Germany’s Three-Party ‘Traffic Light’ Coalition Agrees on Employment Law Undertakings for the Next Legislative Period

On November 24, 2021, the “traffic light” coalition, consisting of the Social Democratic Party of Germany (SPD), the Free Democratic Party (FDP), and Bündnis 90/Die Grünen (the Greens), reached an agreement on its coalition treaty.

The traffic light coalition—so named for the parties’ signature colors, SDP (red), FDP (yellow), and, of course, the Greens’ green—is committed to shaping the modern business world. It intends to open up new professional opportunities while offering job security and flexibility.

Some undertakings on the employment agenda of the traffic light coalition may offer advantages to employers, while other initiatives may bring disadvantages for companies in the next legislative period:

• The statutory hourly minimum wage would be increased to €12.
• The maximum daily working time of eight hours per day would remain in the German Working Hours Act. However, trade unions and employers would be able to provide flexible working-time models with the support of the government. In 2022, a temporary transitional arrangement will take effect, according to which employees will be able to organize their working time more flexibly on the basis of collective bargaining agreements under certain conditions and in compliance with certain deadlines.
• During an experimental phase, the parties would explore creating, on a collective legal basis (by collective bargaining agreement or works agreement), limited deviations from the current maximum daily working time.
• Flexible working-time models, such as trust-based working time, would remain possible. Trust-based working time is a contractual work arrangement under which employees may organize their working time, in particular start and end, largely on their own responsibility.
• The grand coalition consisting of the Christian Democratic Union of Germany and the Christian Social Union (collectively, the CDU/CSU) and the SPD had intended to introduce a legal right to work from home in the last legislative period, but the undertaking failed. The traffic light coalition is now taking up the undertaking and seeks to strengthen the rights of employees in this respect. The definition of “home office” would be distinguished from telework, so that the Workplace Ordinance would no longer apply. Employees in suitable jobs would be given the right to discuss mobile working and home-office arrangements. Employers would be allowed to object to employees’ wishes only if operational concerns conflict with them. An objection would have to be neither irrelevant nor arbitrary. However, deviating collective bargaining agreements and internal company regulations would remain possible.
• The traffic light coalition also wants to make mobile work possible throughout the European Union “without any problems.” This is currently not the case because of the different tax and social security regulations in the individual EU-member states.
• The limits for mini-jobs would be raised to €520 (instead of the previous €450) and midi-jobs to €1,600 (instead of €1,300). Mini-jobs are marginal employment jobs that are generally not subject to taxes and social contributions. Midi-jobs have the advantage compared to full-time employment that, under certain circumstances, only reduced social security contributions are due and the payment of wage tax can be omitted.
• The extensive changes in the law on fixed-term employment contracts, which were included in the coalition treaty of the grand coalition, would not be implemented. Fixed-term contracts without a factual reason would continue to be possible. For public employers, fixed-term contracts would no longer be possible due to limited budgetary resources for remuneration. Chain fixed-term employment relationships (means several fixed-term employment contracts with a factual reason in a row) would be mitigated by limiting the duration of such fixed-term employment contracts with the same employer to a maximum of six years. The undertaking would also permit deviations only within narrow limits.
• The introduction of (partial) vocational training time is intended to make it easier for employees to reconcile work and continuing professional development. An employer and employee would be required to agree upon the terms of the training time.
• Similar to the allowance for work benefits for short-time work, an undertaking would provide for a qualification allowance pursuant to which the Federal Employment Agency may enable a company affected by structural change within the German economy to qualify employees for job training funding in order to keep them in the company and secure skilled workers. The prerequisite for this would be settling upon an agreement with the works council.
• In addition, the transfer short-time job training benefits allowance would be extended and the “transfer company” instrument would be further developed. Transfer companies pursue the purpose of finding new employment for employees of a company who are specifically threatened by unemployment.
• The employment agenda includes an undertaking that would extend the protection against dismissal for employees on parental leave to three months after returning to work.
• The agenda also includes an undertaking that would extend tax relief through December 31, 2022, for employees who work from home.
• An intended pilot project to conduct works council elections online would likely be activated before the regular works council elections coming in 2022.
• Works councils should be able to decide for themselves whether they conduct meetings in-person or virtually, according to the traffic light coalition’s employment agenda.
• An employer’s obstruction of democratic codetermination—i.e., the obstruction of the work council’s work—would be deemed an official offence. Thus, allegations of such obstruction would be prosecuted ex officio by the public prosecutor’s office.
• Trade union access to the workplace should be adapted to the use of modern media, according to the traffic light coalition’s agenda. The agenda calls for trade unions to be given digital access to business operations.
• The employment agenda calls for public procurement by the federal government to be linked to a company’s compliance with a representative collective bargaining agreement for the respective sector in order to strengthen collective bargaining coverage.
• Companies would be prohibited from spinning off business units as a method of escaping collective bargaining obligations.

Of course, each of these plans would still need to be implemented in law. The previous government did not manage to implement all the labor law plans of the coalition agreement during its legislative period. It therefore remains to be seen how and with what speed the traffic light coalition will pursue its labor law goals.

Ogletree Deakins’ Berlin office will continue to monitor and report on developments with respect to the traffic light coalition’s employment law policies and will post updates on the firm’s Cross-Border blog as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.