LABOUR AND
EMPLOYMENT
GUIDE -
GERMANY
November 2022
PRIVATE AND CONFIDENTIAL
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LEGAL LANDSCAPE OF LABOUR & EMPLOYMENT LAW IN GERMANY
Labour and employment law is not regulated by a single labour code but rather originates from different sources. In addition to
comprehensive federal legislation, German labour law is also shaped by case law, collective bargaining agreements
(Tarifverträge) and/or works agreements (Betriebsvereinbarungen), each where applicable, as well as by individual employment
contracts and the employer’s right to give instructions (Direktionsrecht). Furthermore, court rulings and directives on European
level have had and will carry on having considerable impact on German labour and employment law.
This overview is designed to line out the cornerstones of German labour and employment law and the challenges to face when
employing personnel in Germany.
B. CONTRACTING EMPLOYEES
I. HIRING PROCESS
At all times of employment but already starting when advertising job vacancies and conducting job interviews, employers must
observe certain prerequisites of the German Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz). This means that
promoting a job offer needs to be done with no discrimination based on, for example, sex, age or ethnic origin and must clearly
be linked to objective hiring criteria to avoid any legal actions for damage claims by rejected candidates at a later point in time.
Furthermore, employers must take caution when interviewing candidates since the limits to questions to be asked of the
employee are fairly narrow. In essence, the employer may only obtain information directly linked to the employee's future tasks
and responsibilities. For example, the employer may ask about relevant qualifications and experience. On the other hand,
questions relating to pregnancy, age, ethnic origin, sexual identity, religion, trade union affiliation or disability are basically not
allowed during a job interview.
Only permissible in exceptional cases (e.g. where required by statutory law) are the requests for the employee to provide
criminal record certificates or certificates of health.
II. EMPLOYMENT CONTRACT ESSENTIALS
Offer letters as commonly used in other jurisdictions are not market practice and generally not recommended in Germany as
such offer letters might already establish an employment relationship.
According to statutory law, employers must provide employees with their respective employment's essential working conditions
in writing (i.e. signed in original wet-ink). Employers must make sure to provide employees with written evidence of certain
working conditions already on day one of the employment (name and address of the contracting parties, remuneration elements
and working time). Within seven days from the beginning of the employment, employers need to provide written evidence of
further working conditions (e.g. commencement date of employment, place of work, job title, duration of agreed probationary
period). Even further evidence is to be provided at latest within one month from the beginning of the employment (e.g. annual
leave entitlement, information on procedure in case of termination). However, in practice, this is typically complied with all at
once by entering into written employment contracts containing the respectively necessary information with employees.
Employees who were in employment relationships already prior to 1 August 2022 are entitled to demand such written evidence
of their working conditions within a short timeframe of seven days. Non-compliance with the aforementioned obligations can
result in administrative fines of up to EUR 2,000 – for every breach and every employee.
Written employment contracts allow for deviations from (employee friendly) employment law to a certain extent. The concept of
policies unilaterally set by employers is rather unknown in Germany, hence employment contracts in practice also include the
employee’s main statutory duties. Where clauses in employment contracts deviate from statutory law, special care needs to be
taken as to drafting the details of the clause since clauses are deemed invalid if not compliant with general terms and conditions
(Allgemeine Geschäftsbedingungen) provisions as detailed by case law.
As far as the employer wants to agree on a fixed-term employment or use a retirement clause ending the employment
relationship upon the individual statutory retirement age of the employee, this employment contract and especially the clause
regulating the respective topic need to be signed in original (wet-ink signature) by both parties prior to the start of the term and
the employee actually taking up work to be concluded as a valid fixed-term employment. Fixed-term employment contracts may
be entered into either if an objective reason is given (e.g. substitution of a member of staff taking parental leave) or, often used
in practice because no such reason exists, for hires for a maximum of, as a rule, two years but only if the respective employee
has not been previously employed by the contracting employer.
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1 Remuneration
Generally, remuneration can be negotiated freely, as long as no collective bargaining agreement (some of them are generally
binding for all employers of a specific branch (Allgemeinverbindlichkeit)) stipulates otherwise. However, the employer must
ensure compliance with the German Act on Minimum Wage (Mindestlohngesetz) which obligates every employer of every
sector to pay its employees an hourly wage in the amount of at least EUR 12.00 from October 2022 (subject to further increases
in future). There are statutory exceptions, e.g. for trainees under specific circumstances. For certain branches of business,
minimum wage is often increased through collective bargaining agreements, such as manufacturing, construction or nursing
business. Further, the German Transparency in Wage Structures Act (Entgelttransparenzgesetz) sets up a legal basis to avoid
an unequal payment of male and female employees for equal or comparable work.
