Labour law changes in Germany due to COVID-19

Short-time work

To prevent insolvency and redundancies, employers can implement short-time work and thus have their employees work less hours. The employer pays the remuneration for the reduced working hours of the employee. In addition, a short time allowance is granted by the local employment agency of the net income difference up to cap. In many cases, the employer then pays an additional amount on top to (almost) reach the amount of the previous remuneration.

The German government has issued a new regulation which facilitates the application for Short-Time Work and further financial compensation and which applies retroactively from 1 March 2020 to 31 December 2020:

• only 10% of the employees in the company must be affected by the loss of working hours in order to apply for short-time work. Prior to the new regulation, the threshold of affected employees was one third of employees;
• the Federal Employment Agency reimburses the social security contributions which have to be paid solely by employers for employees working short-time work in full
• in case of the use of working time credits, employees must no longer form negative working time balances (so-called minus hours);
• even temporary workers (i.e. leased employee) should also be able to receive short time working compensation;
• a loss of working hours can be immediately notified to the employment agency, and the short-time working compensation will then be paid retroactively from 01 March;
• in addition, remuneration from temporary employment taken up during short-time work is not offset against the short-time allowance;

Further information on how to notify work loss and apply for short-time working compensation and the needed application forms can be found on the website of the Federal Employment Agency.

Compensation for loss of earnings due to childcare

Previously, parents could only stay away from work to care for children for a limited number of days without losing their salary entitlement.

Due to a new regulation in the Infection Protection Act (Infektionsschutzgesetz, “IfSG”), expected to come into force on 29 March 2020, the employer shall now grant employees a compensation, if they cannot work because they have to look after their children due to the closure of schools and day-care centres.
This compensation for loss of earnings paid by the employer will be reimbursed by the competent authority upon request.

It is applicable to employees with custody rights for children up to the age of 12 and amounts to 67% of the net income for up to six weeks.

The prerequisites of the new regulation are

• that the employee is unable to provide any other reasonable care (e.g. by the other parent or emergency care in the facilities) while risk groups such as the child's grandparents do not need to be involved;
• that there are no other ways of staying away from work with temporary pay (e.g.: reducing time credits, short-time work etc.)

The regulation does not apply to periods in which schools, kindergartens or other institutions would be closed for school holidays anyway and is limited until the end of 2020.

Resolutions of the Works Council adopted at a meeting via video or telephone conference are effective

The Federal Ministry of Labour and Social Affairs has stated on its homepage that in light of the considerable challenges not only for the professional world as such, but especially for the work of works councils, increased flexibility must be demanded.

According to the Ministry, works council decisions which are concluded within the framework of a works council meeting via telephone or video conference are effective. Although the Works Constitution Act (Betriebsverfassungsgesetz, “BetrVG”) does not provide for this option in principle, it is not excluded against the background of the exceptional situation.

The use of telephone or video options is explicitly recommended to works councils. In order to ensure the effectiveness of resolutions, works council members must ensure that the attendance list, which is normally signed by hand, is at least kept electronically (for example by sending an e-mail confirming the presence of the individual to the Chairman). In addition, the works council members must ensure that no unauthorised third parties attend the meeting, in order to maintain the non-publicity of the meetings.

In this context, the employee/works council friendly “Bund Verlag” publishing house issued an employer declaration form in order to request employers to waive any potential legal challenges against works council decisions made using telecommunication tools. Although this may provide the works council with a certain legal comfort, there is no need for an agreement between the employer and the works council. Reliance on the minister declaration should currently be preferable and sufficient.

Statement by the Minister of Labour and Social Affairs

Effects of the Corona crisis on variable compensation

Although employers (and employees) are currently in crisis mode and should give priority to acute issues, the longer-term effects of the pandemic must also be kept in mind. The overshadowing question that employees are currently asking themselves is that of their remuneration. This also includes variable compensation, which in many cases depends on the economic environment.

Target agreements concluded, and targets set at the end of last year or the beginning of this year are based on a very different economic situation from the current one. At least employees are therefore now concerned about the extent to which adjustments to the current situation should be made retrospectively.

First: In principle, agreed upon targets are binding, as are targets set by the employer. If the relevant framework conditions change, however, a bilateral adjustment of the targets is possible.

The unilateral adjustment of target agreements is difficult to enforce. Since target agreements have a contractual character, the general possibilities for adjustment under civil law come into play. This gives the option of giving change notice, the effect of which is at least controversial in the case of target agreements. Another, subordinate, possibility is an adjustment of the agreement when the basis for the transaction no longer exists. The unilateral adjustment of targets set by the employer is also difficult. In view of the far-reaching changes in the context of the pandemic, it should also be possible to make adjustments in line with the principles of discontinuation of the business basis.

Which options for action exist in each individual case and whether there are further effects, for example of a regulatory nature, must be assessed on the basis of the individual agreements and specifications. In the regulated banking sector, for example, the law only permits target agreements to be adjusted during the year if the business and risk strategy are changed. An adjustment for other reasons is conceivable however only in coordination with BaFin.

For those employers that have not yet agreed upon targets or set targets for their employees, there remains the possibility of including a “subject to adaptation”-clause which will enable both parties to re-evaluate at a later time. Even though this is not a number one priority, any employer whose deliberations on targets are due in the near future, may keep this possibility in mind.

See our Coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.