Employment & Labor Law in Germany

German Law Accessible Employment & Labor Law in Germany von Stefan Lingemann, Robert von Steinau-Steinrück, Anja Mengel 3. Auflage Employment & Labor Law in Germany Lingemann / Steinau-Steinrück / Mengel wird vertrieben von Thematische Gliederung: Praxisliteratur Verlag C.H. Beck München 2012 Verlag C.H. Beck im Internet: www.beck.de ISBN 978 3 406 60551 2 Inhaltsverzeichnis: Employment & Labor Law in Germany Lingemann / Steinau-Steinrück / Mengel

Lingemann/von Steinau-Steinrück/Mengel Employment & Labor Law in Germany Revision

Employment & Labor Law in Germany Stefan Lingemann Robert von Steinau-Steinrück Anja Mengel qq Verlag C. H. Beck München 2012

The Authors Dr. Stefan Lingemann, Prof. Dr. Robert von Steinau-Steinrück and Dr. Anja Mengel, LL. M. are attorneys in the Berlin offices of leading commercial law firms and a leading specialist law firm, respectively, in Germany GLEISS LUTZ (Lingemann), LUTHER (von Steinau-Steinrück) and ALTENBURG (Mengel). They have extensive practical experience in advising international clients on employment and labor law. Their activities are primarily concentrated in the areas of collective labor law, employment and labor aspects of corporate restructuring and acquisition, remuneration plans and stock options, and company pension plans. Their numerous publications attest to their expertise of German employment and labor law. www.beck.de ISBN 978-3-406-60551-2 2012 Verlag C. H. Beck München Druck und Bindung: Beltz Bad Langensalza GmbH Neustädter Straße 1 4, 99947 Bad Langensalza Satz: Druckerei C. H. Beck, Nördlingen Umschlag: Siegfried Bütefisch, Schlaitdorf Gedruckt auf säurefreiem, alterungsbeständigem Papier (hergestellt aus chlorfrei gebleichtem Zellstoff)

Ktrechtsinnen Revision Ktrechtsinnen Ktlinksinnen Preface Four years have passed since the second edition. It was, like the first edition, very well received in the market and has been sold out for over a year now. New laws relating to labor and employment law have been promulgated such as the EC Regulation on the law applicable to contractual obligations (Rome I) governing the international conflict of laws in employment relationships. On a national basis, new regulations were enacted with regard to employee data protection and minimum wages. The Federal Labor Court has been busy, not only giving quite a number of guidelines referring to the General Equal Treatment Act (AGG), but also extending the right to strike to new forms like flash mobs. Employers and employees as well as the authorities are more than ever focussed on compliance issues. All of this urgently requires a third edition of this book, which, of course, covers these and other (new) matters, while our overall concept remains unaltered: This book explains the essential provisions of German employment and labor law and their interpretation by the Federal Labor Court. Globalization calls upon international companies to increase their understanding of specific aspects of various national legal systems and economic cultures so as to be able to successfully establish production facilities and conduct business transactions abroad. Conversely, management personnel and human resources directors are increasingly finding themselves called upon to act as interpreters of German law and legal business standards for their companies, as are consultants for foreign clients. German employment and labor law, with its extensively developed system of individual and collective protection, is also strongly characterized by a reliance on case law and linkage with the social security laws, thus creating a special challenge for both German and non-german executives and advisors. Accordingly, this book explains the essential provisions of German employment and labor law, including the impact of social security and tax law, concisely and comprehensibly, while assuming no prior knowledge of the subject on the reader s part. Its purpose is to give executives and consultants a brief and succinct overview of the German system of employment and labor law. It is intended to help them recognize the issues which, in our opinion, present the most important problems and risks in establishing and managing German subsidiaries, as well as those arising from takeovers of German companies. The book focuses on those issues which, based on our extensive experience in the field, require the most legal advice and assistance. Academic questions of little practical relevance have been omitted. We would appreciate any suggestions concerning (any) problems that are not addressed in the book. We would like to express our appreciation to the partners in our law firms for their suggestions and comments. We would also like to thank Ms. Bedene Greenspan for her translation of the legal texts, our valued colleague Dr. Rut Groneberg for her support as well as Ms. Susanne Bendrath and Ms. Virginie Dutrannoy for their work on the manuscript. Berlin, August 2011 Dr. Stefan Lingemann Prof. Dr. Robert von Steinau-Steinrück Dr. Anja Mengel, LL. M.

