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www.laborlaw-magazine.com No. 4 – December 4, 2017

Made in Germany

In this issue EU law/labor law – Labor law & maternity protection – Labor law – LLMInternational labor law – Labor law & compliance 2 – Editorial/content – LLM – No. 4 – December 4, 2017

EU law/labor law Labor law International labor law Prof. Thomas Wegerich, 3_ Luxembourg is setting the decisive 13_ Businesses should take advantage 22_ Cutting through complexity Editor points of their opportunities International assignments in light Labor Law Magazine ECJ: Holiday right between Voluntary redundancy programs as of the revised Posting of Workers Germany and Europe – risks for an alternative to unilateral staff cuts Directive [email protected] employers By Dr. Wolfgang Lipinski By Sachka Stefanova-Behlert and By Dr. Bernd Borgmann and Tom Stiebert Dr. Thomas Wolf Labor Law Magazine: Works council elections and Posting of Workers Directive ahead Labor law Dear Readers, Labor law 16_ Achieving the impossible? Labor law & compliance 6_ Close observation of works council Information on mass layoffs in 25_ Guidelines for internal Our prestigious Advisory Board keeps growing: Today we would like to welcome York von Roenne, Global elections 2018 Germany and how to get it right investigations Director of Human Resources, Leica Camera AG, on Mistakes can be expensive for By Dr. Jan Tibor Lelley, LL.M. and Two landmark decisions by the board the ship. employers Dr. Julia Bruck German Federal Labor Court

“Mistakes can be expensive for employers,” says our By Pauline Moritz By Dr. Daniel Klösel and author Pauline Moritz with regard to the German Dr. Thilo Mahnhold works council elections which are on next year’s International labor law agenda. You better find out what she means. Labor law & maternity protection 19_ Working towards an integrated The revised Posting of Workers Directive is high­ 9_ A broader range of protection European labor market lighted in two articles in this edition of Labor Law The German Maternity Protection The posting of workers Magazine. Marc André Gimmy/Katja Schiffelholz and Act and and its current reform By Marc André Gimmy and Sachka Stefanova-Behlert/Dr. Thomas Wolf take a By Axel Braun Katja Schiffelholz look at the new law from different angles. Don’t miss out on the two objectives.

Finally: My colleagues Karin Gangl, Stefan Dworschak and myself wish you a merry Christmas and a happy and successful New Year. Stay with us in 2018!

Sincerely yours,

Thomas Wegerich 28_ Advisory board 32_ Cooperation partners 30_ Strategic partners and imprint 3 – EU law/labor law – LLM – No. 4 – December 4, 2017

Looking to Luxembourg and the ECJ Vacation rights in Germany and Europe and the risks for employers By Dr. Bernd Borgmann and Tom Stiebert

The legal frame

From the point of view of the employee, vacations are usually a nice thing. Even from the point of view of a reasonable employer, there are no concerns about granting leave to workers as they gen­ e­r­ally return to work more relaxed and often more motivated.

From a legal point of view, it is also quite simple: The employee takes annual leave and is paid in full during that time. Vaca- tion entitlement cannot be bought or transferred to subsequent years.

German law confirms this: Payment continues while the employee is on vacation (section 11 Federal Vacation Act [Bundesurlaubsgesetz, BUrlG]). In addi- tion, the vacation must be taken during the current year (section 7 (3) BUrlG). A transfer to subsequent years is generally inadmissible (section 7 (3) BUrlG). Only in special cases can it be transferred to the following year and must then be Sunny with a hint of looming uncertainty – vacationing can also have its legal pitfalls. taken within three months. However, © Wavebreakmedia Ltd/Wavebreak Media/Thinkstock/Getty Images employment contracts or collective –> 4 – EU law/labor law – LLM – No. 4 – December 4, 2017

agreements often provide for the pos- EU law in the last 10 years, which has leave of a worker who is unfit for work Thus, according to case law, there is a risk sibility of a longer transfer period into the meant that German jurisprudence has for several consecutive reference periods”. for the employer in special cases but this following year. If the leave is not taken, had to be modified accordingly. (judgement from November 22, 2011, KHS, is limited financially by the time limit compensation should only be granted if docket number C-214/10) imposed by the ECJ. the employment contract ends (section 7 It all started with the judgment in (4) BUrlG). the Schultz-Hoff case in 2009 (docket German law then had to react to this and Turnaround by ECJ judgment of number C-350/06). The ECJ emphasized interpret § 7 (3) BUrlG in accordance with November 29, 2017 However, more aspects came into play here: “Article 7(2) of Directive 2003/88 European law. through EU law. Directive 2003/88/EC must be interpreted as precluding national Surprisingly, the ECJ seems to see it dif- of the European Parliament and of the legislation or practices which provide The following principles then applied: ferently in a recent decision published Council of November 4, 2003 concerning that, on termination of the employment on November 29, 2017 (docket number certain aspects of the organization of relationship, no allowance in lieu of paid • If an employee has not taken up leave C-214/16). A bogus self-employed person working time states in Article 7: (1) Mem- annual leave not taken is to be paid to a although able to do so, the leave will – an employee who worked on the basis ber States shall take the measures neces- worker who has been on sick leave for the be canceled by the end of the year. of a self-employed, commission-only sary to ensure that every worker is entitled whole or part of the leave year and/or of contract not being entitled to the claims to paid annual leave of at least four weeks a carry-over period, which was the reason • If it was not possible to take leave, of a salaried employee (such as vaca- in accordance with the conditions for why he could not exercise his right to paid especially due to illness, the leave can tion) – had sued for compensation of the entitlement to, and granting of, such leave annual leave”. The excitement was great be transferred for another 15 months. vacation not granted to him from 1999 to laid down by national legislation and/or and many suspected that this should 2012. The ECJ would have been expected practice. (2) The minimum period of paid mean that an unlimited accumulation • This should also apply to the allow- to limit the compensation but this did annual leave may not be replaced by an of leave would be possible, which may ance in lieu – the remaining leave is not happen. allowance in lieu, except where the em- also lead to unlimited compensation. thus to be paid; if the leave entitle- ployment relationship is terminated. Shortly thereafter, the ECJ was forced to ment is lost, there is no claim for The ECJ emphasized: “Article 7 of Directive modify its decision, stressing: “Article 7(1) compensation. 2003/88 must be interpreted as preclu­ The problem of transferring the leave of Directive 2003/88/EC of the European ding national provisions or practices that entitlement to subsequent years, how- Parliament and of the Council of 4 No- • Limitation regulations do not apply prevent a worker from carrying over and, ever, is not explicitly dealt with. Here, vember 2003 concerning certain aspects here either since the claim for allow- where appropriate, accumulating, until therefore, national law still seems to be of the organisation of working time must ance in lieu arises only at the end of termination of his employment relation- relevant. be interpreted as not precluding national the employment relationship. ship, paid annual leave rights not exercised provisions or practices, such as collective in respect of several consecutive reference The important judgments of the ECJ agreements, which limit, by a carry-over • Exclusion periods can indeed be fixed periods because his employer refused to period of 15 months on the expiry of which in principle, but these also do not remunerate that leave.” Nevertheless, for many, surprisingly, the the right to paid annual leave lapses, the begin until the employment relation- right to vacation has become a focus of accumulation of entitlement to such ship ends. –> 5 – EU law/labor law – LLM – No. 4 – December 4, 2017