2 Working time
The statutory maximum working time is 8 hours per day from Monday to Saturday. Working on Sundays and public holidays is
generally forbidden, unless explicitly permitted by law. The statutory maximum weekly working time is 48 hours even if 40 or, if a
collective bargaining agreement applies, the lower number stipulated therein are understood to be “full time work” as employees
mostly have a five-day working week. The regular daily working time may be extended to up to 10 hours, provided that on
average 8 hours per working day are not exceeded within a reference period of 6 months or 24 weeks. An uninterrupted rest
period of 11 hours after daily work must be guaranteed. There are no opting-out provisions under the applicable German
Working Time Act (Arbeitszeitgesetz). These limitations do not apply for board members, managing directors (Geschäftsführer)
and executive employees (leitende Angestellte).
Overtime pay and overtime surcharges are not expressly regulated by law but are subject to individual employment contracts,
collective bargaining or works agreements. It needs to be observed that as of 1 August 2022, employers are obligated to
provide evidence on the employee’s remuneration which includes also the amount and calculation modalities of overtime-
payment. For regular employees, it is only permissible in narrow limits to deem overtime compensated by their fixed
remuneration, e.g. it is possible to contractually agree that overtime of 10-20 % of the regular working time shall be deemed
compensated by the regular remuneration. For employees with an earning higher than the current contribution assessment
ceiling in the statutory pension insurance (Beitragsbemessungsgrenze in der gesetzlichen Rentenversicherung) it can be
agreed that overtime is paid with the fixed salary. Overtime of board members and managing directors is viewed as to generally
be incorporated into their contractually agreed remuneration.
3 Holidays
Employees are entitled to a minimum paid vacation of 20 working days in case of a five-day working week, as long as no
collective bargaining agreement provides differently. Severely disabled employees are entitled to additional five days' paid
vacation per year (on the basis of a five-day working week). This statutory minimum vacation entitlement has to be understood
as in addition to public holidays, the number of which varies from nine to 13 days per year, depending on the federal state
where the employee works. Public holidays are paid as well. It is market practice to contractually grant an additional vacation
entitlement of up to 10 days. Given the detailed case law on this topic, employers often make use of the permitted deviations
from statutory vacation law in their favour in view of the additional vacation entitlements contractually granted.
4 Other time off (sickness, maternity and parental leave)
In the event of inability to work due to sickness, pursuant to the German Continued Remuneration Act
(Entgeltfortzahlungsgesetz) employees are entitled to continuous remuneration for a period of six weeks to be paid by the
employer. All employers with no more than 30 employees (not headcount but rather number of full-time employees relevant) can
claim reimbursement of up to 80 % of such costs from the respective employee’s statutory health insurance due to a mandatory
insurance, so-called U1 system (Umlageverfahren 1) to which these employers have to contribute. Employees are obliged to
submit a medical certificate for any inability to work which lasts more than three calendar days. However, an employer may ask
for such certificate to be submitted from the first day of the employee’s absence from work. Sick pay is payable only to
employees who have completed at least four weeks of service with their employer. The amount is essentially equal to the
employee's usual remuneration, but without overtime pay and certain expenses. If six weeks have expired and the employee
continues to be unable to work due to sickness, employees who are member of the statutory health insurance are entitled to
sick pay (Krankengeld) from their health insurance provider for a maximum period of 72 additional weeks (deviations for
employees who opted for private health insurance may apply). This sick pay amounts to 70 % of the employee's gross
remuneration, but not more than 90 % of the employee's net pay, in each case limited to the respectively applicable contribution
assessment ceiling in the statutory health insurance (EUR 58,050.00 (annual gross) in 2022).
Maternity leave commences six weeks prior to expected childbirth and ends eight weeks after childbirth (12 weeks in the case of
multiple births or pre-term birth). During maternity leave, the employee receives maternity pay from her statutory health
insurance provider or the government and the employer is required to make up the difference between maternity pay and the
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average net remuneration. However, all employers can claim for full reimbursement of such costs from the statutory health
insurance due to a mandatory insurance, so-called U2 system (Umlageverfahren 2) to which the employer has to contribute.
