German Employment Law Fall 2022 Update: Bonuses, COVID-19, and Annual Leave Entitlements

This fall and winter season, employers in Germany have several developments in German employment law to put on their radars, including optional bonus pay due to the spike in energy costs; workplace safety and health measures related to heat, and separately, COVID-19; and annual leave entitlements. Below, we summarize these developments.

Inflation Compensation Bonus

Since the beginning of the year, consumer prices—especially energy costs—have risen sharply. In order to reduce the increased financial burdens, the German legislature provided a possibility for employers to grant tax- and social security –exempt bonus payments to their employees. Until December 31, 2024, employers can, on a voluntary basis, make special net bonus payments of up to EUR 3,000. As a prerequisite for tax and social contribution exemption, however, a bonus must be paid in addition to an employee’s contractual remuneration and be aimed to compensate for inflation-related price increases. This should be documented, for example, on the pay slip. Employers may make the bonus payment as either a one-time payment or in installments. Alternatively, benefits in kind in a corresponding amount can be granted.

Employers granting inflation compensation bonuses to their workforces must observe the principle of equal treatment—i.e., if parts of a workforce are to be excluded from the payment or receive lower bonuses, there must be reasons to justify the exclusion. Otherwise, unjustly disadvantaged employees might be able to assert additional payment claims.

Workplace Temperatures

Rising energy costs are not only a burden to employees; employers also face additional financial burdens. Seeking a possible remedy, employers may aim for consuming less energy, including using less heating. But what is the minimum temperature an office workplace must have?

Occupational health and safety regulations stipulate the requirements. The Ordinance on Workplaces, for example, requires “room temperature during the period of use that is conducive to [good] health.” (Emphasis added.) This requirement is specified in the “Technical Rules for Workplaces—Room Temperature” (German version). These rules stipulate a minimum room temperature of 20°C (68°F) for “light activities” that are carried out predominantly in a seated position—i.e., the classic office job. However, a recent amendment to the Energy Saving Ordinance (German version) allows this minimum temperature to be reduced by 1°C through February 28, 2023, i.e., to 19°C (66.2°F). For public employers, this minimum temperature is also the upper limit. Private employers, on the other hand, are still free to continue heating their offices at higher temperatures.

COVID-19 Measures and Home Offices

Just in time for the cold season, an updated SARS-CoV-2 Occupational Health and Safety Regulation (German version) took effect on October 1, 2022. Unlike the previous regulation, it no longer explicitly requires employees to work from home. As part of their risk assessments, employers now only have to consider offering their employees the opportunity to carry out suitable work activities at home if there are no operational reasons for not doing so. Consequently, employees have no legal right to perform their work in home offices. At the same time, this means that employers have no way of ordering their employees to perform their work from home offices without a corresponding clause in the employment contract.

While the current SARS-CoV-2 Occupational Health and Safety Regulation does not impose the same level of requirements that its predecessors did when it comes to home-office work, it nevertheless reintroduces many familiar measures.

Just as in previous fall and winter seasons, employers must examine and define suitable protective measures to minimize workplace COVID-19 infection as part of their company hygiene concepts. In this context, measures like keeping distance, hand hygiene, wearing masks in everyday life, and regular ventilation continue to be of particular importance. Employers may want to limit the number of people in close physical proximity, for example, by ensuring that only one person uses a room at a time.

Furthermore, employers may want to examine whether they can offer free testing opportunities as part of their company hygiene concepts. The regulation does not provide for a general obligation to offer testing.

Employers may require their employees to wear masks wherever other measures to contain the risk of infection are not possible or not sufficient. Such is the case, for example, if minimum distances cannot be maintained due to work conditions. In such cases, employers must provide medical masks.

The regulation also contains familiar requirements on the subject of vaccinations —namely, that employers must inform their employees about the health risks in the event of COVID-19 infection and about the possibility of protective vaccinations. Employers must also allow employees to make appointments for such vaccinations during working hours. The regulation states that if vaccinations are carried out by company physicians on-site, employers should support them in terms of personnel and organization.

Telephonic Sick Notes

Since August 4, 2022, doctors have been allowed to issue sick notes to their patients based on telephone calls. Employees suffering from mild respiratory diseases can call their doctors, who may send them on sick leave for up to seven calendar days due to suspected COVID-19 infections. In addition, an extension of the sick leave for an additional seven days is also possible via telephone. This regulation is currently limited until November 30, 2022, but an extension is expected in the near future.

No Automatic Start of Limitation Periods for Paid Annual Leave

Just in time for the end of the year, the topic of unclaimed paid annual leave days has once again become particularly relevant. In several recent rulings, the European Court of Justice (ECJ) has once again emphasized that (statutory) paid annual leave entitlements do not automatically expire and their limitation period does not start unless employers have fulfilled their obligations to cooperate.

Relevant case law provides that, contrary to the wording of the German Federal Leave Act, employees’ annual leave entitlements do not just expire at the end of the year or on March 31 of the following year. Rather, as we reported in March 2019, the prerequisite for expiration is that employers inform their employees in advance about existing paid annual leave entitlements and their imminent expiration and request that employees make use of them. If employers fail to do so, they run the risk of employees accumulating vacation days over a longer period of time or demanding payments in lieu of vacation, including for unused vacation from previous years, upon termination of their employment. Employers may thus wish to keep track of the number of unused vacation days still available to their employees in order to ensure that these will be taken in good time. A recent decision by the ECJ serves as a reminder to employers to consider notifying employees of their leave entitlements.

According to the Luxembourg judges, the employers’ obligation to cooperate as described above also applies with respect to the statute of limitations period applicable to paid annual leave entitlements. According to current German law, the three-year limitation period for unused paid annual leave claims usually starts at the end of the calendar year.

However, the ECJ has now taken a different view and held that for the statute of limitations period to start, employers need to have fulfilled their obligations to inform and cooperate with employees and need to have requested that leave be taken. Otherwise, employers may not later invoke the statute of limitations. Employers that do not wish to risk potentially substantial claims for payments in lieu of paid leave upon their employees’ terminations of employment may thus want to consider systematically keeping track of any unused annual leave entitlements of their workforces.