Green light for the new coalition: What changes employers could see in employment law

“Daring to make more progress – Alliance for freedom, justice and sustainability.” Under this heading, SPD, FDP and Bündnis 90/ Die Grünen (the Greens) signed a coalition pact to form a new government, styled as a “traffic light” coalition based on the parties’ signature colours of red, yellow and green. The fourth chapter, “Respect, Opportunities and Social Security in the Modern World of Work” (p. 65 onwards), contains the employment law points envisaged for the coming legislature period. This article presents and briefly discusses the coalition’s projects that are most important to employers.

1. More flexible working conditions and new ways of working

The infection control measures that have become necessary in the Covid pandemic have driven the digitalisation of work and again highlighted the need for more flexible working conditions, including flexible working time arrangements. This transformation of the world of work is to be reflected in the following measures:

Room for experimentation in the Working Time Act

• The Working Time Act is to be supplemented in 2022 by a time-limited regulation with an evaluation clause. Trade unions and employers are to be given the opportunity to agree on more flexible working time arrangements in collective agreements. The eight-hour day is intended to remain unaffected in principle, although collective agreements can also deviate from it – in the context of “room for experimentation”.
  
  
• On the other hand, according to the wording of the coalition pact, works councils and employers will not automatically be allowed to enter into agreements diverging from the provisions of the Working Time Act, but only if collective agreements grant such powers. Companies not bound by collective agreements are therefore unlikely to be able to take advantage of this option. The current trend of compensating legislatively for the apparent lack of attractiveness of the trade unions, which are affected by a decline in membership, will therefore continue. It remains to be seen whether a provision will be introduced corresponding to the fourth and sixth sentences of section 1(1b) of the Temporary Work Act (Arbeitnehmerüberlassungsgesetz), allowing employers not bound by collective agreements to adopt corresponding collective agreements.
  
  

Recording working time

• The topic of trust-based working time now seems to be increasingly important. After a ruling by the European Court of Justice on 14 May 2019 (case C-55/18) called on Member States to oblige employers to put in place effective time recording systems, there has been and still is uncertainty in companies about whether, in light of this ruling, trust-based working hours will remain possible in future. Fortunately, the coalition pact clearly supports trust-based working hours. But it remains to be seen how this can be implemented in line with European regulations.
  
  

Working from home

• The coalition parties correctly understand working from home as a form of remote working, distinct from the concept of teleworking and the scope of the Workplaces Regulation (Arbeitsstättenverordnung). Appropriate and flexible solutions are to be developed for occupational health and safety and good working conditions for home-based employees. How these will be designed in individual cases is not yet foreseeable. However, there is hope that legal certainty will be created, in particular for occupational health and safety, to determine what requirements employers have to meet and ensure at the same time that the requirements are not over-extended.
  
  
• In the opinion of the coalition parties, EU-wide mobile working should also be possible easily in future. This will require appropriate European regulations which, ideally, will reduce the administrative burden on employers that want to let their employees work abroad remotely. It remains to be seen whether this will succeed.
  
  
• What’s also new is that employees are to be granted a right to discuss remote working and working from home options with their employers. According to the ideas set out by the coalition parties, the employer will only be able to refuse employees’ requests if they conflict with company interests. It is still unclear, based on these ideas, to what extent employees will be able to claim a right to work from home, and it is also unclear what requirements will be placed on the company’s interests. The devil is likely to be in detail here, with potential for conflict between employees and employers.
  
  

The gig economy

Work is increasingly being assigned via digital platforms. The coalition partners intend to review existing legislation in this respect, improve the data foundations in dialogue with stakeholders, and constructively support the European Commission’s initiative to improve working conditions on platforms.

2. Strengthening the autonomy of collective bargaining

The coalition partners aim to reinforce the autonomy of collective bargaining. They are planning the following measures:

• Public procurement by the federal government is to be tied to the company’s compliance with a representative collective agreement for the relevant industry. However, this is not intended to create any more red tape. A simple declaration should suffice.
  
  
• Another aim is to ensure the continuation of collective agreements in the case of corporate spin-offs if the previous owner remains unchanged. However, this is not intended to affect the rules on the transfer of undertakings in section 613a German Civil Code. It is unclear whether the term “identity” of the owner refers to restructuring within group structures and whether the term “spin-offs” means measures under conversion law or under company constitutional law, or both.
  
  

3. Co-determination in businesses

Co-determination in businesses is to be refined, partly by the following measures:

• In future, works councils are to be allowed to decide whether to work in person or digitally. As the law stands, works council meetings can currently be held by video conference, but in-person meetings take precedence. In the view of the coalition parties, the new regulation will introduce real freedom of choice. This will probably also lead to an obligation on the part of employers to equip their works councils with appropriate digital infrastructure if the works councils opt for digital meetings.
  
  
• According to the plans, there will be a pilot project allowing works council elections to take place online too. Presumably this will make it easier to hold the elections. Corresponding tools and professional software providers are already available on the market.
  
  
• Trade unions are set to gain a right of digital access to the company equivalent to their offline rights. As the law stands, trade unions represented in the company generally have the right for an authorised representative to access the company to guarantee the performance of duties under company constitutional law. This includes, for example, participating in works council elections, the right to request the judicial exclusion of works council members for gross breach of duty, or attending company or department meetings.