There was no time limit here, with the always be preserved for the employee. before. Vacation rights continue to be a result that the employer has to finan- The interests of the employer, however, topic where fundamental changes are cially compensate a vacation entitlement can lead to this claim being cut. Surpris- always possible. Knowledge of German of 13 years (i.e., at least 13 x 20 = 260 days), ingly, the ECJ no longer refers to the law alone is no longer sufficient here; which is a significant cost. The ECJ did not recreational function of the vacation in its Luxembourg sets the course. <– rule on whether, had the employment re- argumentation, but turns it into a purely lationship continued, it would have been financial consideration. possible to claim the leave for 260 days as well. At first glance, however, this judg- Consequences in practice ment seems to be a negative departure from previous case law – at least from the It is always important to check the rights perspective of an employer. to which an employee is entitled. This includes strictly distinguishing between However – and this is also clear – the employees and the self-employed. An judgment seeks in most cases to main- error does not release the employer from tain case law and limit the accumulation his or her duties, as the ECJ expressly of vacation entitlement and allowance in points out. This cannot be restricted by lieu. In particular, the judgment expressly contractual arrangements; these would, recognizes that employers should be pro- as the ECJ makes clear, be ineffective. Ex- tected against excessive financial burden clusion periods would also only begin at (recital 55) if they need this protection. the end of the employment relationship This view is completely correct. and no earlier. Dr. Bernd Borgmann, Rechtsanwalt, Fachanwalt für Arbeitsrecht, Partner, DLA Piper UK LLP, Cologne In this specific case, however, the ECJ For this reason, in order to avoid risks, it acknowledges that “protection of the em- must always be carefully checked wheth- ployer’s interests does not seem strictly er a jobholder is an employee. Creative [email protected] necessary” (recital 59). The nongranting constructions for bypassing are strongly of leave is based on a violation by the discouraged. Employers should always Tom Stiebert, employer, who has also benefited from be advised to ensure that employees use Rechtsanwalt, Lehrbeauftragter für Arbeitsrecht an der Fachhochschule für Ökonomie und Management (FOM) in Köln, Associate, this. For this particular reason alone there their vacation within one year. This mini- DLA Piper UK LLP, Cologne is no time limit. mizes the risks of – possibly unlimited – compensation when leaving employ- [email protected] The court thus recognizes that vacations ment. Employing a bogus self-employed have a financial dimension that must person is therefore now even riskier than www.dlapiper.com 6 – Labor law – LLM – No. 4 – December 4, 2017

Close observation of works council elections 2018 Mistakes can be expensive for employers By Pauline Moritz

orks council elections ensure the ongoing existence of a works are generally held every council, even if the workforce has no four years, from March 1 interest in such a representative body. throughW May 31. A flawed election process can be costly for the employer. Election costs Violations of election rules may ren- der the election retrospectively void The employer bears all costs of the elec- and trigger a new election. All actions tion. This includes all costs connected to taken and agreements entered into by the initiation and execution of the works the works council elected in an invalid council election as well as the revision election are null and void. Therefore, of the election results – but only to the timely and well-informed interven- extent that they were necessary for the tion, as well as close monitoring of the election. election process, can save unneces- sary costs and at the same time open Necessary costs may include the follow- important doors to exercise influence. ing:

A works council election is left to the em- • costs for providing rooms, information ployees’ initiative. If the employees decide and communication technology as to elect a works council, the employer well as equipment, election docu- may not reject or impede the election. ments, writing materials, voting boxes, An employer who hinders or influences telephone calls, postage, legal texts More than just a show of hands: Flawed elections may be declared null and void. a works council election, for instance by and commentaries; © MichaelJay/iStock/Thinkstock/Getty Images threatening to terminate employment re- • costs for training concerning election lationships, may face imprisonment of up provisions for members of the elec- to one year or a fine. In businesses with tion committee; • the costs of any legal dispute with The employer must also continue to pay an existing works council, the initiative • legal costs for advising members of the election committee in connection salaries for the time that employees need of a single employee can be sufficient to the election committee; and with the works council election. to exercise their voting rights or other –> 7 – Labor law – LLM – No. 4 – December 4, 2017

rights in connection with the election. ed by the general works council or the appeal against the works council election The election Members of the election committee group works council in companies with and hence result in substantial additional who carry out office tasks outside their more than one business. If none of these costs for the employer. Works councils may be elected either by working hours are entitled to time off or bodies exists, or if these bodies remain the standard or the simplified election overtime compensation. inactive, a general staff meeting appoints Within two weeks of the election invita- procedure. The main difference between the election committee. Either three of tion and compilation of the voter list, em- the two is that under the standard pro- Before the election the business’ employees who are eligi- ployees may submit nominations for the cedure, which applies to businesses with ble to vote, or a trade union represented election committee. At the later works more than 50 employees who are eligible The election committee, which consists in the business may call a general staff council election, only those employees to vote, votes are cast for candidate lists, of at least three employees who are meeting. who have been nominated for election whereas in the simplified procedure, indi- eligible to vote, initiates and carries out may be voted for. This is an essential vidual candidates are elected. the election. It is appointed by the acting The appointed election committee issues phase for the employer because at this works council no later than ten weeks – in an election invitation and establishes a point – within the framework of tighter After the election small businesses with no more than 50 voter list. The publication of the election legislative limits and ensuring the free employees who are eligible for election, invitation marks the start of the official decision-making process of the election – In practice, most election committees four weeks – before the end of the acting election process. It must be displayed in he or she might exert influence over the make mistakes but most works council works council’s term in office. an easily accessible place throughout the election with the objective of securing elections nonetheless remain undisputed entire preparation phase of the election the names of “employer-friendly” employ- and not all mistakes render the election If no or no proper election committee has until the end of the last day of the casting ees on the voter list. void. A successful appeal, however, will been established eight weeks before the of votes. The voter list contains the names lead to the election being declared invalid end of the acting works council’s term in and dates of birth of all employees who Leased employees and trigger a new works council election. office – in small businesses with no more are eligible to vote. The employer must than 50 employees who are eligible for provide the election committee with all Leased employees are entitled to vote if Every breach of material provisions of the election, three weeks – the relevant labor information and documents necessary to it is clear on the day of voter list compila- right to vote, the eligibility to vote or the court can appoint an election commit- compile the voter list. During this process, tion that he or she will work in the busi- election procedure, are grounds for an ap- tee upon a respective motion by at least the election committee shall ensure that ness for more than three months. peal unless a correction has been made. three employees who are eligible for only those employees who are entitled to Three employees acting together, the election, or by a union represented in the vote are in fact included in the voter list Regularly deployed leased employees are trade union which is represented within business. The labor court may also ap- because this will influence the size of the to be taken into account for the thresh- the business or the employer may file point union representatives who are not works council to be elected. olds relevant for the size of the works an appeal. The appeal has to be declared employees in the business in question. council in the borrowing company. within two weeks of the announcement Only employees that appear on the voter of the election results. If an appeal is not If no works council has yet been estab- list are eligible to vote and be elected. lodged within this time period, the works lished, the election committee is appoint- Mistakes in the voter list can justify an 8 – Labor law – LLM – No. 4 – December 4, 2017

council is deemed to have been elected validly.

If an election is particularly flawed, it may be declared null and void without an appeal.

Conclusion

Employers should observe the upcom- ing works council elections closely and follow the election procedure in order to avoid the defeasibility of the election and to work towards – within given legal limits – a favorable election result. <–

Pauline Moritz, Rechtsanwältin, Fachanwältin für Arbeitsrecht, Senior Associate, Mayer Brown LLP, Frankfurt/Main

[email protected]

www.mayerbrown.com 9 – Labor law & maternity protection – LLM – No. 4 – December 4, 2017

A broader range of protection The German Maternity Protection Act and and its current reform By Axel Braun

or almost 65 years, the Mater- nity Protection Act has remained unchanged as the main law for Fmaternity protection in Germany, provid- ing bans on employment and protection against termination of employment for pregnant women and such rights after giving birth. Since employment has changed greatly over the past couple of decades, it was time to adjust the Act to take account of modern work environments, health perceptions and employment law developments. This was one of the final actions carried out in the legislative period tht has just come to an end. This article gives an overview of the main provisions of the Maternity Protection Act, including the most important changes which will take effect from the beginning of 2018.

