ABR 22/21), to maintain a “reliable, objective and accessible” system for recording daily time worked. According to the Federal Labour Court, to protect employees, it was essential to record not only how long but also at what times and on what days employees work.

However, it was not clear exactly how the working time was to be recorded in practice. Is manual timekeeping on a piece of paper or in an Excel spreadsheet already a “system” that is “reliable, objective and accessible”? The Federal Labour Court had clarified that working time does not necessarily have to be recorded electronically. In contrast, the requirements found in the new draft bill are stricter. It is considered likely that the legislator – as provided in the draft – will in principle stipulate electronic recording, which means that many employers will have to make changes.

What are the specific plans?

The Labour Ministry’s draft bill of 18 April 2023 states that the German Working Time Act (Arbeitszeitgesetz – “Working Time Act”) is to be amended in order to reflect requirements established by case law.

Up to now, the Working Time Act has only required that working time exceeding that of a normal working day be recorded. In future, employers will be obliged under section 16(2) of the Working Time Act (new version) to electronically record the beginning, end and duration of employees’ daily working time on the day they perform the work.

New obligation to record working time electronically

The draft bill goes beyond the form requirements established by case law and stipulates that employees’ working time must in principle be recorded electronically. According to the draft bill, exemptions from this form requirement will only be available to employers who either employ ten or fewer employees, are subject to a collective agreement with a corresponding exemption or are subject to a works agreement based on such a collective agreement.

However, at least generous transitional periods, staggered according to number of employees, are provided for the changeover to electronic timekeeping:

Employers with up to 10 employees	No electronic timekeeping requirement is intended. A handwritten record on paper is sufficient.
Employers with fewer than 50 employees	Five-year transitional period to switch to an electronic timekeeping system.
Employers with fewer than 250 employees	Two-year transitional period to switch to an electronic timekeeping system.
Employers with 250 or more employees	One-year transitional period to switch to an electronic timekeeping system.

However, caution is advised here, as this relief only extends to the form of the record. Once the law is in force, all employers will be obliged to comply with all other newly introduced obligations under the law, such as information, record storage and monitoring obligations.

Can timekeeping be delegated?

The draft provides the practical solution that the timekeeping can be done by employees themselves or by a third party. This is essential, especially in the case of mobile work (field service or remote work). Depending on a company’s circumstances, it is advisable that the timekeeping be done either by employees themselves or by a department head, shift supervisor, foreman or the client that uses the services of a temporary employee. Software solutions (e.g. apps on smartphones or laptops) are particularly suitable for employees who work in the field or remotely. In each such individual case, it should be determined which option is best suited for practical and legally certain implementation.

It is important to note that the responsibility always remains with employers, and they are obliged to carry out random checks of working time records that have been delegated to the employee.

Information requirements

Employers must inform employees of the recorded working time upon request. This follows from the principle established by the European Court of Justice that a timekeeping system must be “accessible”. Employees can also request copies of the records. The explanatory memorandum of the draft bill states that compliance with this request can be sufficient in the form of transmission of an electronic copy or allowing employees to inspect the records themselves and make copies. The draft does not state how often employees can make use of their rights to information and copies. This constitutes the same risk of excessive use linked to the rights to information and copies found in Article 15 of the EU General Data Protection Regulation (GDPR).

Overtime pay and the likely avalanche of lawsuits

The obligation to keep records will lead to an increase in the number of legal actions for overtime pay. As a general rule, employers need only pay for overtime actually worked and initiated by them. Employees bear the burden of proof of the number of overtime hours worked. Up to now, many claims for remuneration of overtime have failed because the plaintiffs, i.e. the employees, could not prove in detail the overtime actually worked. In the future, however, employees will be able to easily prove (in court) the number of overtime hours worked. According to established case law, records actually made are presumed to be correct. With this in mind, employers would be well advised in future to regularly check working time records and, if necessary, discuss with employees whether the overtime was actually necessary and could be avoided in future. Only employers that have intervened in time and/or implemented legally sound rules will be able to defend themselves against claims for large amounts of overtime pay in future. Employers should therefore implement a suitable system to prevent “self-initiated” overtime or enter into appropriate agreements on (effective) compensation for overtime.

