Germany Envisaged Labor Employment Law Changes of the New Coalition Government

Following months of uncertainty after the German elections in September of 2017 failed to produce an overall majority for any party, the center-right Christian Democratic Union (CDU/CSU) and the center-left Social Democratic Party (SPD) decided on a coalition agreement on February 7, 2018. Strongly influenced by the SPD, the coalition agreement provides for various labor and employment law changes that employers may have to face in the near future.

Fixed-Term Employment Contracts

Since redundancies are very restricted under German law, fixed-term employment contracts are popular with employers as a way to cover temporary demands for work, test employees, and avoid cost-intensive redundancies. Currently, fixed-term employment contracts must either be limited to a two-year period, or be backed up with a justifiable reason for the fixed-term nature, e.g. such as work on a specific project. Within the two-year period, the employment contract can be extended up to three times—a practice that has been common with German employers.

The future coalition plans to significantly restrict fixed-term employment contracts. First, the coalition plans on reducing the maximum period allowed for fixed-term contracts without justification to 18 months. Within this maximum period, only one extension will be allowed. Additionally, companies with more than 75 employees will have a limit of 2.5 percent of total staff that can work under fixed-term employment contracts. If this quota is exceeded, every additional fixed-term employment contract will automatically be considered as an unlimited employment relationship unless there is a justifying reason for the time limitation.

For fixed-term employment contracts with a justifying reason, the coalition agreement provides for a maximum duration of five years. Previous employment with the company as a temporary employee or agency employee shall be counted towards this five-year period.

Right to Fixed-Term Part-Time Employment

Currently, German law allows employees to temporarily reduce their working hours in very specific cases, such as for parental leave and certain situations in which the employee is caring for close relatives. In the future, employees in companies with more than 45 employees will generally have the right to reduce their working hours for a limited period of time (between one and five years). In order to protect smaller employers, however, companies with between 46 and 200 employees will only be obligated to approve a request if fewer than 1 in 15 employees work part time.

Strengthening of works councils

The so-called simplified election procedure for works councils that currently applies to businesses with up to 50 employees shall become mandatory for businesses with up to 100 employees—making it easier for works councils to be created. Companies with up to 200 employees will be able to opt for the so-called simplified election procedure on a voluntary basis.

Digitalization, Mobile Work, and Flexibility of Working Hours

Against a background of increasing digitalization, the future coalition will strengthen employees’ rights to “mobile work,” i.e., working from home. In particular, under the coalition agreement, employees must be given reasons for the rejection of a request to mobile work. What circumstances (if any) would be considered an acceptable reason to reject a request is unclear in the coalition agreement.

Furthermore, to meet the changing needs to flexible working time, the coalition agreement will strengthen long-term working time accounts and will give collective bargaining parties the possibility to regulate their working hours more flexibly.

Comment

The changes to fixed-term employment contracts—in particular the new limit of 2.5 percent of employees that can be engaged on a fixed-term contract in the absence of justification—will most likely impose the biggest challenge for employers. Many companies will have to reduce the number of fixed-term employment contracts they use and monitor those numbers moving forward. This will require significant additional operational and bureaucratic efforts on behalf of the company.

Written by Ashkan Saljoughi of Ogletree Deakins