Basics: The Maternity Protection Act

Maternity protection in Germany pro- vides female employees with comprehen- sive protection during their pregnancy and for a certain period of time after they The reformed law provides expectant mothers with more independence and choice. have given birth, against any disad- –> © Creatas Images/Creatas/Thinkstock/Getty Images 10 – Labor law & maternity protection – LLM – No. 4 – December 4, 2017

vantages arising in connection with the The Act does not apply to women who mother and child that may arise in the ment (decision from October 19, 2017, ref. birth of their child with regard to their are self-employed. In its original version, workplace. Pursuant to section 9 (2) and no. C-531/15 – Otero Ramos). health and preserving their jobs and it did not apply either to women who (3) Maternity Protection Act, the employer salaries. hold a position in an executive body of a must ensure that the workplace of a In the order of precedence of protec- legal entity. However, its applicability to pregnant employee corresponds to her tive measures, bans on employment can The special status of pregnant women the latter was in dispute for years due to requirements, i.e., the activities need to be applied depending on the condition and mothers is already constitutionally EU Directive 2010/41/EU on the Applica- be adjusted in terms of type, place, pace of the individual employee’s health. If protected by article 6 (4) German Basic tion of the Principle of Equal Treatment and length and must be as ergonomic medically certified, a ban on employ- Law (Grundgesetz, GG), which states that and the case law of the European Court and emission-free as possible. This also ment for health reasons is possible at any each mother is entitled to be protected of Justice – at least with regard to the includes granting breaks or providing point during the pregnancy (section 16 and cared for by the community. Under support that should be provided to the opportunity to sit or lie down during [1] Maternity Protection Act). Other bans employment law, the Maternity Protec- pregnant self-employed women by the working hours. Even if the employment on employment apply irrespective of the tion Act (Mutterschutzgesetz, MuSchG) state, and the termination and revocation contract does not contain any provisions particular circumstances, above all if the ensures that during pregnancy and for possibilities regarding (external) female regarding being transferred to protect employee’s tasks involve manual labor or some time afterwards, extensive protec- directors who are bound by instructions her health, a pregnant employee may the employee is exposed to harmful en- tion is given to (expectant) mothers. and whose employment up until most be given other tasks to perform if it is vironmental conditions (section 11 [1] and This applies to all women who are in recently could also be terminated during deemed unreasonable for her to continue [5] and section 12 Maternity Protection employment, irrespective of whether the a pregnancy. With the reform of the Act, to carry out her current duties (Section 13 Act). These bans on employment concern employment is permanent, temporary, it now explicitly applies to all pregnant [1] No. 2 Maternity Protection Act). Pursu- expectant women as well as breastfeed- probationary, principal or secondary, as women who are not self-employed but ant to section 7 (2) Maternity Protection ing women. In addition, pursuant to sec- per section 1 (2) sentence 1 Maternity Pro- have a dependent work relationship pur- Act, if requested, the employee must be tion 11 (6) Maternity Protection Act, piece tection Act in conjunction with section 7 suant to the new section 1 (2) sentence 1 granted the necessary time off to breast- work or assembly line work, meaning (1) German Social Code IV (Sozialgesetz- Maternity Protection Act in conjunction feed. With the reform of the Maternity systems that are dependent on the speed buch IV, SGB IV) and section 1 (2) sentence with section 7 (1) German Social Code Protection Act, an em-ployer is now also of work or quantity produced, is forbid- 2 Maternity Protection Act. It also applies IV. Thus, it now also includes managing obliged to run a conceptual risk assess- den. Expectant mothers and those who to employees who work from home directors as well as interns, pupils and ment on every actual or possible danger are breastfeeding are also not allowed to (section 1 [2] sentence 2 No. 6 Maternity students. to pregnant employees (Section 10 Mater- do overtime or night work. As a rule, the Protection Act) and women who are in an nity Protection Act); protective action can maximum working time is 8 hours a day apprenticeship (originally and currently Scope of protection also include workplace reorganization. (section 4 [1] sentence 1 Maternity Protec- still provided by section 10 [2] German The European Court of Justice recently tion Act). Six weeks before the birth, the Vocational Training Act [Berufsbildungsge- One of the main areas covered by the decided that the employee bears the employee may not work at all, section 3 (1) setz, BBiG]). statutory maternity protection provisions burden of proof at first when appealing Maternity Protection Act, and eight weeks is health protection, which aims to ward the content of the conceptual risk assess- after the birth (in the event of multiple off any risks to the life and health of the births, twelve weeks, Section 3 [2] –> 11 – Labor law & maternity protection – LLM – No. 4 – December 4, 2017

sentence 2 Maternity Protection Act, or the employee is not generally obliged to over the last 13 weeks or 3 months before invalid; moreover, any breaches made even longer in cases of miscarriage). Ac- inform the employer about her preg- she became pregnant if she has been by the employer of the statutory provi- cording to sections 4 (1), 5 (1) and (2), 6 (1) nancy (section 15 [1] Maternity Protection transferred on the basis of a ban on em- sions of the Maternity Protection Act may and 12 Maternity Protection Act, the same Act). However, an obligation may exist as ployment or can-not work either in whole constitute an administrative or even a bans on employment apply to women an ancillary obligation under the employ- or in part (section 18 Maternity Protection criminal offense (sections 32 and 33 Ma- who are breastfeeding as to those who ment contract (section 241 German Civil Act). During the protective period before ternity Protection Act in conjunction with are expecting. Code [Bürgerliches Gesetzbuch, BGB]) if and after the birth, the employee’s obliga- section 9 [2] German Administrative Of- substantial legitimate interests of the tion to work is suspended, which is why fenses Act [Ordnungs­widrigkeitengesetz, The new Maternity Protection Act leaves employer would be affected by the preg- she is not entitled to any remuneration. OWiG]) from 2019, also for violations pregnant employees a further choice nancy, for instance if the employee holds To ensure financial security during these within the conceptual risk assessment. within the ban period before giving a key position which would require a long periods, however, the employees receive This prohibition includes terminations of birth. Provided the employee expressly period of training for anyone covering the monies from their social security provider any kind and, therefore, alongside routine agrees and a medical certificate confirms position during maternity leave. On the or the state (maternity pay) and a subsidy termination and dismissal with the op- her ability to do so, she may continue other hand, an employer is also not al- from their employers (section 19 Materni- tion of altered working conditions, also to work during this period (section 3 lowed to ask an applicant in an interview ty Protection Act). For the latter, and also extraordinary termination and termi- [1] Maternity Protection Act). However, if she is pregnant, which is why a preg- for any monies that may be paid during nation during insolvency proceedings. there is an absolute ban on employment nant applicant has a “right to lie” without the ban, according to section 11 Maternity Newly introduced is the clarification that within the protective period after the any legal consequences if confronted Protection Act, the employer is entitled to job protection applies for at least as long birth, which cannot be repealed even if with this type of question. However, this be reimbursed for the statutory medical as any ban on employment. requested by the mother (section 3 [2] does not apply if, due to the pregnancy, insurance contributions (section 1 [2] No. Maternity Protection Act). Before giving she could not carry out the intended work 1 and 2 German Expenditure Compen- Dismissing an employee during the ma- birth, employers are also obliged to avoid or if a ban on employment were to apply sation Act [Aufwandsausgleichsgesetz, ternity protection period is also only pos- irresponsible risks for the employee or her to the applicant. AAG]). sible in exceptional circumstances and child by letting her work alone. Overtime with an acceptance declaration by the and night work is now possible, but only Protection of remuneration Workplace protection responsible regulatory authority, which in exceptional circumstances and with an constitutes their main role in maternity acceptance declaration from the regula- In order to discourage the employee from According to section 17 (1) Maternity protection. The basic precondition for this tory authorities responsible for work performing work that could damage her Protection Act, the employment con- is that the termination has nothing to do protection (normally the trade office or health, the Maternity Protection Act also tract of an affected employee cannot be with the pregnancy (section 17 [2] Mater- the work protection agency). stipulates that remuneration is to be pro- terminated during the pregnancy and nity Protection Act). Furthermore, more tected. This means that the employee will also for a period of four months after the stringent requirements, also with regard Although the employer can only take receive maternity protection pay from her birth (workplace protection). Pursuant to content, apply than with an extraor- maternity protection measures after employer, which guarantees that she will to section 134 German Civil Code, any dinary termination under section 626 (1) having been informed about a pregnancy, receive the average remuneration earned terminations made to the contrary are German Civil Code: There must always –> www.businesslaw-magazine.com Current Issue: 12 – Labor law & maternity protection – LLM – No. 4 – December 4, 2017 November 23, 2017

