Transposing the EU directive on working conditions: time to amend all your employment contracts?

EU Directive 2019/1152 on Transparent and Predictable Working Conditions in the European Union (“Working Conditions Directive”) aims to promote transparent and predictable employment and introduces wide-ranging rules on the information that employers must provide. The German Bundestag passed the bill transposing the Directive on 23 June 2022. The act is to come into effect on 1 August 2022. It will cause more work for employers. What steps do you need to take?

What does the Working Conditions Directive regulate?

The Working Conditions Directive standardises requirements for employers to provide extensive information about the essential aspects of employment relationships and necessitates comprehensive changes to the German Written Statement Act (Gesetz über den Nachweis der für ein Arbeitsverhältnis geltenden wesentlichen Bedingungen, “NachwG”). The NachwG, which was previously of lesser importance in employment law practice, will play a more prominent role in the future. Under the bill, violations of a company’s obligations will be punishable by fines of up to EUR 2,000.

Which employment contracts are affected?

While all employment relationships are potentially affected, employers only need to take proactive action for new employment contracts.

New contracts: Employers are required to proactively provide information to employees with employment relationships beginning on or after 1 August 2022. The criterion here is the existence of the employment relationship (and not the conclusion of the employment contract), meaning that this requirement also applies to contracts concluded in the past if the employment relationship commences on or after 1 August 2022.

Existing contracts: Employees who were employed before the effective date only need to be provided with information at their request. Employers are then obliged to provide written information in addition to their existing employment contract – if their written employment contract does not already contain this information.

How will the proposed legislation impact an employment contract’s validity and content?

Breach of legislation does not render an employment contract invalid. Nor do employment contracts already have to include all the information. Employees can also be provided with information about the essential contractual conditions in a separate letter. However, a more straightforward approach would be to specify the necessary details in the employment contract itself – at least for new employment contracts.

The bill’s information obligations with the greatest impact include:

  • Information about the termination process: Alongside the previously common clauses such as the written form requirement for terminations and the notice period, the bill requires that employees are notified of the deadline for bringing an action on the grounds of unfair dismissal. However, failure to fulfil this obligation does not mean the three-week deadline for filing an action does not apply.
  • Any entitlement to employer-provided training
  • Elements of remuneration, including elements and amounts of remuneration for overtime, bonuses, allowances, premiums, special payments, and other elements of remuneration, each of which must be stated separately alongside the date on which they are due for payment and the method by which payment is to be made
  • Agreed breaks and rest periods, and if shift work has been agreed, the shift system, rhythm and conditions for shift changes
  • The ordering of and requirements for overtime (if agreed)
  • Where commitment to a company pension has been made, the name and address of the pension fund institution

Written form requirement in the age of digitalisation 

Until the end, there was intense discussion over whether electronic proof was to be permitted – as the Directive explicitly foresees. Despite severe criticism from quarters such as the Confederation of German Employers’ Associations (BDA), the bill regrettably retains the stricter written form; employees must therefore be provided with information about their essential working conditions in writing.

That means that employers must supply a document signed in wet ink containing all essential working conditions. While employment contracts can theoretically still be concluded verbally or electronically – unless they are contracts for a limited term of employment only – the impracticality of producing two documents will result in a practical need to list all essential working conditions in the employment contract.

The written form requirement for providing information is met:

  • If the employment contract is concluded in writing and a contract deed is supplied to the employee
  • If the essential conditions of employment are printed out, signed by the employer, and then supplied to the employee; The employee is not required to countersign for the obligation to be met.

When does the information have to be provided?

The bill sets three different deadlines. Some information has to be made by the first day of work (e.g. name and address of the parties to the contract and the elements and amount of remuneration); for other information, it is the seventh calendar day after the agreed start of the employment relationship (e.g. time and date of the start of the employment relationship, place of work, and description of the work); and for yet other information one month after the agreed start at the latest (e.g. period of paid leave or entitlement to employer-provided training). To ensure compliance, employers should include all the necessary information in their contract templates and supply a signed contract document to employees before commencement of the contract.

If they haven’t yet done so, companies should check their standard contracts and ensure their processes meet the new requirements. Feel free to contact us for more information.