On June 23, 2022 the German Bundestag adopted a package of amendments to implement the EU Working Conditions Directive. The seemingly mundane amendments to the German Act on the Notification of Conditions Governing an Employment Relationship (Nachweisgesetz – NachwG) and other laws significantly extend the employer’s obligation to provide (prospective) employees with information about key aspects of the employment relationship. The package establishes minimum working conditions concerning the maximum duration of any probationary period, parallel employment, minimum predictability of work, requests for transition to a different form of employment, as well as mandatory training. Crucially, while the Act previously played an insignificant role, fines may now be imposed for failure to comply.
The changes to the NachwG
The key changes to the NachwG apply from August 1, 2022. Employers must now provide (prospective) employees with information on the following topics in the employment contract or a separate (signed) document:
- The end date, if agreed, for any fixed-term employment relationships;
- In the case of remote work, the agreement must specify that employees are free to choose their place of work;
- The duration of any agreed probationary period;
- The components and amount of remuneration (basic remuneration, any premiums, special payments, allowances, bonuses etc.), listed separately;
- In addition to agreed working hours, information on agreed breaks and rest periods. In the case of shift work, the shift system, the shift schedule and the prerequisites for a shift change must also be indicated;
- For on-demand work, the agreement regarding on-demand work, the minimum number of paid working hours, the time period set for the performance of the working hours as well as the respective notice period for the employer;
- Whether there is a possibility to order overtime hours as well as their requirements;
- Any entitlements to training courses provided by the employer;
- In case of a commitment under a company pension scheme, the name and address of the pension provider unless the pension provider is obliged to provide this information; and
- The procedure to be complied with in case of a termination of the employment agreement, including at least the written form requirement for termination, the notice periods as well as the period for filing a complaint for unfair or wrongful dismissal.
The written form requirement will be fulfilled either if the employment agreement is concluded in writing, and a signed original is presented to the employee, or if the essential contractual terms are printed, signed by a representative of the employer and provided to the employee. Employees should be asked to counter sign such documents as proof of their consent to the conditions.
Shorter periods to provide written information
Until now, the NachwG gave employers one month from the commencement of the employment relationship to specify the essential working conditions in writing. In the case of new employment relationships starting from August 1, 2022, employers will have to inform employees in writing about the details of the contractual parties, the remuneration as well as the working hours (including breaks and rest periods) at the latest on the first day of work. Employers will have one month to inform the employee about the duration of annual leave, any entitlement to training courses, the details of the pension provider, the procedure for giving notice as well as to make reference to any collective agreements; all other information must be provided to the employee within 7 days.
This artificially staggered timing is time-consuming and confusing. With the exception of those provisions which should be set out in a separate agreement for legal reasons, e.g., a post-contractual non-competition obligation or annual target agreement, all regulations under the NachwG should be included in one employment agreement provided at the latest on the first day of work.
Existing agreements may require adjustment. Existing employees may request a copy of the essential working conditions in writing. This record must be provided at the latest 7 days after the request.
If many employees exercise their right to receive a record of the essential working condition, companies may face extremely tight deadlines. Employment agreement templates should therefore be reviewed professionally and model wording should be drafted for conceivable scenarios without delay.
Consequences in case of violations of the NachwG
Until now, merely had the burden of proof in proceedings before the labor courts with regard to the essential contractual terms. From August 1, 2022, violations of the NachwG will be penalized. Violating the obligation to record the essential contract terms in writing or failure to comply with the time periods is an administrative offence which may result in a fine of up to €2,000.
Impact on company pension schemes
While company pensions were already considered an essential contract term, corresponding records rarely considered this aspect adequately. The new provisions require considerably more detailed information.
The new NachwG makes it necessary to name any external pension providers, as well as the individual amounts of the benefit and its maturities, based on commitments. However, it is unclear how to comply where the benefit amounts (keywords: purely defined contribution commitments and contribution-based benefit commitment) and commencement of contribution have not been determined yet.
Where the occupational pension scheme is set forth in collective, works or service agreements, a reference to the collective labor law regulation will suffice.
Need for action in other areas
The package also introduced changes to other laws.
• Vocational Training Act (BBiG)
The written record of a training contract must now include the name and address of the contracting parties and, if the trainees are minors, the name and address of their legal representatives. In addition, the location of the training site, any training measures to take place outside of the training site, the amount and composition of remuneration, as well as the remuneration and compensation for overtime must be documented.
• Act on Temporary Employment (AÜG), the Trade, the Commerce and Industry Regulation Act (GewO)
Employers must provide temporary agency workers and temporary employees, who express their desire in writing to take over or continue the employment relationship as an unlimited employment relationship, with a reasoned response in text form within one month of receipt of this notification.
The GewO now provides that employees may not be charged for training if the employer is required by law or collective bargaining agreement to offer such training. Training courses must also be held during regular working hours.
• Part-Time Work and Fixed-Term Employment Act (TzBfG)
An agreed probationary period in a fixed-term employment contract must be proportionate to the expected duration of the fixed-term and the nature of the activity. The legislator does not provide guidance on what is considered proportionate.
Employers have had little time to prepare. Existing standard employment agreements that do not comply with the new provisions must be amended as a priority.
Whether the implementation of the Working Conditions Directive into German law is in line with the spirit of the Directive on transparent and predictable working conditions in the European Union is questionable. Employment agreements will become even more comprehensive and, from the employee’s point of view, even more illegible and difficult to understand. However, this does not change the fact that employers in Germany must now revise model and existing employment agreements and adjust their HR practices for compliance without delay.