be special circumstances which make autonomy to decide whether they terminating the employee unavoid- continue working until a later stage Made in Germany able, e.g., willful breaches of contract, during their pregnancy or not. It also offenses involving property or financial stipulates an extension of their work- risk to the employer. place protection as employers now even have to wait with preparations of With the reform of the law, protec- potential terminations until bans on tion against terminations is extended employment have ended. For them, the Subscribe for free: www.businesslaw-magazine.com to employers’ actions of preparing a new regulations also provide a stricter termination, Section 17 (1) sentence 3 obligation to monitor the working Maternity Protection Act. Therefore, conditions of pregnant employees due he Business Law Magazine reports quarterly on all important questions dismissals are also invalid if the termi- to the new mandatory risk assessment. Trelated to German corporate, commercial, tax, labor, compliance and IP/IT law. nation has been declared after the pro- Even if highly criticized by trade unions Featuring articles written with real-world legal practice in mind, the online English- tection period but preparations have because of the potential pressure on language magazine primarily targets company lawyers, managing directors, been made before. This includes, for ex- pregnant employees to continue work- judges, prosecutors and attorneys in Germany’s leading trade partners. ample, advertising for the employee’s ing as long as possible, the Act now job, interviewing potential successors includes a broader range of protection,

and even obligatory consultation of especially regarding the employee’s www.businesslaw-magazine.com No. 4 – November 23, 2017 the works council or an application general health while still working. Last for the acceptance declaration by the but not least, even more women are responsible regulatory authority. now able to make use of the protection Made in Germany offered by the Act. <– Outlook In this issue Capital market law – Cartel law/competition law – AmCham, Germany’s Corporate and Business Law Committee, reports – EU law/intellectual property – Patent law/licensing law The reform of the Maternity Protection Act gives pregnant employees more

Axel Braun, Published by Attorney, Specialist Attorney and Partner in Employment & Labor Law, Luther Rechtsanwaltsgesellschaft mbH, Cologne

[email protected] Strategic Partners

www.luther-lawfirm.com

BLM_Anzeige_alle-Formate.indd 2 28.11.2017 13:59:10 13 – Labor law – LLM – No. 4 – December 4, 2017

Businesses should take advantage of their opportunities Voluntary redundancy programs as an alternative to unilateral staff cuts By Dr. Wolfgang Lipinski

or various reasons, companies mination agreements signed by com- decision-makers, economic situation), The pros and cons of voluntary may be forced to make short- mon consent on the basis of voluntary the company should make decisions ­redundancy programs term decisions on staff reduc- programs. After thoroughly analyzing on a case-by-case basis. This article Ftions. Staff can be reduced traditionally the existing situation (among other shows that voluntary programs can be Voluntary programs can be implemented by termination by the employer for things, existing job security, company a genuine alternative to unilateral staff quickly and therefore bring swift financial operational reasons, or through ter- image, works council and trade union reductions, and how they can work. relief. As termination agreements are –>

Golden handshake? Voluntary redundancy programs can end up being expensive for companies.

© kzenon/iStock/Thinkstock/Getty Images 14 – Labor law – LLM – No. 4 – December 4, 2017

concluded to ensure legal compliance, councils. If a works council exists, the it highly recommendable to include a faces a blocking period of twelve weeks there will be no dismissal protection voluntary program constitutes a meas- bonus, meaning an additional payment before he or she can claim unemploy- lawsuits involving legal risks. Voluntary ure which must be negotiated with the for employees who sign the termination ment benefit. Insofar as the business programs are low profile, with minor works council and which is subject to a agreement within a very short period does not wish to bear these costs, it impact on the company’s image. The reconciliation of interests and a social of time (for example, 10 to 14 calendar should attempt everything with regard programs do not require social selection, plan, insofar as the planned downsizing days). Additionally, the number of jobs to to labor and social security law, partly in enabling separation agreements with is covered by the requirements of section be eliminated should be specified. cooperation with the works council, in older employees and employees under 17 of the German Protection Against order to avoid a blocking period (i.e., a special protection against dismissal in Unfair Dismissal Act (Kündigungss- The company should prepare guidelines collective decision). As voluntary pro- order to achieve a new age structure. This chutzgesetz, KSchG). If the works council for unilateral staff reduction which might grams frequently conclude more termi- often reduces staff costs permanently supports the voluntary program, the become necessary as a follow-up meas- nation agreements than the standard if older and more expensive employees additional challenge of a collective social ure if the number of jobs to be eliminated number pursuant to section 17 KSchG leave. In contrast to unilateral staff reduc- plan with the trade union typically will is not reached. Such guidelines provide within 30 calendar days, a mass dis- tion, voluntary programs do not usually not arise, or will at most assume a subor- reliability, a time schedule and thus the missal notification must be sent to the induce strike action by trade unions with dinate role. For the voluntary program to ability to plan, which both frequently relevant employment agency (Agentur representation in the company, or at least be successful - from a business perspec- save the company a lot of money. From a für Arbeit) before signing the termina- only limited action. tive - careful consideration should be business perspective, a voluntary pro- tion agreements. If this is not carried given to an exact definition of the scope gram runs particularly well if it is possible out in the correct form, the concluded The disadvantages of voluntary programs of its application during negotiations to negotiate with the works council, in termination agreements will be invalid. are that they are often (very) expensive with the works council. Furthermore, the addition to the works agreement for the As voluntary programs usually grant a and might constitute a negative prece- works agreement regarding the volun- voluntary program, a social plan with bonus for those who make a quick deci- dent for any later social plans with unilat- tary program should include a provision lower benefits in the event of unilateral sion, it is often not possible to navigate eral staff reduction. From the company’s reserving its double voluntary nature. terminations. The social plan applies if the process in a way that renders a mass point of view, a voluntary program that Such a provision can prevent key employ- the desired reduction numbers have not dismissal notification unnecessary, for is poorly designed bears the risk that key ees leaving with severance payments. been reached after the voluntary program instance by not exceeding the threshold. employees the company actually wants However, a guideline must be drawn has been finalized. Businesses frequently fail to consider to retain leave with high severance pay- up to cover the risk of repercussions for that the threshold includes terminations ments, and the company has to bring in employees if they state an interest in Blocking period and mass dismissal that are not part of the voluntary pro- expensive replacements for them later. the voluntary program but the company notification gram (e.g., terminations by employees refuses to conclude a termination agree- for operational reasons and dismissals Negotiations with the works council ment as it does not want to lose them. It Since it is common for voluntary pro- with the option of altered conditions of would also be beneficial to define clear grams to make severance payments of employment). Voluntary programs may be implement- financial terms (for example compensa- more than 0.5 monthly salaries per year ed in businesses with or without works tion formula with ceiling). We consider of employment, the employee often –> 15 – Labor law – LLM – No. 4 – December 4, 2017

Implementation and communication plan and suggest a voluntary program. important factors for the success of a Alternatively, the company may initially voluntary program. The voluntary program should be openly declare its intention to implement a supported by the works council (for unilateral staff reduction. The works • It is essential to involve labor lawyers example at works meetings through joint council may then discover the possibil- early in the process to ensure the declarations by the employer and works ity of using an initial voluntary program voluntary program is designed and council to employees). In order to have prior to the implementation of a unilat- implemented successfully. the works council on its side, a com- eral staff reduction during the course of pany should consider the budget for the negotiations. However, this depends on • Voluntary programs are regularly voluntary program carefully and ensure a the existing situation of the business and successful if supported by the works transparent restructuring concept, which on the negotiation strategy chosen by the council. has ideally been confirmed by a works employer. Businesses should take reason- council expert. In any case, a well-planned able advantage of their opportunities to • In spite of the high costs, voluntary and thorough communication strategy is design and control this situation. programs offer considerable advan- essential for the success of any voluntary tages. <– program. In this context, the following KEY POINTS: should be taken into consideration: Time schedule, guidelines for termination talks, • Voluntary programs, which may be preparation of flyers, posters and letters skillfully combined with a unilateral to individual employees. staff reduction and respective regula- tions for handling and/or designing Conclusion a social plan, are an effective method and a genuine alternative to unilateral Dr. Wolfgang Lipinski, Businesses that have to downsize should staff reductions. Rechtsanwalt, Partner, Beiten Burkhardt, Munich look closely at the advantages and oppor- tunities offered by voluntary programs. • Thorough analysis of the legal and The employer may openly enter into current situation, careful preparation [email protected] negotiations with the works council on and a reasoned negotiation strategy a reconciliation of interests and a social on the part of the employer are all www.bblaw.com 16 – Labor law – LLM – No. 4 – December 4, 2017