In the case of corporate co-determination, i.e. co-determination by employee representatives on the supervisory board (or advisory board), the coalition parties also see a need for action:

• The scope of the One-Third Participation Act (Drittelbeteiligungsgesetz), which specifies that one-third of the supervisory board is to be made up of employee representatives, is to be extended to larger group structures. As the law stands, employees who are employed in group companies are attributed to the group parent company to meet the relevant threshold of more than 500 employees on a regular basis only if there is either a control agreement between parent company and subsidiary or if the subsidiary is incorporated into the parent company under stock corporation law (section 2(2) of the One-Third Participation Act). The aim is to harmonise the attribution rules with the provisions of the Co-Determination Act (Mitbestimmungsgesetz: threshold is normally over 2,000 employees with equal staffing of the supervisory board with employee representatives and shareholder representatives). In that case, attribution takes place if the company is de facto subject to a single management team (section 5(1) Co-Determination Act in conjunction with section 18(1) Stock Corporation Act (Aktiengesetz)). A control agreement or incorporation under stock corporation law is not required. The consequence of this would be that many SME groups would have to be restructured to avoid one-third of supervisory board members being employee representatives at the parent company.
  
  
• Co-determination in the European company (Societas Europaea or SE) is also to be extended. German co-determination laws are not currently applicable to an SE. Co-determination in an SE instead depends on whether and what type of co-determination is agreed with the employees or what applied before conversion to an SE or the foundation of the SE. This agreed or preserved co-determination status remains regardless of how the number of employees evolves (“freeze effect”). The coalition parties wish to abolish this freeze effect and extend co-determination to the SE. In any case, the future federal government wants to advocate for this. This will have to be coordinated at European level, as SEs are based on EU law, specifically Regulation (EC) No 2157/2001 of the Council of 8 October 2001 on the Statute for a European company (SE) in conjunction with Directive 2001/86/EC supplementing the Statute for a European company with regard to the involvement of employees dated 8 October 2001.
  
  

4. Use of temporary agency workers

The coalition partners have not announced any specific measures on temporary agency work and the use of temporary agency workers based on contracts for work. In future, structural and systematic breaches of the law are to be prevented with more effective enforcement of laws. Employers therefore still need to create compliance structures to ensure a legally sound use of temporary workers.

5. Part-time and fixed-term employment

• For employment contracts limited for an objective reason, the coalition partners want to set a maximum fixed term of six years in future which can only be exceeded in a very limited number of exceptional cases. This will greatly limit companies’ options for flexible personnel planning. At present, an upper limit applies only to fixed terms with no objective justification; by contrast, fixed terms for an objective reason can currently be extended indefinitely (except in the case of inadmissible circumvention structures).
  
  
• However, in terms of companies’ flexibility, it is positive that the option of fixed terms with no objective justification is apparently to be kept.
  
  
• In the public sector, the currently permissible budget limit is to be abolished.
  
  
• On-call work is to be made more secure, according to the coalition pact. What exactly the parties mean by this is not yet clear.
  
  

6. Minimum wage, mini-jobs and midi-jobs

• The minimum wage is to rise to €12 an hour before tax as a one-off, after which further increases will be decided by the Minimum Wage Commission, staffed on an equal basis by representatives of employers and employees. Compared to the current minimum wage of €9.60 an hour before tax, this is a significant rise of 25%.
  
  
• The thresholds for mini-jobs and midi-jobs will be raised correspondingly, with a planned upper threshold for mini-jobs of ten hours a week. Future rises in the minimum wage will in future not have to lead to a reduction in working hours. With a minimum wage of €12 before tax, the mini-job earnings cap will be €520 in future.
  
  

7. Further vocational training

• A system of part-time study based on the Austrian model is to be introduced for vocational courses and training. Under this scheme, employees will be able to reduce their weekly working hours in order to take training courses. They will receive a government grant to cover their loss of earnings.
  
  A training salary based on the furlough scheme is to be launched. This is meant to enable companies experiencing structural change to keep their employees in the company via training and to retain specialist workers in collaboration with the Federal Employment Agency. This is to be done based on works agreements. It is not clear what will apply in companies with no works council. Whether this is meant to indirectly promote works councils – like the promotion of trade unions – is anyone’s guess. In any case we see no objective reason for treating companies with and without works councils differently. It’s clear, however, that the State is bound by the principle of equal treatment here, too.

• In addition, incentives are planned for transformation-related collective agreements, transfer furlough pay is to be expanded and the tools of the Third German Social Code(Drittes Sozialgesetzbuch) are to be refined in transfer companies. But there are no further details on this yet.
  
  

8. Summary

While the coalition pact will usher in some changes to the working world, key issues like the sensible design of the co-determination right of works councils in the digitalisation of businesses have not been addressed. In fact, the coalition pact does not represent a major change in terms of more flexibility in working hours and new ways of working, either. Overall, there is too much focus on promoting the unions and not enough on creating options for employees and companies (combining work and family commitments, sensible working-time arrangements, etc.). On the other hand, the plans for further vocational training are certainly sensible, although, as practical experience shows, it is the employees rather than the companies who will need to be persuaded to make use of these opportunities. Germany’s businesses would no doubt benefit if the coalition partners used their term in office to aim for “more progress” in many other practical issues faced by companies which have been neglected for years.