Parental leave may be taken if employees care for their child. Parental leave can in principle be taken until the child´s third
birthday. With the employer´s consent, up to 24 months’ parental leave may be taken after the child´s third birthday but prior to
his or her eighth birthday. Parental leave is unpaid by the employer; however, a government benefit up to EUR 1,800 is
available to employees for a maximum period of 12 or 14 months (if both parents take parental leave or for single parents) or at
a reduced rate for twice the applicable maximum period. Also, employees are entitled to work a monthly average of up to
32 hours per week during parental leave. If the child to be cared for was born before 1 September 2021, the entitlement to work
during parental leave is limited to a monthly average of 30 hours per week. Further, employers have to make the employee's
position available for the employee upon her or his return to work or to allow the employee to return to a comparable new
position suitable for the skills of the employee concerned.
5 Social security and income tax
The majority of employees in Germany is subject to the statutory social insurance system (i.e. protection against income-
decreasing disability and insurance for old-age pension, unemployment, sickness and nursing). The employer is required to
register its employees with the employees’ respective statutory health insurance provider (deviations in case the employee is
privately health insured) upon the employee taking up work. Conversely, the employer has to deregister its employees when
they cease employment. The employer and the employee pay contributions to the social insurance system equally, each
determined depending on the respective employees’ gross remuneration limited by the division-specific contribution assessment
threshold. The social insurance contributions are paid out by the employer to the health insurance scheme for both parties.
CONTRIBUTION
ASSESSMENT
THRESHOLD
(BEITRAGSBEMESSUNGSGRENZE)
EMPLOYER'S
CONTRIBUTION
EMPLOYEE'S
CONTRIBUTION
Pension Insurance
18.6 % shared equally
EUR 7,050 (West)
EUR 6,750 (East)
Up to EUR 655.65 (West)
Up to EUR 627.75 (East)
Up to EUR 655.65 (West)
Up to EUR 627.75 (East)
Unemployment Insurance
2.4 % shared equally
EUR 7,050 (West)
EUR 6,750 (East)
Up to EUR 84.60 (West)
Up to EUR 81.00 (East)
Up to EUR 84.60 (West)
Up to EUR 81.00 (East)
Health Insurance
14,6 % plus individual
additional contribution
depending on health
insurance provider (current
average 1.3 %), both shared
equally
EUR 4,837.50 (West & East)
Up to EUR 353.14 plus
equal share of individual
additional contribution
Up to EUR 353.14 plus
equal share of individual
additional contribution
Long-term care
3.05 % shared equally
(exception for Saxony,
where the employer only
pays 1.025 %)
EUR 4,837.50 (West & East)
Up to EUR 73.77
Up to EUR 73.77 + 0.35 % if
older than 23 and childless
(All data in this table refers to the status as of 1 January 2022.)
Please note that employees have a claim against their employer to implement and administrate an occupational pension
scheme in which they may accrue pension entitlements through deferred compensation (Entgeltumwandlung) which in turn is
tax-free up to 4 % of the current contribution assessment threshold in the statutory pension insurance. Since 2019, employers
have to contribute a lump-sum of 15 % of the deferred amount as an employer subsidy to the employee's pension contribution if
social contribution payments are saved.
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Income tax is calculated upon and deducted from the employee's gross salary and paid by the employer to the tax authorities on
behalf of the employee. However, the employee remains the legal debtor of the respective income tax payments.
6 Occupational Health and Safety
German labour law provides for detailed regulations on health and safety standards at the workplace which public as well as
private employers must comply with. These regulations are predominantly set out by the German Occupational Health and
Safety Act (Arbeitsschutzgesetz). According to these regulations, employers must ensure appropriate measures to protect their
employees from any hazardous employment conditions and maintain continuous supervision and analysis of possible health
hazards within the workplace. The competent authority (e.g. trade supervisory authorities, offices for occupational health and
safety or the district governments, each depending on the federal state the respective establishment is located in) is responsible
for monitoring employers' compliance with statutory occupational health and safety provisions. The respective public authority
has the right to enter and inspect establishments, demand access to information and documentation regarding occupational
health and safety measures as well as examine those measures in place.
Where a works council is established, it may assert certain co-determination, information and inspection rights within the scope
of occupational health and safety. Further, in establishments with more than 20 regular employees, a so-called health and
safety committee (Arbeitsschutzausschuss) must be set up, which must meet at least every three months to discuss health and
safety matters. Depending on the branch and site of the business, employers may be obliged to appoint a safety specialist
(Fachkraft für Arbeitssicherheit).
