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An Overview of the New German Minimum Wage Act (Mindestlohngesetz, Milog)

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An Overview of the New German Minimum Wage Act (Mindestlohngesetz, Milog) Minimum Wages in Germany – You Might Be Affected, Too: An Overview of the New German Minimum Wage Act (Mindestlohngesetz, MiLoG) By Dr. Marc Spielberger and Angela Schilling ermany recently established its first national minimum wage leg- islation providing for a minimum wage of EUR 8.50 per hour. G Unlike most European countries and the U.S., Germany did not previously have any nationwide minimum wage legislation. Instead, it was mainly the responsibility of labor unions and employers’ associations to lay down minimum wages in collective bargaining agreements. In the coalition agreement, which was negotiated by the Christian Democratic Union (CDU)/Christian Social Union (CSU) and the Social Democratic Party (SPD) after the parliamentary election in September 2013, the new German government has planned quite a considerable number of new labor and social law regulations. The Federal Ministry of Labor and Social Affairs, responsible for their implementation, is taking the provisions very seriously and has set a remarkably quick pace. This has, in a relatively short period of time, led to the Minimum Wage Act, which is part of the reform package “Act on Strengthening Collective Bargaining Autonomy” (Tarifautonomi- estärkungsgesetz). In July, the Federal Minister of Labor proudly announced: “The minimum wage is coming”. In the following, we will describe the basic features of the new Minimum Wage Act and why it may also affect U.S.-companies and employers. I. Introduction On July 3, 2014, in its 46th session, the lower house of the German parliament DR. MARC SPIELBERGER is a licensed (Bundestag) approved the German Act on the Regulation of a Minimum Wage labor law specialist in Munich, Germany, (Mindestlohngesetz; hereinafter referred to as “Minimum Wage Act”) based on a and is a partner in the law firm Reed recommendation and a report of the Committee for Labor and Social Affairs. In Smith, LLP; its 924th session on July 11, 2014, the upper house of the German parliament (Bundesrat) approved the draft law. With few exceptions, the law provides for the MS. SCHILLING is an attorney-at-law right to a minimum wage effective January 1, 2015. The Minimum Wage Act in Frankfurt am Main, Germany, and is a was promulgated in the Federal Law Gazette on August 15, 2015 and entered partner in the law firm Beiten Burkhardt. into force on August 16, 2014. FALL 2014 ©2014 BY DR. MARC SPIELBERGER AND ANGELA SCHILLING 163 MINIMUM WAGES IN GERMANY – YOU MIGHT BE AFFECTED, TOO: AN OVERVIEW OF THE NEW GERMAN MINIMUM WAGE ACT (MINDESTLOHNGESETZ, MILOG) II. Which Persons Are d) Long-Term Unemployed People Entitled To The New Statutory For employment relationships of employees who have been long-term unemployed (one year or longer) directly before Minimum Wage? the beginning of their employment, the minimum wage shall not apply during the first six months of employment. 1. Persons Employed In Germany On June 1, 2016, the German government must report to the legislative bodies on the extent to which this special The Minimum Wage Act principally applies to all em- regulation for the long-term unemployed has promoted ployees who are employed in the territory of the Federal their reintegration into the labor market and give an opin- Republic of Germany. Whether the employer is based ion on whether this provision should continue to exist. inside or outside of Germany is irrelevant. The Minimum This regulation to promote reintegration into the labor Wage Act therefore also applies to foreign employers market had been strongly disputed in the run-up to the and their employees if such employees perform work law’s enactment. The Minimum Wage Act accommodates in Germany. this by including the review obligation. 2. Exempted Types of Employees 3. Temporary Exceptions a) Interns a) Deviating Collective Bargaining Agreements As a general rule, interns are entitled to the minimum wage Until 31 December 2017 as well. The minimum wage applies to interns in order to The Minimum Wage Act will provide for a right to a mini- reduce the number of underpaid young employees who mum wage as from January 1, 2015. Until December 31, are performing normal work as so-called “interns”. 