What do you need to know about German labour law? Here´s a brief insight.
Legal sources of German labour law
Labour law is divided into individual and collective labour law. Within the scope of the legal possibilities, as in other areas of German law, the principle of freedom of contract also applies to employment agreements. The legal framework for this is provided by the German Civil Code as well as special legal regulations, for example on collective bargaining agreements with trade unions, works agreements with works councils, protection against dismissal, leave entitlements, minimum wage or working hours. In addition, German labour law is largely shaped by case law and is therefore subject to constant change.
Employment agreements
As a rule, the law provides for employment agreements of indefinite duration. However, fixed-term agreements are possible under special legal conditions. The statutory minimum wage of currently 12.41 EUR gross per hour must not be undercut. In general employees’ working hours may not exceed eight hours per day. They may be extended to up to ten hours only if the average working day does not exceed eight hours within six calendar months or within 24 weeks. The notice periods to be observed by the parties are regulated by law or – where relevant – by collective bargaining agreement. By law, the notice period to be observed by the employer increases with the duration of the employment relationship.
Holiday and sick leave
The statutory minimum leave is 20 working days per year for a 5-day working week. If the employee is prevented from working due to illness, the employer must continue to pay remuneration for up to 6 weeks.
Collective bargaining agreements
For around 41% of employees in Germany, the employment relationship was governed by collective bargaining agreements with trade unions in 2022. The parties to collective bargaining agreements are the trade unions and employers’ associations, but also individual employers. Collective bargaining agreements can also be declared generally binding for individual sectors or areas by the Federal Ministry of Labour and Social Affairs. With the declaration of general applicability, the legal norms of the collective bargaining agreement in its area of application also cover employers and employees not previously bound by collective agreements. Collective bargaining agreements regularly contain provisions on wages, special payments, working hours, leave and notice periods.
Works Councils
Works councils may be elected in all establishments that normally have five or more permanent employees with voting rights, including three who are eligible. The same applies to joint establishments of several companies. The works council is an association of employees. It has the task of representing the interests of the employees vis-à-vis the employer. The works council has co-determination and participation rights with regard to decisions and measures in the establishment, such as the setting of working hours, the ordering of overtime, the introduction of monitoring systems or the implementation of restructuring measures. The works council must be consulted before any notice of dismissal is given. It cannot prevent the dismissal. However, if the works council is not consulted on the dismissal, the dismissal is invalid for this reason alone. If there are several works councils in one company, a central works council is to be established. If several companies form a group under corporate law, a combine works council can be formed.
Termination of the employment relationship
The employment relationship can end due to various reasons. For example, the employment relationship may end due to expiry of time in the case of fixed-term employment relationships, through a mutual termination agreement or unilateral termination. A prerequisite for effectiveness is always compliance with the statutory written form. The oral termination of an employment relationship or a termination by e-mail or with a scanned signature is not effective under German law. In the event of a dismissal, the employee may, under certain conditions, bring an action for protection against dismissal before the labour court. The action is usually directed at the declaration of the invalidity of the dismissal and continued employment. In this case, the employer must demonstrate and prove in court that the dismissal is socially justified for operational reasons or reasons relating to the employee’s person or behaviour. Very often, such dismissal protection proceedings are ended in court by settlement against payment of a severance package, which is usually subject of free negotiations between the parties to the proceedings.