Furthermore, the employer must provide occupational accident insurance (Unfallversicherung) as part of the mandatory social
insurance scheme for e.g. accidents involving employees in the workplace, occupational diseases as well as accidents on the
ways from and to work. Contributions to the occupational accident insurance are to be borne solely by the employer and depend
on several criteria such as previous expenses for damages in the past or the level of risk in the respective industry.
7 (Post-contractual) non-compete restrictions
Employees are generally subject to a statutory duty not to compete during the course of the employment relationship.
Any post-contractual non-compete restrictions must be agreed upon in writing and must provide for certain minimum payments
to be made (essentially 50 % of the overall remuneration formerly received) throughout the period of the restriction. The
limitations as to scoping require diligent drafting of respective clauses as they are only valid and enforceable if their geographic
and content scope are deemed reasonable (therefore usually not valid globally) and period does not exceed two years.
Employers may waive the post-contractual non-compete restrictions by written declaration before the termination of the
employment relationship with the effect that he shall be released from the obligation to pay the compensation upon the expiry of
one year from the declaration only. Due to the associated costs and strict prerequisites for post-contractual restrictive
covenants, they are not market standard in all employee groups but are rather only agreed with specific groups of employees,
e.g. key sales employees whose departure poses a risk of damage to the employer's business.
Non-solicitation clauses either with respect to clients, customers or employees of the former employer may be agreed upon
within slightly wider limits.
III. SHORT-TIME WORK
For times during which companies experience a temporary loss of workload and want to reduce the working time of their
employees, German labour law provides for the instrument of so-called short-time work (Kurzarbeit). In this instance and based
on either collective bargaining agreements, works agreements or individual contracts with the employees, employers, under
certain conditions, may reduce the contractual working time even until zero. Correspondingly, the employer may apply to the
Federal Labour Agency (Bundesagentur für Arbeit) for the payment of short-time work allowance (Kurzarbeitergeld) to cover the
employees' loss of remuneration due to the decreased working hours. The short-time work allowance regularly amounts to 60 %
(67 % in case of dependent children) of the difference amount between the contractually agreed upon net remuneration versus
the actual net remuneration. To comply with the statutory requirements for applying for short-time work allowance, the loss of
workload has to be due to economic reasons or based on force majeure, be of only temporary and unavoidable nature and
affect at least one third of the employer's work force. Short-time work allowances are regularly paid for a maximum period of 12
consecutive months.
However, in the event of economic crises (e.g. the COVID-19 pandemic), the legislator will adjust the aforementioned
conditions, such as the amount and duration of short-time work allowance or prerequisites for becoming eligible to apply for
short-time allowances, at short notice.
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IV. ENDING EMPLOYMENT RELATIONSHIPS / SEVERANCE PAYMENTS
In contrast to other jurisdictions, German labour and employment law provides for a considerable protection of employment
through statutory law as well as through regulations within e.g. collective bargaining agreements. To terminate employment
relationships in a legally effective way, employers need to observe a variety of provisions.
Employment contracts need to be ended through a written notice (wet-ink signature required) of termination signed by a duly
authorised representative of the employer (e.g. managing director with sole power of representation or duly authorised head of
HR). The employer must ensure to obtain proof of receipt by the employee.
Further, statutory or contractually agreed notice periods must be observed when issuing a notice of termination. If statutory rules
apply, notice periods vary between four weeks to the 15th or end of the month up to seven months to the end of the month,
each depending on the affected employee's length of service.
The German Protection against Unfair Dismissal Act (Kündigungsschutzgesetz) is in general applicable to all establishments of
a company with more than ten regular full time employees and to the individual employee after six months of employment. If the
aforementioned statute is applicable, an employment relationship can only be terminated if there is either (i) gross misconduct
(e.g. theft) in which case the employer can terminate the employee even without notice (fristlose Kündigung aus wichtigem
Grund), provided the termination notice is issued to the employee within two weeks following the employer's first knowledge of
the facts justifying the termination or (ii) one of the following reasons such as repeated misconduct (subject to a previous final
warning (Abmahnung)), personal reasons (e.g. drug addiction) or operational reasons (e.g. restructuring of positions) exist in
which case the employee can be terminated but only while adhering to the individual notice period for such termination.