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Ktrechtsinnen Revision Ktrechtsinnen Ktlinksinnen Abbreviations AEU-Vertrag Vertrag über die Arbeitsweise der Europäischen Union AGG Allgemeines Gleichbehandlungsgesetz AktG Aktiengesetz ArbGG Arbeitsgerichtsgesetz AÜG Arbeitnehmerüberlassungsgesetz a. m. ante meridiem (vormittags) ArbZG Arbeitszeitgesetz Art. article (Artikel) BEEG Bundeselterngeld- und Elternzeitgesetz BErzGG Bundeerziehungsgeldgesetz BetrAVG Gesetz zur Verbesserung der betrieblichen Altersvorsorge BetrVG Betriebsverfassungsgesetz BUrlG Bundesurlaubsgesetz BGB Bürgerliches Gesetzbuch DrittelbG Drittelbeteiligungsgesetz e. g. exempli gratia/for example (zum Beispiel) EntgeltfortzG Entgeltfortzahlungsgesetz et seq. et sequentes/and the following (und Folgende) etc. et cetera/and so forth (und so weiter) ff. and the following pages (und die folgenden Seiten) GmbHG GmbH-Gesetz HGB Handelsgesetzbuch i. e. id est/that is (das heißt) KSchG Kündigungsschutzgesetz MitbestG Mitbestimmungsgesetz MuSchG Mutterschutzgesetz no. number (pl. nos.) (Nummer(n)) NachwG Nachweisgesetz p. page (pl. pp.) (Seite(n)) p. m. post meridiem (nachmittags) SGB III 3. Sozialgesetzbuch SGB IV 4. Sozialgesetzbuch SGB IX 9. Sozialgesetzbuch TVG Tarifvertragsgesetz TzBfG Gesetz über Teilzeitarbeit und befristete Arbeitsverträge

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Table of Contents IX Revision Table of Contents Table of Contents Table of Contents Part I: Overview A. Fundamentals... 1 I. History and Introduction... 1 II. Players... 1 1. Employees and Employers... 2 2. Works Councils... 2 3. Trade Unions... 3 4. Employers Associations... 3 III. Employment Agreement, Works Agreements, Collective Bargaining Agreements and other Legal Sources. 4 1. Legal Sources... 4 a) Employment Agreement... 4 b) Works Agreements... 4 c) Collective Bargaining Agreements... 4 d) Statutes... 5 e) Company Practice... 5 f) Directives by the Employer... 5 g) Equal Treatment... 5 h) Constitution... 6 i) European Law 6 j) International Law... 7 k) Case Law... 7 2. Order of Precedence... 7 a) Hierarchy... 7 b) Specificity... 7 c) Replacement... 7 d) Favorability... 7 V. Social Security... 8 V. Tax Law... 8 VI. Conflict of laws... 8 B. Employment Law... 9 I. The General Equal Treatment Act... 9 1. Scope of Application... 9 2. Prohibition of Adverse Treatment. 10 3. Organizational Duties of the Employer... 11 4. Rights of the Employees... 11 5. Legal Consequences... 11 6. Consequences for Practice in the Workplace... 12 II. Conclusion of Employment Agreements... 13 1. Application... 13 a) Prohibition of Discrimination... 13 b) CV and References... 13 c) Interview What Questions Can Be Asked... 14