What about executive employees?

In general, executive employees are not covered by the scope of application of the Working Time Act pursuant to its section 18(1) no. 1. The draft bill has no express provision that would oblige executive employees to record working time in future.

What about collective agreements?

Like many laws, the draft bill contains a collective bargaining clause, according to which it is possible to deviate from the timekeeping obligation by means of a labour-management agreement, in particular with regard to the form and the time of recording. The parties to the collective agreement can also exempt certain groups of employees from the timekeeping obligation, but these groups can contain only certain employees with special characteristics that are prerequisites. These prerequisites could be met, for example, by managers, special experts or scientists.

Does the works council have to be involved?

Introducing an electronic system for recording working time is subject to mandatory co-determination by the works council because section 87(1) no. 6 of the German Works Constitution Act (Betriebsverfassungsgesetz) applies. Employers should therefore familiarise themselves with the various possibilities and systems for recording working time and determine from the outset what is possible and what is necessary.

What are the legal consequences for violations?

The draft provides for violations to be punishable as administrative offences with fines of up to €30,000. Employers are subject to this fine if they intentionally or negligently fail to draw up records at all or correctly, completely, in the prescribed manner or in a timely manner.

The same applies to employers that do not keep all the records for at least two years or do not comply with an employee’s request for information or a copy. Employers already face fines of up to €30,000 for failure to comply with requirements regarding maximum working time, break times and time off between working days according to section 22(1) nos. 1-3 of the Working Time Act or even imprisonment of up to one year under section 23 of the Working Time Act. In future, however, employers will face the considerable risk that employees will be able to prove or supervisory authorities will be able to very easily determine these violations.

Will trust-based working time still be possible?

Mandatory recording of employees’ working time (by the employees themselves) does not prevent employees from continuing to decide themselves when this work will be done within the framework of trust-based working hours. Compliance with the provisions of the Working Time Act regarding breaks, time off between workdays and maximum working time has always been mandatory for every form of trust-based working time. Trust-based working time in which employees “work when they want” without adhering to these legal framework conditions has always been and will remain impermissible.

However, the draft bill is also considerably stricter on this point. In the case of trust-based working time, employers will be explicitly obliged to take appropriate measures to ensure that they become aware of violations of the Working Time Act and take appropriate remedial action. The explanatory memorandum of the draft bill proposes automated notifications to employers which would make them directly aware of such violations that become apparent when employees record their working time electronically.

However, on the one hand, there is a very fine line between the necessary monitoring of working time and illegal employee surveillance, so employers must be careful. On the other hand, employers that become aware of violations of the Working Time Act may face penalties if they fail to act (imprisonment for up to one year or a fine, sections 22 and 23 of the Working Time Act).

Outlook

At this point, there is no need for panic but rather for an objective discussion of the issue. The changes planned in the draft bill include far-reaching consequences for many employers in Germany. It is considered certain that the proposed electronic form of recording working time will not be abandoned in the resulting law. There will still be discussions regarding the details, as numerous comments from associations and trade unions are to be expected. Nevertheless, the draft bill could be passed in the near future. Particularly for larger companies, it will simply not be practicable over a longer period of time to (continue to) record working time in paper form. Practically speaking, good software-based solutions such as apps will be necessary, but it is important to remember that works councils have a right of co-determination. Generous transitional periods are provided for initiating an electronic system.

Employers should make sure they understand the amendments, which entail considerable risks for them. For one thing, the records can serve as evidence for supervisory authorities, which can lead to fines or even imprisonment if, for example, maximum working time is exceeded. If employees work overtime not initiated or monitored by their employers, the employers will also be exposed to considerable claims for overtime pay, which employees can easily enforce in court, since overtime will in future be documented in a legally watertight manner and employers demonstrably could have been aware of it.