Even if there is no statutory provision commanding a severance payment in case of a termination, it is common practice in
Germany (due to the considerable legal hurdles of such dismissals) that employers either offer their employees termination
agreements to end the respective employment relationships against payment of severance to be negotiated therein or conclude
court settlements compromising on severance payments following a notice of termination and a subsequent unfair dismissal
claim by the employee concerned. The individual severance is not regulated by law but rather subject to negotiation between
the parties concerned. However, the German market practice is to negotiate a factor of monthly salaries multiplied with the
company seniority which can be taken as a guideline for employers when calculating severance payments. Nevertheless, the
factor/the final amount of severance payment will finally depend on the various aspects of the individual case at hand (age and
company seniority of the employee, chances on the job market) and in particular the chances of success of the unfair dismissal
claim in court.
Under certain circumstances, employees may also be entitled to special protection against dismissal. For example, severely
disabled employees may be dismissed only after prior approval by the integration office. The dismissal of a female employee is
prohibited during pregnancy and a four-month period after childbirth if the employer, when giving notice, was aware of the
pregnancy or childbirth or if it is informed thereof within two weeks from receipt of the notice by the employee. Similar protection
exists for employees on parental leave, nursing care leave, or family care leave as such terminations require prior consent of
the competent public authority. Works council members or candidates in the course of an election to the works council are
protected from dismissal as well as throughout their period of membership or candidacy, and for one year thereafter. Special
protection also applies to the company´s data protection officer.
V. MASS-LAYOFFS
In cases where larger numbers of employees have to be given notice due to redundancy, employers have to meet special
prerequisites to be able to effectively terminate the respective employment relationships.
Where a certain percentage of the entire regular staff is being terminated (either by being given notice, entering into a
termination agreement or otherwise initiated by the employer), the employer has to file a so-called mass dismissal notice
(Massenentlassungsanzeige) with the competent labour office prior to terminating the employment relationships. In
establishments with works councils, this mass dismissal notice must be discussed with the works council two weeks prior to
filing the application with the labour office within the consultation procedure (Konsultationsverfahren). The works council may, in
this instance, give its opinion on the intended mass dismissal within the aforementioned two-week period. However, if the works
council does not give an opinion or objects to the mass dismissal, this will not result in the inadmissibility of the mass dismissal
application which the employer may file irrespective of the works council's reply. Non-compliance or incorrect application of the
mass dismissal notice make all related terminations legally invalid.
Further, employers with an established works council and more than 20 regular employees may be required to consult with it on
a change of the operations (Betriebsänderung), if the structural change (e.g. shut-down of the business) might trigger significant
(potential) disadvantages for the workforce of the affected establishment. In this instance, the employer and the works council
have to enter into negotiations and have to try and agree on a reconciliation of interests (Interessenausgleich) governing the
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steps to be taken within the intended change of operations. Furthermore, the parties need to agree on a social plan (Sozialplan)
compensating the affected employees for their disadvantages due to the change of operations (e.g. by providing for severance
payments). Even if the works council is essentially not able to hinder the measures intended by the employer, the works council
is in a position to delay the process and to significantly increase the employment costs of such a measure.
VI. TRANSACTIONS / TRANSFERS OF UNDERTAKING ("GERMAN TUPE")
Where establishments (Betriebe) or separable parts of such establishments (Betriebsteile) are being transferred by means of
selling all or the essential tangible and/or intangible assets, this regularly constitutes a so-called transfer of undertaking
(Betriebsübergang). In course of such transfer of undertaking, all existing employment relationships are being automatically
transferred to the new owner of the assets. However, this generally does not apply to contracts with company representatives
such as managing directors or board members.
Within such transfer of undertaking, in principle, collective bargaining agreements and works agreements remain in place (on an
individual or collective level) but can also be amended or replaced by existing collective agreements at the new employer, each
depending on the individual case at hand. Moreover, the transfer of undertaking may also impact the works council up to it being
exchanged with a works council in place at the new employer. However, the precise consequences for works councils are
diverse and will depend on the individual scenario.
Furthermore, the transfer of undertaking arises the (joint) duty of the old and the new employer to duly inform the employees
affected in writing and before the transfer of undertaking takes place about certain details of the intended transfer, such as the
planned date of the transfer, its reason, the legal, economic and social implications arising for the employees as well as any
measures intended alongside this transfer of business (e.g. restructuring measures leading to dismissals by the new employer).
This so-called information letter (Unterrichtungsschreiben) must be written in a comprehensible and correct manner and inform
the employees on their right to object to the transfer of their employment to the new employer within one month from receipt of
the information letter. If the employees object to this transfer, their employment contract will stay in place with their old
employer. In case the information letter is incorrect, the aforementioned objection period is not set in motion, hence making it
possible for employees to object to the transfer of their employment even months or years after the transfer of undertaking, e.g.
in situations in which the new employer wants to terminate the employment contract the employee may object to the transfer
simultaneously claiming employment with his former employer. Therefore, complying with the prerequisites of a formally correct
information letter is a key element when conducting any measures triggering transfers of undertaking.
