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Information in employment contracts: what’s changing in the EU?

Global
07.06.22
13
In Germany, the draft law to implement the EU Transparent and Predictable Working Conditions Directive will require employers to provide employees with more information on their working conditions. Will German employment contracts need to be amended soon, and what is the position in other countries?

 

A new version of the German Evidence Act is currently being discussed to implement the EU Transparent and Predictable Working Conditions Directive. The Evidence Act (the law of proof of substantial conditions applicable to the employment relationship) is certainly not one of the best-known labour laws in Germany, but the proposed changes could be significant in practice.

Background

The current proposed amendments are based on the Transparent and Predictable Working Conditions Directive (2019/1152), which entered into force on 31 July 2019 (see here for more detail). This Directive aims to create more transparency regarding employment contract conditions in Europe and must be implemented by 1 August 2022. For quite some time, nothing happened with regard to implementation in Germany.

However, on 14 January 2022, a draft bill was published. This draft bill was adopted on 6 April 2022. It includes amendments to the Evidence Act, the Vocational Training Act, the Trade Regulation, the Temporary Employment Act, the Maritime Labour Act, the Part-Time Work Act and the Fixed-Term Work Act. The German Federal Parliament debated it for the first time on 12 May 2022. Following the debate, the draft was referred to the lead committee for labour and social affairs for further discussion. However, we do not expect huge changes within the scope of the parliamentary process.

In Germany, the Directive will be implemented mainly by extending the employer’s information obligations, which are already regulated in the Evidence Act. At first glance, it appears the new requirements relating to the maximum duration of a probationary period, multiple employment, predictability of working conditions and especially the composition and level of pay may cause headaches for employers.

What is the law now?

In Germany, the Evidence Act already regulates extensive information obligations so that workers are aware of their contractual conditions. Section 2 of the Evidence Act stipulates, among other things, that the following should be included:

  • date of commencement of the employment relationship;
  • the foreseeable duration of the employment relationship in the case of fixed-term contracts;
  • the place of work or (if the employee is not to work at only one particular place of work) an indication that the employee may be employed at different places;
  • a brief description of the activity;
  • the composition or the amount of the remuneration;
  • the agreed working hours;
  • holiday entitlement;
  • notice periods; and
  • general reference to applicable collective agreements or works agreements.

 

If these points are not regulated in an employment contract, organisations must set down the essential contractual conditions in writing no later than one month after the start of the employment relationship, sign the minutes and hand them over to the employee.

The purpose of the Evidence Act is to provide clarity and protect employees who do not have a (written) employment contract. This serves the second aim of the Evidence Act: to regulate working conditions in smaller organisations as well as in atypical employment relationships and to avoid illegal employment. The third function of the Evidence Act is to avoid disputes over working conditions. It is important to note under the current law, there was no provision for sanctions if employers’ information obligations were not fulfilled or not fulfilled properly. This is also changing.

What will change: the draft law

The following changes are particularly likely to have an impact:

  • There is a requirement to state, separately, the composition and amount of remuneration, including overtime pay, bonuses, allowances, premiums and special payments as well as other components of remuneration. Their due date and method of payment must also be included.
  • There is a requirement to state the duration of the probationary period; in the case of a fixed-term employment relationship, this must be proportionate to the expected duration of the fixed-term and the nature of the work.
  • The agreed working time, agreed rest breaks and rest periods must be provided and, if there is agreed shift work, the shift system, shift rhythm and prerequisites for shift changes.
  • If agreed, the employer must include the fact there is a possibility of ordering overtime and its conditions.
  • The procedures to be followed by the employer and the employee in the event of termination of the employment relationship must be set out, at least the written form requirement and the time limits for termination of the employment relationship, as well as the time limit for bringing an action for protection against dismissal. If the employee is not properly informed, this does not change the fact that the employee has to assert the dismissal’s invalidity in court in due time..

 

The employer’s duties to provide evidence are partially supplemented and new duties to provide information are introduced on the probationary period, the scope of entitlement to further training, overtime, on-call work and the identity of the pension provider for occupational pension schemes. The duties to provide information in the event an employee is posted abroad are also extended.

What impact will the changes have?

For companies, the exciting question now is what effects the planned changes will have. Do all employment contracts now have to be changed? The answer is short: No. Unfortunately, we need to add a ‘but’ here. Other ways of providing information are envisaged, meaning that old contracts do not have to be changed. However, new employment contracts should be reviewed and adjusted after the law is passed. In addition to amending contracts, it is also possible to hand out an information sheet to the employee so that the duty to inform is fulfilled. There is a provision that means that employees whose employment relationship already existed before 1 August 2022 must also be informed of all newly added information if they request it.

It is interesting that the German draft law imposes a written form requirement and excludes the electronic form, when the Directive permits the use of electronic means of communicating essential information.

In future, the absence of, or incorrect, information will constitute an administrative offence that can be punished with a fine of up to EUR 2,000.

In addition, there are changes to the deadlines that exist for providing information. Under the existing provisions, the employer had to inform an employee of the essential terms of his or her contract within one month. When these changes are implemented, shorter time limits will apply, depending on the subject matter of the information. As a rule of thumb, the information must be provided at the latest on the first day of work performance.

Finally, there is an interesting provision which stipulates that the employer must also provide information on the requirements for protection against dismissal and the deadlines for bringing an action for unfair dismissal. The legislator has made it clear in the explanatory memorandum that this obligation, even if breached, will not render a dismissal legally invalid. Nevertheless, employee representatives may raise the objection that the dismissal is invalid if incorrect information is provided. This argument must already be countered, because although the directive also mentions sanctions, it refers to fines and not to the invalidity of dismissals.

Overall, we believe that the draft law will lead to an increased administrative burden, especially for organisations that cannot refer to collective agreements or works agreements to demonstrate working conditions. Employers can already take precautions by drafting the information required after the law is passed. In addition, organisations should prepare themselves for the fact that there may be requests that need to be processed quickly after the changes come into force and have the appropriate processes in place to do so. More generally, German employers should prepare themselves for these changes, take a close look at the implementation and amend their standard employment contracts to comply with their legal requirements, and to avoid fines.

For more information about terms and conditions

The view from other places.

Brazil:
Chile:
Finland:
Greece:
Italy:
Kazakhstan:
New Zealand:
Slovakia:
Sweden:
United Kingdom:
Written by
Kliemt.HR Lawyers, the first port of call in employment law for top-class and future-proof advice.
Authors
Dr Dominik Sorber
Senior Associate - Germany
Kliemt.HR Lawyers
Dr Alexander Ulrich
Partner - Germany
Kliemt.HR Lawyers