Achieving the impossible? Information on mass layoffs in Germany and how to get it right By Dr. Jan Tibor Lelley, LL.M. and Dr. Julia Bruck

hy should we expect the tion and consultation procedure with the impossible to be simple? works council is now more prominent. In reality it ranges from a Today, any error or failure to comply with mereW formality to a complex and critical this highly formalistic procedure regu- obligation. Apart from many different larly invalidates terminations in a RIF and laws applying on restructuring cases, therefore creates major financial risks for such as negotiation of reconciliation of companies when restructuring. interests (Interessenausgleich) and social compensation plan (Sozialplan) or works What triggers the process? council consultation before terminations, there is the information and consulta- A company is obliged to inform the tion – of the works council – and then relevant Federal Labor Office according to again information – of the Labor Of- § 17 paragraph 1 KSchG if the dismissal of fice – prior to a reduction in force (RIF) a certain minimum number of employees or mass dismissal. This procedure has is planned. This notification duty is trig- to be carried out according to § 17 of gered for the Dismissal Protection Act (KSchG). • businesses with generally more than This information and consultation pro- 20 and less than 60 employees when cess used to be seen as a formality based more than five employees are to be on labor market policy where the labor dismissed, office would receive information on the number of individuals joining the labor • businesses with generally at least 60 market. Today, however, German labor and less than 500 employees when Reductions in force (RIF) should be executed diligently. Otherwise, the terminations in courts have developed it into a combina- 10% of the regular employees or more question may be invalidated. tion of formalities and obligations driven than 25 employees are to be dis- © vadimguzhva/iStock/Thinkstock/Getty Images by EU Directive 98/59/EG. The informa- missed, and –> 17 – Labor law – LLM – No. 4 – December 4, 2017

• businesses with generally at least employee. It is very likely that this ruling • the criteria to be used for calculat- agement needs to start the process as 500 employees where the planned is also relevant for other groups of pro- ing possible severance packages (in a soon as the employer is seriously consid- dismissals will affect 30 or more tected employees, for example expectant social compensation plan). ering steps leading to mass dismissals. In employees. women, mothers or disabled employees. order to be compliant with § 17 paragraph Notification/consultation procedure 3 KSchG, the procedure should be initiated The term “employee” in § 17 paragraph 1 Two procedures for mass dismissals with the works council at least two weeks before the Federal La- KSchG includes executive employees and bor Office is notified of the mass release. even managing directors. The RIF must The notification requirement consists of The notification and consultation proce- be completed within 30 calendar days. two completely separate procedures: The dure with the works council is much more In addition to the content as per § 17 Due to European Union requirements, notification and consultation procedure difficult than notifying the Federal Labor paragraph 2 no. 1 – 6 KSchG, the notifica- “dismissal” is no longer the coming into with the works council (§ 17 paragraph 2 Office. tion must entail an express offer of con- effect of the termination on the last day KSchG) and the notification to be submit- sultation to the works council. It is best of the notice period, but the receipt of ted to the Federal Labor Office (§ 17 para- First of all, it has to be carried out with practice to include a timetable for the the notice of termination. This includes graph 3 KSchG). Regarding the content of the works council of the affected plant. If planned mass dismissal with two specific not only dismissals in the literal sense the information, both procedures are the there is no works council, the procedure is dates for consultation with the works but also, for example, termination agree- same. According to § 17 paragraph 2 num- dispensable. If the consultation procedure council. Consultation with the works ments which are actively offered by bers 1 – 6 KSchG, the information/consul- concerns senior employees, the works council should take place no earlier than the company to advance restructuring tation and notification must include: council is not responsible. In this case, the one week after the first notification. This measures. representative body for executive staff gives the works council time to prepare • the reason for the planned dismissals, has to be involved. and, if necessary, request further infor- If employees with special protection mation. The schedule can also specify against dismissal are impacted by the RIF, • the number and profession of employ- The procedure according to § 17 para- when the works council would make its special rules apply. Recently, the Federal ees to be dismissed, graph 2 KSchG consists of two compo- statement on mass dismissal and when Labor Court (case 6 AZR 442/16) ruled nents, notification to the Federal Labor Office is that a protected employee (protected • the number and profession of employ- planned. because of parental leave) needs to be ees who are regularly employed, • the notification process and included in the notification/consulta- Notification of the works council must be tion process with the works council and • the timeframe in which the termina- • the consultation process. given in writing. While it was controver- also notification to the Federal Labor tions will be issued, sial for a long time whether this meant Office even if the dismissal is outside the The goal of notification and consultation the legal form of § 126 of the German 30-day period of § 17 paragraph 1 KSchG. • the criteria chosen for the selection of is to inform the works council about the Civil Code (BGB), the Federal Labor Court In this case, it is enough that the com- employees to be dismissed, and planned dismissals in a timely fashion has recently ordered that the legal writ- pany applied to the relevant agency for and to facilitate consultation between ten form – which would mean wet-ink permission to terminate the protected the employer and the works council. Man- signature – is not necessary. But nev- –> 18 – Labor law – LLM – No. 4 – December 4, 2017

ertheless, it is best practice to document the information/consultation procedure. • Consult with the works council con- pleted information and consultation the whole process properly in case there In this case, without any available state- cerning possible options to avoid RIF process and a report on the current is any dispute. ment from the works council, manage- or reduce the number of dismissals state of the consultation. ment needs to confirm in a special form or mitigating their consequences for During the process, the employer and that the information and consultation employees. • Forward a copy of the notification works council have to consult on how process is complete. In order to fully com- sent to the Federal Labor Office to the to avoid redundancies and or how to miti- ply with the notification obligations set • Inform the labor office about the start works council. <– gate the consequences of the intended out in § 17 paragraph 3 KSchG, we recom- of the information and consultation RIF. This may include measures such mend using the forms provided by the procedure with the works council. as severance payments, retraining of Federal Labor Office. Afterwards a copy staff, transfer to a different company or of the notification must be sent to the • After completing the information short-time work (Kurzarbeit). However, works council for information purposes and consultation procedure with the no agreement has to be reached. The according to § 17 paragraph 3 KSchG. works council: Submit notification of consultation process is over when the mass dismissals in writing to the la- works council issues a statement or by How to get it right? bor office, together with a statement establishing prima facie evidence of the from the works council. Or, if such a notification and consultation process Make no mistake: The notification of statement is not available, with prima after at least two weeks. mass dismissals to the labor office and facie evidence concerning the com- in particular advance information and Notification to the Federal Labor Office consultation with the works council is a lynchpin in every RIF. The Federal Labor Office must always be Dr. Jan Tibor Lelley, LL.M., notified, whether or not there is a works Using a checklist can help to successfully Certified Specialist for labor and employment law, Partner, Buse Heberer Fromm, Frankfurt/Main council. The notification is sent to the navigate the murky waters of the infor- district’s office where the plant conduct- mation, consultation and notification ing the RIF is located. If several plants of procedure: [email protected] / Twitter: @JanTiborLelley one company are conducting RIFs, several notifications must be submitted to the • Prepare information for the works Dr. Julia Bruck, local labor offices, in this case the place of council in writing. Provide the infor- Trainee Lawyer, Buse Heberer Fromm, Essen the corporate headquarters is not crucial. mation at least two weeks before submitting notification for a mass The Federal Labor Office has to be noti- dismissal to the Federal Labor Office. fied after the works council has given its statement or two weeks after starting www.buse.de 19 – International labor law – LLM – No. 4 – December 4, 2017

Working towards an integrated European labor market The posting of workers By Marc André Gimmy and Katja Schiffelholz