Generally, such transfers of undertaking do not comprise any obligations for the employer vis-à-vis the works council in terms of
information or co-determination. However, if established, an economic committee in place would have to be informed of the
intended asset deal. Further, in case a change of operations is triggered due to the transfer of undertaking, mandatory
negotiations on a reconciliation of interests as well as the agreement on a social plan become generally mandatory.
Conversely, sole share deals typically do not trigger such transfers of business nor do they generate any informational duties for
the employer towards its employees or make negotiations on reconciliations of interests or the agreement on a social plan with
an existing works council necessary. However, an existing economic committee or, if not established, the works council must be
informed of the details concerning the intended direct share deal if at least 30 % of the company's voting shares are acquired,
e.g. name of potential purchaser, its intentions regarding the future business activities and their consequences for the
employees.
C. THIRD-PARTY CONTRACTORS
Other than engaging employees in the aforementioned sense, companies may also deploy independent contractors/freelancers
(freie Mitarbeiter) or temporary workers (Leiharbeitnehmer) in order to save personnel costs and to be more flexible, e.g. to
handle peaks in production.
In contrast to employees, freelancers work independently on the basis of service agreements and do not enjoy the same level of
economic and social protection as regular employees do. Freelancers are typically distinguished from employees by certain
criteria, e.g. freelancers are not integrated into the employer's operational organisation, they do not receive work instructions
prior to taking up their work and solely bear the risk of their entrepreneurial undertaking. However, according to comprehensive
case law, freelancers are often misclassified and turn out to really be (dependent) employees for whom, in such a scenario, not
only social insurance contributions would have to be paid retroactively, but also special employment protection laws (such as
dismissal protection) apply. As per this backdrop, contracting freelancers often exposes companies to significant (financial) risks
which is why it is recommended to not hire any freelancers without detailed legal assessment of its feasibility.
Within fairly strict limitations, employers may also engage temporary workers by means of labour lease
(Arbeitnehmerüberlassung); even further restrictions apply for the construction business. Temporary workers may be leased to
the lessee (Entleiher) only by an officially recognised lessor (Verleiher) who must obtain a lease permit from the Federal Labour
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Agency prior to leasing employees to the lessee. Further, temporary workers may only be engaged for a maximum time limit of
18 months by the same lessee and, in general, shall receive equal pay and equal treatment as compared to the permanent staff
of the lessee. However, collective bargaining agreements may provide for certain regulations deviating from the aforementioned
statutory rules, e.g. they may stipulate a prolongation of the maximum term of the engagement of temporary workers. During the
term of the lease, agency workers are represented by the lessee's works council and, in principle, count as its employees when
determining meeting respective thresholds for works council rights or co-determination on a corporate level.
D. EMPLOYEE REPRESENTATIVES
I. TRADE UNIONS / INDUSTRIAL ACTIONS
Less than one fifth of German employees are members of trade unions (Gewerkschaften). They are generally established for
different branches of businesses, e.g. manufacturing, construction, public transport or the public sector. Trade unions typically
deal with employers' associations (Arbeitgeberverbände) as well as individual employers and enter into collective bargaining
agreements (Tarifverträge). The right to forming or being member of such collective labour organisations is constitutionally
guaranteed, as is the right to refrain from doing so.
Collective bargaining agreements generally regulate the key terms and conditions for employment relationships within their
respective branches of businesses, especially remuneration models. The regulations therein apply only if either both the
employer and the employee are tariff-bound (tarifgebunden, e.g. due to membership in the respective trade union and
employers’ association) or if the employment contract provides for so-called reference clauses (Bezugnahmeklauseln)
incorporating the respective collective bargaining agreement's provisions into the employment contract. The latter is fairly
common within the aforementioned branches of businesses thereby significantly increasing the number of employees whose
working conditions are regulated by collective bargaining agreements.