X Table of Contents d) Employment Questionnaire... 15 e) Medical Examination... 15 f) Interview Costs... 15 g) Participation of the Works Council... 15 2. Content of Employment Agreements... 15 a) Conclusion of the Agreement... 15 b) Limitation of Term... 15 c) Part-Time Contract... 16 d) Leasing of Employees... 17 e) Foreign Employees... 18 f) Prohibition of Discrimination... 19 3. Control of General Terms and Conditions... 19 a) Review of Subject Matter... 20 b) Specific Clauses... 20 4. Form... 21 5. Invalid Employment Agreements. 22 a) Minors... 22 b) Fraudulent Misrepresentation.. 23 c) Error... 23 d) Lack of Residence or Work Permit... 23 III. Rights and Duties... 23 1. Duty to Work/Right to Work... 23 2. Remuneration... 23 a) Minimum Remuneration... 23 b) Bonus... 24 c) Stock Options. 24 d) Company Pension Plans... 25 e) Capital Formation Benefits... 26 3. Sick Pay... 27 4. Working Time... 27 5. Vacation... 28 6. Maternity Protection Parental Leave and Parental Benefits... 29 a) Maternity Protection... 29 b) Parental Leave and Parental Benefits... 29 7. Confidentiality... 31 8. Covenant Not to compete... 31 9. Data Protection... 31 a) Data Storage with the Consent of the Employee 31 b) Data Storage without the Consent of the Employee... 31 10. Liability... 32 11. Inventions... 32 IV. Compliance... 33 V. Termination of Employment Relationships... 34 1. General Points... 34 a) Declaration of Dismissal... 34 b) Form... 34 c) Delivery... 35 d) Dismissal by Authorized Representatives... 35 e) Dismissal Notice Periods... 36 f) Calculating the Notice Periods. 36 2. Consultation of the Works Council... 36

Table of Contents XI 3. General Protection Against Dismissal... 37 a) Conduct-Related Dismissals... 38 b) Dismissals on Persononal Grounds... 39 c) Dismissal for Operational Reasons... 41 d) Dismissal for Variation of Contract... 43 4. Ordinary Dismissal or Dismissal for Cause... 43 a) Cause for Dismissal... 43 b) Two-Week Period... 43 c) Resignation for Good Cause... 44 d) Employees Protected Due to Age... 44 e) Tactical Advice... 44 5. Special protection Against Dismissal... 45 a) Maternity Protection... 45 b) Parental Leave 45 c) Protection of Persons with Severe Disabilities... 45 d) Works Council Members and Other Officers under the Works Constitution Act... 45 e) Mass Layoffs... 46 6. Termination Agreement... 46 VI. Transfer of Business and Transformation... 47 1. Transfer of Business... 47 a) Introduction... 47 b) Prerequisites... 48 c) Passing of the Employment Relationships as a Legal Consequence... 48 d) Information Requirements and Right of the Employees to Object... 49 e) Distribution of Liability... 50 f) Impact on the Employee Representative Bodies 50 g) Continued Application of Collective Norms... 50 2. Transformations.. 51 VII. Assignment to Foreign Countries... 52 1. Employment Law Issues... 52 2. Social Insurance Issues... 53 3. Tax Law Issues... 54 C. Labor Law... 55 I. Laws Governing Works Councils... 55 1. Works Councils... 55 a) Workplaces That Can Have Works Councils... 55 b) Election of the Works Council.. 55 c) Election Committee... 55 d) Election and Costs... 56 e) Works Council Members... 56 f) Joint Works Council... 57 g) Group Works Council... 58 h) European Works Council... 58 i) Economic Committee... 58 j) Youth and Trainee Representation... 58 k) Spokespersons Committee for Managerial Employees... 59 l) Severly Disabled Employees Representation... 59 m) Other Representative Bodies... 59

XII Table of Contents 2. Rights of Participation and Codetermination... 59 a) Information and Consultation Rights... 60 b) Codetermination Rights... 60 c) Exercising Codetermination Rights... 63 3. Works Agreements... 64 a) Typical Content... 64 b) Conclusion... 64 c) Effectiveness... 64 d) Termination... 65 4. Disputes between Employer and Works Council... 66 a) Suits before a Labor Court... 66 b) Cease and Desist Claims... 66 c) Temporary Hirings and Transfers... 67 d) Conciliation Board... 67 e) Other Remedies... 67 5. Transfer of Business, Transformation and Restructuring... 67 II. Collective Bargaining Agreements Law... 68 1. Collective Bargaining Agreements 68 a) Typical Content... 68 b) Conclusion... 69 c) Effect... 69 d) Termination... 70 2. Labor Disputes/Industrial Action 70 a) Strike... 70 b) Conduct of the Strike... 70 c) Reaction of the Employer... 70 d) Flash Mobs... 71 III. Corporate Codetermination... 71 D. Employee Protection Laws... 72 I. Laws Governing Working Hours... 73 II. Shop Closing Hours Act... 73 III. Maternity Protection Act... 74 IV. Federal Parental Allowance And Parental Leave Act... 75 V. Young Persons Protection in Employment Act... 75 VI. Laws Regarding Employees with Disabilities... 75 E. Social Insurance Laws... 76 I. Statutory Social Insurance... 76 1. Pension Insurance... 77 2. Unemployment Insurance... 78 3. Health Insurance. 78 4. Home and Institutional Care Insurance... 79 5. Employee Accident Insurance... 80 II. Social Insurance Obligations... 81 1. Total Social Insurance Contribution... 81 2. Freelance Workers and Self-Employed Personnel... 82 3. Pseudo-Independence... 83 III. Termination of Employment Relationships... 84 1. Disqualification Periods and Suspension Periods for the Employee 84 2. Severance Pay... 85