Introduction existing case law, it must be concluded that the host Member State may not im- The primary objective of the European pose administrative formalities or addi- Union is to establish a common economic tional conditions on posted workers from area. Therefore, the freedom of move- third countries when they are lawfully ment for workers serves to provide a Eu- employed by a service provider estab- ropean labor market where workers can lished in another Member State, without offer and employers can request labor prejudice to the right of the host Mem- irrespective of national borders. However, ber State to check that these conditions there are forms of transnational worker are complied with in the Member State mobility which do not integrate workers where the service provider is established). to the extent described by the freedom of movement for workers. Workers tend to By posting workers, questions arise in re- remain connected to their home country lation to the applicable legal system. The with less integration into the employ- Rome I Regulation generally determines ment system of the host country. This is which law is applicable to situations referred to as the posting of workers and involving several countries. If no choice is guaranteed by the (active) freedom to of law is selected pursuant to Article 3, provide services, Article 56 of the Treaty the applicable law is determined pursu- on the Functioning of the European ant to Article 8 (2) Rome I Regulation. In Union (TFEU). This also applies when the principle, the law of the country where posted workers are not EU citizens but the work is habitually carried out, regard- from third countries (Case 43/93 - [1994] less of the temporary posting, has to be ECR I-3803) because the freedom to applied. Nevertheless, Directive 96/71/EC provide services enjoyed by the posting establishes certain overriding mandatory company results in an ancillary freedom rules in the area of employment con- of movement for the posted worker (see tracts, particularly when national rules Which law applies for posted workers? The answer tends to be complex. also COM [206] 159, p.8: On the basis of are more favorable for the employee. © TongRo Images Inc/TongRo Images/Thinkstock/Getty Images –> 20 – International labor law – LLM – No. 4 – December 4, 2017

The posting of workers across Europe has residence title and/or work permit (see in addition significant impact on social table below). law and immigration with respect to

Overview of Requirements for Postings in Europe

Austria Czech Republic Germany Hungary Netherlands France United Kingdom Poland Slovakia Residence title (RT) required EU nationals No No No No No, except Croatians No No No No EEA No No No No No No No No No Switzerland No No No No No No No No No Others Yes Yes Yes Yes, except if Yes Yes Yes Yes Yes employer est. inside EU Work permit required EU nationals No, except Croatians No No No No, except Croatians No No No No EEA No No No No No No No No No Switzerland No No No No No No No No No Others Yes; except if Yes; incl. in RT Yes; incl. in RT Yes; incl. in RT; Yes; incl. in RT or Yes; incl. in RT or Yes, incl. visa + Yes; incl. in RT or Yes; except if employer est. except if employer work permit work permit ­sponsor license work permit employer est. in EU / EEA / CH est. in EU in EU / EEA / CH Notification of Yes; i.e., online Yes; at labor office Yes; i.e., online Yes; i.e., online Yes; at Chamber of Yes; i.e., online Depending on Yes; i.e., online Yes; i.e., via e-mail posting required Commerce nationality Social security EU law is applicable for Union citizens (nationals of EU Member States), Icelandic, Norwegian, Liechtenstein and Swiss citizens; refugees and stateless persons residing in an EEA state; also nationals of third countries system who are legally resident in an EU Member State (Regulation (EU) No. 1231/2010); refugees and stateless persons residing in an EEA state; also nationals of third countries who are legally resident in an EU Member State (Regulation (EU) No. 1231/2010); exceptions apply to Denmark and UK List of social secu­ Link to List Link to List Link to List Link to List Link to List Link to List Link to List Link to List Link to List rity agreements Contribution rates 20,72% 34% 19.425% + 22% (19.5% approx. 18.42% approx. 30.14% 13.8% 20.74% 35% for employer accident from 1.1.2018)

–> 21 – International labor law – LLM – No. 4 – December 4, 2017

Different options States to reach agreements providing for subject to the social security system of exceptions. A request concerning these the sending state. <– In general, workers moving within the exceptions shall be submitted with- European Union must be subject to sin- out delay when it can be foreseen that Editor’s note: The information regarding gle social security legislation. Generally activity will take place for more than 24 the different countries has been provided speaking, the social security scheme es- months. Furthermore, extensions can by several lawyers from Taylor Wessing: tablished by the legislation for the Mem- be requested if the work could not be Wolfgang Kapek and Sandra Popp (Aus- ber State of the new employment is ap- completed due to unforeseen circum- tria), Ales Linhart (Czech Republic), Marc plicable under the regulations. However, stances (such as sickness). These requests André Gimmy and Katja Schiffelholz in order to give as much encouragement must be submitted and substantiated (Germany), Torsten Braner (Hungary), Bart as possible to the freedom of movement before the end of the initial period. If Hunnekens (Netherlands), Claire Dieterling for workers and services and to avoid work continues for more than two years (France), Sean Nesbit (United Kingdom), unnecessary and costly administrative without an exemption or extension, Krystian Stanasiuk (Poland), Radovan Pala complications, the Community provisions employees will have to switch to the local and Silvia Gatciova (Slovakia). (tw) in force allow for certain exceptions. Post- social security system and contributions ing workers gives rise to three situations: paid in the hosting Member State. It is Posting from another Member State of worth noting that a suspension of work the European Union (a), posting from during a posting period (due to holidays, Iceland, Liechtenstein, Norway or Swit- illness, training, etc.) does not extend the zerland (b) or posting from a state which posting period. A complete new posting does not belong to the EAA (EU + Iceland, can however be authorized after a two- Liechtenstein and Norway) and which is month waiting period from the date of Marc André Gimmy, not Switzerland (c). expiry of the previous posting period. Rechtsanwalt, Fachanwalt für Arbeitsrecht, Partner, Taylor Wessing, Munich

In scenarios a) and b), a worker may If situation (c) arises, the sending state continue to be covered for a maximum has either concluded a social security [email protected] period of 24 months by the social security bilateral agreement with the hosting system of the sending state. In order to state which will determine the respec- Katja Schiffelholz, stay in their home social security system, tive rules and procedures, or there is no Rechtsanwältin, Associate, Taylor Wessing, Munich employees will need an A1 form which social security bilateral agreement. In the states that they are still covered by their latter case, the social security system of home system while abroad. Article 16 of the hosting state will apply. This might, [email protected] the Regulation even permits the relevant depending on the sending state, result authorities of two or more Member in the situation that the worker remains www.taylorwessing.com 22 – International labor law – LLM – No. 4 – December 4, 2017

Cutting through complexity International assignments in light of the revised Posting of Workers Directive By Sachka Stefanova-Behlert and Dr. Thomas Wolf

Introduction

International employee assignments are a complex matter. Since the imple- mentation of the Enforcement Directive 2014/67/EU, which provides a mechanism for the implementation of the Posting of Workers Directive by introducing assign- ment-related registration obligations for posted workers and companies, interna- tional employee assignments throughout Europe have become even more complex. Not only have the companies to comply with existing social security and tax obli- gations, but also to ensure that employee assignments within Europe are registered in a timely manner with the relevant labor authorities. Otherwise they may be exposed to severe sanctions and fines in some EU countries. Further, companies If the Directive is adopted in its revised form, it will have a significant impact on EU-wide assignments. are required to observe far more than a © anyaberkut/iStock/Thinkstock/Getty Images formal procedure when fulfilling registra- tion obligations. They must make sure that mandatory local employment laws Member States require companies not The current Amendment Proposal for ning of next year without any further apply to their assigned employees. Man- only to comply with typical mandatory the Posting of Workers Directive 96/71/ modifications, will bring about consider- datory laws and the level of protection working provisions, but also with more EC, which was approved by the Euro- able changes with the aim of increasing for posted workers may vary from one far-reaching provisions. pean Council on October 23, 2017 and is the level of protection for posted workers country to another. In particular, some expected to come into force at the begin- –> 23 – International labor law – LLM – No. 4 – December 4, 2017