For the trade unions to be able to effectively negotiate such key working conditions and enter into respective collective
bargaining agreements, the main tool to put pressure on the employers' side is the employees' constitutional right to take
industrial action (Arbeitskampf). An industrial action is subject to certain requirements to be legally permissible. For example,
during the periods of collective bargaining agreements, there is a general peace obligation preventing the involved trade unions
from taking industrial action. However, the employer does not have to accept the consequences of an industrial action-related
business disruption directed against him and can, in turn, try to limit the consequences of the industrial action-related stoppage
by taking countermeasures. The classic means of employer action is suing the trade union for injunctive relief by arguing that
the industrial action is unlawful (e.g. during periods of peace obligations). Also, employers may decide on a so-called lockout
(Aussperrung). This is understood to mean the planned lockout of several employees by one or more employers, refusing to
continue to pay wages in order to achieve a specific goal, which regularly involves shortening an industrial action by increasing
the economic burden on the employees' side.
II. WORKS COUNCILS
In establishments with more than five regular employees, a works council (Betriebsrat) can be elected at the free discretion of
the workforce. Works councils have extensive rights to information, consultation and/or mandatory co-determination in respect
of most organisational matters. In companies with more than 20 employees in Germany, works councils also have the right to
be consulted on decisions regarding individual personnel matters (such as the recruitment or transfer or an employee, dismissal
and redundancies). In addition, and irrespective of the size of the establishment, the works council has to consent on some
general personnel matters (such as selection criteria or evaluation principles) and must be consulted prior to any dismissal. The
works council regularly meets with the employer.
Actions taken by the employer violating the works council’s rights may be legally invalid and can be punished by imposing fines
on the employer for each incident of violation. Where the works council and the employer are in dispute on a matter on which
the works council has a right of co-determination and if they fail to reach an agreement, both parties may call for a conciliation
committee (Einigungsstelle) to be established in order to resolve the issue. The conciliation committee is empowered by law to
render a final and binding decision.
Furthermore, in companies with more than 100 regular employees, an economic committee (Wirtschaftsausschuss) is to be
established through election among the works council. Its function comprises regular consultations of economic matters with the
employer.
Where establishments employ more than 5 disabled persons or disabled persons with equivalent status not only on a short-term
basis, a representation body for disabled employees (Schwerbehindertenvertretung) may be constituted. This body has to be
informed of all measures affecting disabled employees prior to their respective implementation. A dismissal of a disabled
employee without hearing the representation body for disabled employees first is ineffective.
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III. SUPERVISORY BOARDS AND EMPLOYEE PARTICIPATION
Within companies with regularly more than 500 employees, supervisory boards with one-third members elected by and from the
workforce may need to be established according to the German One-Third Participation Act (Drittelbeteiligungsgesetz).
Moreover, in companies with more than 2,000 regularly employed staff, supervisory boards are to be established and shall
comprise half of their members elected by and from the workforce according to the German Co-Determination Act
(Mitbestimmungsgesetz). As required by law, the chairman of these supervisory boards is nominated from the employer's side
and has the casting vote, so final control is placed on the employer's side.
E. EMPLOYING FOREIGN NATIONALS
As far as non-German nationals shall be employed, employers need to observe that certain immigration steps and criteria are
met before the employee actually takes up work in Germany.
As a rule, all non-EU/EEA-nationals who want to enter and work in Germany need to apply for a respective visa before entering
Germany for the first time. If necessary to enter Germany, such visas will be issued by German embassies abroad. However,
there are exceptions to this rule, inter alia for UK, US, Canadian, Australian, Israeli, Japanese or Swiss nationals who may enter
German territory without firstly having to obtain a respective visa; the maximum duration for such visa-free visits amounts to 90
days within a 180-day period.
If not already obtained abroad at the German embassy, once in Germany, non-EU/EEA-nationals subject to visa requirements
will have to apply for a residency permit (Aufenthaltstitel) with the local public office for foreigners (Ausländerbehörde). After
obtaining approval of their applications, the respective visa will be transformed into a residency permit which, if granted,
simultaneously authorises the individual to take up work in Germany through the incorporated work permit therein. If all
documentation is gathered and in order, the application process for such residency permits will take up to 4-8 weeks.
Even though all non-EU/EEA-nationals generally require such a residency and work permit to perform gainful employment in
Germany, there is a limited catalogue of activities which are permitted to be carried out in Germany without such residency and
work permit, e.g. activities of managing directors of a company, attending business meetings or performing certain installation
works. The assessment of whether such exceptions apply will always need to be carried out on a case-by-case basis.
Should no such exception apply, non-EU/EEA-nationals will need to fulfil certain criteria in order to be eligible for a residency
and work permit. Individuals will generally be able to apply for such a residency permit if (i) they are highly qualified or have a
non-vocational qualification if there is a shortage of skilled workers in the profession to be practised in Germany, (ii) there is a
specific job offer on the table and (iii) the education is recognised as equal to a German degree.