2017, deviating provisions of any collective bargaining Interns are consequently exempt from the Minimum agreement signed by representative collective bargaining Wage Act’s scope of application if: partners shall prevail over the minimum wage if it has been made binding for all employers, based in Germany or abroad, (1) they are completing an internship that is mandatory that fall under the collective bargaining agreement’s scope of for their school education, vocational training or application and their employees. This applies accordingly to higher education, or in the framework of a coopera- minimum wages fixed on the basis of the German Second- tive education program which is regulated by law; ment Act (Arbeitnehmerentsendegesetz) and Section 3a of (2) they are completing an internship of up to three the German Act on Temporary Agency Work (Arbeitnehm- months to help them make a career choice or before erüberlassungsgesetz). However, the aforementioned deviating taking up studies; regulations must provide for a remuneration of at least (3) they are completing an internship of up to three months EUR 8.50 per hour effective January 1, 2017. This means in addition to their vocational training or higher that if the statutory minimum wage is increased subsequent education, unless they have previously completed an to its first revision on January 1, 2017, representative collec- internship with the same employer; or tive bargaining partners may maintain the initial minimum (4) they are participating in a qualification module wage of EUR 8.50 per hour until December 31, 2017. (Einstiegsqualifizierung) pursuant to section 54a SGB III (Third Book of the German Social Code) b) Newspaper delivery persons or in preparatory vocational training pursuant to The Minimum Wage Act also provides for special rules for sections 68 to 70 of the German Vocational Training newspaper delivery persons. Effective January 1, 2015 they Act (Berufsbildungsgesetz, BBiG). will be entitled to 75%, and effective January 1, 2016 to 85% of the minimum wage. From January 1, 2017 until b) Minors December 31, 2017, the minimum wage will amount Children and adolescents without completed vocational to EUR 8.50 per hour. Newspaper delivery persons are training are exempt from the Minimum Wage Act. persons who are employed to deliver exclusively periodical newspapers or magazines to end customers, which also c) Trainees And Volunteers includes advertising journals with editorial content. Neither does the Minimum Wage Act regulate the remu- The special treatment of a specific group of employees neration of persons whose work is part of their vocational comes as a surprise and, with a view to this individualized training or who work on an honorary basis. regulation, is an inconsistency in the law. This exemption 164 LABOR LAW JOURNAL FALL 2014 is justified by the functioning of the freedom of the press with the minimum wage (functional equivalence of and the time needed for adjustments in rural and structur- comparable benefits). ally disadvantaged regions in particular. Employers from other sectors would certainly have welcomed extended b) Remuneration Elements For time limits as well. Performance Exceeding Ordinary Performance Or For Other Purposes c) Seasonal Workers In contrast, additional remuneration elements for addi- The special regulation for this group that is particularly im- tional performance by the employee shall not be included portant for agriculture is not provided for in the Minimum in the minimum wage if they constitute compensation for Wage Act itself. An amendment to the Fourth Book of the extra work or work hours under special circumstances. This German Social Code now stipulates that the time limits applies, for example, to premiums for work on Sunday for marginal employment (geringfügige Beschäftigung) in and on holidays, night-work pay, shift premiums or over- the form of short-term employment (kurzfristige Beschäf- time pay. In this case, the special time of the performance tigung) are extended to accommodate problems with beyond the ordinary remuneration is honored. In other seasonal work in the context of the introduction of the cases, the particularly inconvenient, difficult, physically or minimum wage. From January 1, 2015 to December 31, psychologically particularly troublesome or dangerous cir- 2018, employment of marginal employees may be limited cumstances under which work is performed are accounted to no more than three months (instead of two months) or for in the form of dirty-work bonuses or hazard pay. Also 70 working days (instead of 50 working days) within one covered are those cases where the employee performs more calendar year, or can be contractually limited in advance. work per time unit (e.g. piecework bonuses) or renders a This provision will automatically expire on December 31, special quality of the work (quality bonuses). 2018, to prevent a general increase of marginal employ- ment that is exempt from social security contributions. c) Differentiation The minimum wage must therefore generally be paid to Thus, the differentiation of remuneration components seasonal workers effective January 1, 2015, but in return counting as part of the minimum wage and other remunera- the above changes allow longer employment of seasonal tion components is clear: If the employer intends to honor workers, with a privileged social security status. only the actual contractual performance, then, in principle, the respective remuneration counts as part of the minimum III. Content Of The Minimum wage. If, however, a further or other purpose is pursued, no crediting shall take place in general. This means that capital Wage Claim accumulation benefits shall not be credited whereas lump- sum payments in the nature of a pay raise may be credited. 1.
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