and harmonizing practice throughout wages has to be ensured. By contrast, un- 12 months. Within the 12 months, the vised Posting of Workers Directive which Europe. der the revised Directive, posted workers mandatory working conditions described is perceived to be lex specialis in relation shall receive the same remuneration as above are to be complied with. Upon to Article 8 of Rome I Regulation. Con- In light of the existing registration the comparable local workers in the host expiration of the 12-month period, com- sequently, the companies must comply mechanisms of Enforcement Directive country. This includes any allowances and panies must adhere – in addition to the with any working conditions applicable in 2014/67/EU, which has been already bonuses and not just the minimum wage. minimum working conditions as set forth the host company as soon as the assign- implemented in all Member States, it is In addition, posted workers need to be re- in the Directive – to any other working ment exceeds 12 months, or 18 months a pressing challenge for companies to imbursed for expenditure resulting from conditions applicable in the host country in the event of an extension, regardless review and, if necessary, adjust their em- travel, board and lodging in the future. on the basis of national laws, regulations of the parties’ choice of law. The choice ployee assignment practice in Europe. or administrative provisions, or univer- of law may only matter with regard to Maximum duration of posting to be sally applicable collective agreements the questions of termination law and Main changes 18 months or arbitration awards. Formal provisions, company pension scheme, which are no provisions on the conclusion and ter- less important. However, the enhance- The Posting of Workers Directive 96/71/EC Postings are by definition temporary mination of employment relationships ment of applicable local working terms shall generally apply to all assignments and this is nothing new. For decades, as well as provisions on supplementary beyond the minimum requirements and within the European Union regardless of there have been legal disputes about the company pension schemes shall be ex- the reduction of the choice of law makes sector. Specific rules will be laid down for permissible and appropriate duration of a empted and shall not be mandatory. In the domestic secondment agreement as the transportation sector, though. temporary posting. The revised Directive the event of extension, the same applies a contractual tool for assignments less finally settles these disputes by limiting after 18 months. attractive and more problematic. By con- Equal remuneration the duration of inter-European assign- trast, the conclusion of a local contract ments to 12 months with the option of Practical impact and recommendations from the beginning for any assignments One of the main revisions aims to extending for a further six months upon longer than 12 months appears to be strengthen the principle of equal pay- notification from the service provider to a Revision of the contractual arrangement more beneficial for companies. It ensures ment for equal work. Under the revised total of 18 months. The Directive does not for assignments compliance with the provisions of the Directive, posted workers shall receive the contain any additional requirements for Directive and also creates legal clarity for same remuneration as comparable local granting the extension. Consequently, the Many companies use domestic second- the companies regarding the applicable workers in the host country. According period of 18 months is likely to become ment agreements when posting workers law by avoiding any clash of jurisdic- to the current version of the Directive, the significant benchmark for assign- abroad. This practice goes back to the tions. Further, the choice of law offers no companies must comply with mandatory ments. Rome I Regulation 2008/593/EC which protection for companies seeking to avoid working conditions, such as maximum allows parties to choose almost freely the the more beneficial effect of local termi- work periods and minimum rest peri- As the posting of workers shall now not applicable law in the event of temporary nation law for the employees. The latter is ods, minimum paid holidays and safety exceed 12 months, the revised Directive employment in a host country (cf. Article explicitly stipulated in Rome I Regulation. regulations, for example. With regard to foresees different labor law regimes 8 of Rome I Regulation). This rule is now In other words, the conclusion of a local remuneration, the payment of minimum before and after the expiration of the considered to be superseded by the re- 24 – International labor law – LLM – No. 4 – December 4, 2017

contract is the preferable option for as- obligations has become imperative for signments. In particular, companies are signments of more than 12 months. current assignment practice. well advised to review their assignment practice and adjust the contractual ar- Social security considerations Another aspect companies need to be rangement to the new regulations of aware of is the fact that neither the Post- the Directive. This is especially compel- This contractual tool does not hinder the ing of Workers Directive – in its current or ling in light of the obligations to register retention of social security coverage and revised version – nor the Enforcement Di- posted workers with local authorities benefits of the home country in most rective distinguish between posted work- and prove compliance with local working assignments. ers and business travelers. The concept of conditions. The Enforcement Directive business travelers has not been consid- is already in place. The revised Posting Unfortunately, the EU legislator has failed ered at all. Any obligations resulting from of Workers shall apply in 4 years at the to synchronize the permissible duration both Directives, compliance with formal earliest. Nonetheless, companies should of postings under the Posting of Workers registration obligations and substantive become acquainted at the early stage of Directive with the existing social secu- requirements are likely to apply to busi- planning with the local working condi- rity legislation (cf. Regulation 2004/883/ ness travelers too. Based on current prac- tions whenever they assign employees EC and 2009/987/EC). This contains a tices of local authorities, there is a strong abroad. <– 24-month limit for social security free- trend in EU Member States to subject dom for posted workers. This is confusing. business travel to registration obligations In any case, the revised Directive 96/71/EC and requirements for compliance with shall not have any impact on social secu- local working conditions regardless of rity matters, in particular on the duration the duration. As a consequence, there is of postings, for social security purposes. barely any room left for companies to in- Sachka Stefanova-Behlert, fluence the character of the assignment Rechtsanwältin, Manager, KPMG Law Rechtsanwaltsgesellschaft mbH, Berlin Labor law registration obligations and the resulting obligations. By contrast, given the existing registration periods in The implementation of the Enforcement some countries, companies should plan [email protected] Directive urges companies to deal thor- assignments well in advance in order not oughly with the question of applicable to jeopardize their implementation. Dr. Thomas Wolf, laws in the host company. This results Rechtsanwalt, Partner, KPMG Law Rechtsanwaltsgesellschaft mbH, Berlin clearly from the existing registration Summary obligations with the local labor authori- ties and the notable financial exposure If the Posting of Workers Directive is [email protected] for companies in the event of noncompli- adopted in its revised form, it will have ance. Indeed compliance with registration a significant impact on EU-wide as- www.kpmg-law.com 25 – Labor law & compliance – LLM – No. 4 – December 4, 2017

Guidelines for internal investigations Two landmark decisions by the German Federal Labor Court By Dr. Daniel Klösel and Dr. Thilo Mahnhold

orruption, antitrust viola- be replaced by the GDPR and a revised tions, fraud, data theft, theft of version of the German Data Protection company assets, the betrayal Act on May 25, 2018, both decisions give Cof company secrets: The list of potential some indication of how courts could rule breaches of contract and, in most cases, in the future. criminal offenses in the workplace seems to be never-ending. The development The German Federal Labor Court of sophisticated compliance strategies on private investigators to reduce the risk of such violations or mitigate their liabilities if the inevitable In its decision of June 29, 2017 (2 AZR occurs is no longer unique to multina- 597/16), the German Federal Labor Court tionals. Investigating potential cases of clarified the legal framework for the such criminal offenses is an important deployment of a private investigator. The element of compliance strategies and – in previous instance, the Appellate Court of some jurisdictions – is key to the reduc- Baden-Württemberg, had decided that tion of administrative fines. But what if the deployment was not justified as the it is not the suspect but the investigator Employers should make sure that pursuing a private investigation is warranted. private investigator was only investigat- who is the actual source of potential li- © stockce/iStock/Thinkstock/Getty Images ing a single breach of contract and not a abilities? The EU General Data Protection criminal offense. In this case, the employ- Regulation (GDPR), which will come into er had received an e-mail (addressed to a force on May 25, 2018, is accompanied is hidden” and investigators “hate what instances, even criminal liability and the customer) which mentioned that the em- by administrative fines of up to 4% of is hidden”, it stands to reason that there inadmissibility of evidence in court. ployee was working for a competitor. The the total annual worldwide turnover of will be a conflict of interests. This makes employer then consulted a private inves- a corporate group. In addition, individu- it even more important to be aware The German Federal Labor Court has tigator who ultimately saw the employee als who suffer material or nonmaterial of what investigators can do without now issued guidance for internal inves- working for the competitor. The Appellate damage as a result of an infringement of violating data privacy laws and exposing tigations in two landmark decisions. Court of Baden-Württemberg came to the GDPR are entitled to compensation. the employer to risks such as administra- Although they refer to the current the conclusion that the dismissal without Because data protection laws “hide what tive fines, damage claims and, in some German Data Protection Act, which will notice was invalid as the evidence –> 26 – Labor law & compliance – LLM – No. 4 – December 4, 2017