Highly educated non-EU/EEA nationals with university degrees (or a comparable degree) and professional experience also
have the option to apply for a so-called EU Blue Card allowing them to stay and work in Germany for up to 4 years (prolongation
optional). To fulfil the requirements, these individuals need to not only present their respective university degree, but also need
to provide documentation on a specified job offer or contract with an annual gross salary of at least EUR 56,400 (in 2022). This
threshold is lowered to EUR 43,992 (in 2022) if the applicant's profession lies within the fields of mathematics, engineering,
natural sciences, technics or medicine.
Moreover, through implementing the European ICT Directive through federal law, intra-corporate transfers were made easier
beginning 1 August 2019. According to this legislation, non-EU nationals become eligible to apply for a new residency permit
called ICT Card which provides the permission to work for a German group entity for up to three years if posted from a group
entity outside EU territory.
10-64701038-1 9
CONTACTS
DR. MARTIN LÜDERITZ
Partner
M: +49 (0) 151 544 13 160
D: +49 (0)40 87 4060 25
Martin.Lued[email protected]
JENS PETERS LL.M. (STELLENBOSCH UNIVERSITY)
Counsel
M: +49 (0) 160 294 9919
D: +49 (0)40 87 4060 20
Martin is the head of the German labour & employment
team and advises national and international companies
on all aspects of individual and collective labour law.
He is a specialised attorney for Labour Law and has
been advising clients in employment law for more than
15 years.
Jens is an employment law specialist and advises
medium sized and large national and international
companies on all issues relating to individual and
collective labour law and occupational pension schemes.
He works across all sectors, but has a particular
experience in the automotive, pharmaceutical and food
industry. His experience includes several years working
for Magic Circle law firm where he advised national and
international listed clients.
DR. ELISABETH SECHTEM
Managing Associate
M: +49 (0) 162 137 9781
D: +49 (0)40 87 4060 29
elisabeth.sechtem@aglaw.com
Elisabeth is a lawyer specialised in German labour and
employment law. She is experienced in advising national
and international clients in all matters of individual and
collective labour law issues as well as occupational
pension schemes.
Elisabeth’s main fields of expertise lie within legal advice
on employment and pension related questions in context
with M&A processes as well as restructurings.
10-64701038-1 10
OUR TEAM
Our employment team in Germany has a nationally and internationally recognised reputation for all aspects of labour and
employment law. We are deeply rooted in the German market, combining local market knowledge with international expertise
for clients with business across the globe. They have long-time specialist experience in handling complex and sensitive matters,
which are of high value or have the potential to affect reputation of clients. Working closely together with our other lawyers in
Germany, in particular with Corporate and Commercial, M&A, Data Protection, IP and Competition, we can provide a one-stop
offering for any labour and employment related query.
We are not only international in terms of the clients we work with, but also have excellent teams in the UK, continental Europe,
Asia and GCC to call upon to provide co-ordinated local market knowledge and maintain high quality cross-border. Where we
do not have offices, we engage with leading employment lawyers from across our global preferred firm network with whom we
have cultivated long-lasting relationships.
We are able to support clients across a wide range of sectors including Automotive, Digital, Financial Services, Health,
Industrials, IT, Real Estate, Retail & Consumer and Transport.
OUR APPROACH
We are known for offering a compelling combination of value and expertise. Our approach is to develop an insight into client
organisations, what they value and their strategic and cultural approach to people issues in order to serve our clients best. We
never sit on the fence and always give a view on what we believe to be the right approach for your business. We give high
quality practical advice, suitable for the business needs of each individual client.
OUR EXPERTISE
Our strength is in the breadth of our experience and coverage while maintaining high quality advice, which spans:
● Service agreements with board of directors and/or managing directors including post contractual non-competition clauses
and complex incentive schemes, employment contracts with key employees and other white and blue collar employees
● Restructurings including mass redundancies
● Employment Litigation, in particular in response to unfair dismissal claims
● Pre and post transactional labour and employment issues in the M&A context
● Transfer of undertakings ("TUPE")
● Employee Incentives
● Negotiation with works councils on reconciliation of interests, social plans and tariff agreements
● Co-ordination of cross-border employment projects
● Business immigration questions and social security implications
● Pension schemes, incentive plans and Employee Stock Option Plans (ESOP)
We also offer an extensive range of value-add services, including but not limited to legal training for in-house legal and HR
teams and line managers and tailor made employment updates.
MORE IMAGINATION MORE IMPACT
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