Table of Contents XIII F. Tax Laws 85 I. Withholding Tax on Wages... 85 II. Special Issues... 86 1. Company Car... 86 2. Stock Options... 87 3. Severance Payment... 87 G. Labor Court Proceedings 88 I. Courts... 88 II. Protection Against Dismissal Proceedings... 88 1. Out-of-Court Negotiations... 88 2. Three-Week Period for Filing Complaints... 88 3. Course of Dismissal Proceedings and Tactical Considerations... 88 4. Judicial Dissolution of Employment Relationships and Severance Pay... 89 5. Remuneration Claims and Default in Acceptance.. 90 6. Right to Employment... 90 H. Managing Directors, Management Board Members... 91 I. Managing Directors of Limited Liability Companies... 91 1. Appointment of Managing Directors... 91 2. Removal of Managing Directors... 91 3. Service Contract.. 92 4. Duties and Responsibilities of the Managing Directors... 92 a) Managing the Business of the Company... 92 b) Diligence... 93 c) Organisation Duties... 93 d) Duty to inform Shareholders... 94 e) Accounting... 94 f) Insolvency... 94 g) Raising and Maintenance of Capital... 94 h) Fiscal Obligations... 95 i) Social Security Obligations... 95 II. Management Board Members of Stock Corporations... 95 1. Appointment of Management Board Members... 95 2. Removal of Management Board Members... 95 3. Service Contract.. 95 4. Duties and Responsibilities of the Management Board Member... 96 a) Not bound by Directives... 96 b) Diligence... 96 c) Organisation Duties... 96 d) Information Duties... 97 e) Accounting... 97 f) Insolvency... 97 g) Raising and Maintenance of Share Capital... 97 h) Fiscal Obligations... 97 i) Social Security 97 Part II: Statutory Material I. Civil Code (BGB)... 99 II. General Equal Treatment Act (AGG)... 128

XIV Table of Contents III. Part-Time and Limited Term Employment Act (TzBfG)... 152 IV. Continuation of Remuneration Act (EFZG)... 166 V. Protection Against Unfair Dismissal Act (KSchG)... 178 VI. Federal Vacation Act (BUrlG)... 199 VII. Act for the Improvement of Company Pension Plans (BetrAVG) 207 VIII. Comercial Code (HGB)... 253 IX. Treaty on the Functioning of the European Union (AEU-Vertrag) 259 X. Works Constitution Act (BetrVG)... 261 XI. Collective Bargaining Agreements Act (TVG)... 371 XII. Act on the Co-Determination of the Employees (MitbestG)... 380 XIII. One-Third Participation Act (DrittelbG)... 409 XIV. Hours of Employment Act (ArbZG)... 418 XV. Maternity Protection Act (MuSchG)... 443 XVI. Federal Parental Benefit and Parental Leave Act (BEEG)... 461 XVII. Social Security Code III (SGB III)... 470 XVIII. Social Security Code IV (SGB IV)... 480 XIX. Social Security Code IX (SGB IX)... 506 XX. Law Pertaining to Companies with Limited Liability (GmbH- Gesetz)... 529 XXI. Stock Corporation Act (AktG).. 538 XXII. Labor Court Act (ArbGG)... 580 XXIII. Act Regulating the Commercial Leasing of Employees (AÜG)... 595 XXIV. Law on Documenting Essential Applicable Conditions for an Employment Relationship (NachwG)... 605 Glossary of Key Words English/German... 608 Glossary of Key Words German/English... 612