collected by the private investigator was • there is a (simple) suspicion of gross less of content, from business to online Even in light of this ruling, keylogging is inadmissible in court and therefore gross misconduct, which does not necessar- banking to personal correspondence. The not a no-go per se but is definitely a last misconduct had not been proven. ily have to be a criminal offense; employer in this case had decided to take resort with very limited areas of applica- this step after rumors that the employee tion. Its use must be clearly restricted in The Federal Labor Court overruled this de- • the suspicion is based on specific facts in question was using his work computer scope and time, and a careful weighing cision with unmistakable clarity. Although (to be documented); for private business during working time. of interests must take place to ensure the decision of the Appellate Court of It was also reported to the employer that that its use is not excessive. The Federal Baden-Württemberg was based on a • no less intrusive investigative meas- the employee had hastily closed “heavily Labor Court even gives an example for a strong argument – specifically, the word- ures exist (“need to know”); pictured” windows on his computer in less intrusive and permissible surveillance ing of section 32 (1) Data Protection Act at least one case. In its decision of July measure: Recording process data for use which only referred to criminal offenses • the investigative measure is reason- 27, 2017 (2 AZR 681/16), the Federal Labor of the internet browser for a limited pe- - the Federal Labor Court ruled that able (balance of interests). Court compared keylogging to covert riod. Evaluation of this kind of data on a there was no legal argument to interpret video surveillance, which it had already random basis can be the preferred option section 32 (1) Data Protection Act as the It should be noted that German case law deemed to be justified under strict for monitoring compliance with com- appellate court had. According to the applies a strict interpretation of these requirements. The court also considered pany policies on Internet use. This is good Federal Labor Court, this interpretation principles. The steps that can be taken the aforementioned principles, which news from the employer’s perspective, would be in contravention of European must be selected in accordance with the lay down the legal framework for the as the court clearly acknowledges the law as it would not reasonably weigh circumstances of the specific case. In deployment of private investigators, video employer’s interest in warranting compli- the employee’s right to privacy against particular the “need to know” principle surveillance and other covert investiga- ance with internal policies and protecting the employer’s interest. Furthermore, the must be closely observed. If, for example, tive measures. With regard to the case at company assets and IT systems. court assumed that when section 32 Data a measure that is less intrusive than us- hand, however, the court held that the Protection Act came into effect in 2009, ing a private investigator does not exist, use of a keylogger failed to meet even the Relevance under the GDPR it was not intended to modify the rulings the scope and length of the investigation first prerequisite of a simple suspicion of of the Federal Labor Court, which had al- must nevertheless be limited, for instance gross misconduct based on specific facts. What will these landmark decisions be lowed covert investigations under certain only a few hours a day and not every day. Rumors and the one-time closing of a worth when the GDPR and the new Ger- conditions. It is also crucial that a weighing of the “heavily pictured” window are simply not man Data Protection Act come into force? respective interests has taken place. sufficient. The court also highlights that In all relevant aspects, the new section Against this background, the Federal keylogging is highly intrusive and contra- 26 (1) of the German Data Protection Act Labor Court states that the (covert) sur- The German Federal Labor Court venes the right to privacy as it provides a is identical to section 32 (1) of the current veillance of an employee by a private on keylogger programs comprehensive and complete profile of Data Protection Act. The aforementioned investigator is justified in general if the computer use. The court explicitly states decisions are based on an argumenta- following rules are observed: The second decision of the German Fed- that the use of a keylogger in this specific tion which allows the Federal Labor Court eral Labor Court concerned keyloggers, case was excessive. to continue to uphold both decisions which track all keyboard entries regard- even under the new laws. Even if –> 27 – Labor law & compliance – LLM – No. 4 – December 4, 2017

it remains speculation, there is good All in all, there is good reason to believe use of telecommunications, data protec- reason to believe that this is the purpose that the German Federal Labor Court will tion policies or compliance policies in a of the two carefully drafted decisions. not be forced to alter its decisions. The broader sense could be an appropriate Nevertheless, there is one crucial and ECHR ruling only influences the inter- place for these disclosures. For employers unanswered question that the German pretation of German laws and German with works councils, master works agree- courts have to deal with under the GDPR courts decide at their own discretion ments on data protection or individual and the Data Protection Act: According how to observe such rulings. Although works agreements regarding the tools to article 13 (1) GDPR, the data subject, the GDPR is binding, there is reason to that are subject to codetermination that is the employee, must be informed assume that it does not aim to abolish (for example video surveillance) could at the time that personal data is being reasonable covert investigative measures be another smart option when taking obtained directly. It is irrelevant whether as this would otherwise be an overzeal- precautionary steps. In light of all the this entails video surveillance, private ous interpretation of the right to privacy. unknown factors, one thing is certain: The investigators, keylogging or GPS tracking In addition, article 14, which addresses implementation of the GDPR is a chal- if the data is obtained directly from the duties to inform when data is not col- lenge, not only for employers but also for subject. If the employer or investigator lected from the data subject, provides the courts. <– is obliged to simultaneously notify the for an explicit exemption from the duty employee about these tools or measures, to inform if the information in question covert investigations would be impos- seriously impairs the achievement of data sible. In light of this, a recent decision processing objectives. It is merely logical by the European Court of Human Rights to apply this exemption to situations in (ECHR, judgment of September 5, 2017, which the data is obtained directly from B˘arbulescu v. Romania, no. 61496/08) is the subject or employee (see Byers, NZA Dr. Thilo Mahnhold, also noteworthy. It advises local courts to 2017, 1086, 1090). Rechtsanwalt, Partner, Fachanwalt für Arbeitsrecht, JUSTEM Rechtsanwälte, Frankfurt/Main take into account that employees should be notified in advance of the possibility What needs to be done? that their employer might take measures [email protected] to monitor correspondence (in the case Because the GDPR and the new Data at hand, this was a messenger service). Protection Act are currently driving many Dr. Daniel Klösel, Although the ECHR has justified the use employers to revise their data protection Rechtsanwalt, Associate, JUSTEM Rechtsanwälte, Frankfurt/Main of covert investigative measures such policies, there is good reason to consider as video surveillance in the past, this is whether the mere possibility of specific another hurdle to be overcome if the Ger- (covert) investigative measures should be [email protected] man Federal Labor Court wants to uphold disclosed as part of a revised data protec- its two landmark decisions. tion concept. Policies on IT security, the www.justem.de 28 – Advisory board – LLM – No. 4 – December 4, 2017

Kristin Band Dr. Marc Kaiser Legal Department Leiter Arbeitsrecht, Versicherungs- / Schadenmanagement Fritz Dräxlmaier GmbH & Co. KG AUDI AG Vilsbiburg Ingolstadt

[email protected] [email protected] www.draexlmaier.de www.audi.de

Gerrit-Michael Böning Dr. Frank Kohls Deutsche Bank AG Counsel, Labour Law Europe Managing Director / Head of Labour Relations IBM Deutschland Management & Business Support GmbH Frankfurt/Main Ehningen

[email protected] [email protected] www.db.com www.de.ibm.com

Stefan Braun Stefan Möhren General Counsel EMEA, Fachanwalt für Arbeitsrecht, Fachanwalt HR Labor Relations für IT-Recht LEDVANCE GmbH Diebold Nixdorf, Paderborn Garching

[email protected] [email protected] www.dieboldnixdorf.com www.ledvance.com

Sandra Dreyer Ellen Raahede-Secher Senior Counsel Labor & Employment Managing Director / Country Human Resources Director Germany GE Parker Hannifin Manufacturing Germany GmbH & Co. KG Frankfurt/Main Kaarst

[email protected] [email protected] www.ge.com www.parker.com

Michael Fritz York von Roenne Geschäftsführer Personal Bereichsleiter Human Resources / Global Director Human Resources DB Engineering & Consulting GmbH Leica Camera AG Berlin Wetzlar

[email protected] [email protected] www.deutschebahn.com www.leica-camera.de 29 – Advisory board – LLM – No. 4 – December 4, 2017

Frank Schürmann Liana Weismüller Director Labor Relations Germany Leiterin Arbeitsrecht und Betriebsverfassung / Head of Labour Law UPS Deutschland Inc. & Co. OHG Condor Flugdienst GmbH Neuss Frankfurt/Main

[email protected] [email protected] www.ups.com www.condor.com

Alexandra Seemann Alexander Werner Legal Department Manager / German Labor Relations, Labor & Social Law Head of Team Labor and Employment Law SAP SE Merck Walldorf Darmstadt

[email protected] [email protected] www.sap.com www.merckgroup.com

Christian Stadtmüller Head of HR Labor Relations Infineon Technologies AG Neubiberg

[email protected] www.infineon.com

Christian Vetter Leiter Arbeits- und Sozialrecht Deutschland Dow Deutschland Inc. Hamburg

[email protected]

Dirk Wasmuth Leiter Arbeitsrecht, Versicherungs- / Schadenmanagement Porsche Ingolstadt

[email protected] www.porsche.de 30 – Strategic partners – LLM – No. 4 – December 4, 2017

Dr. Anja Mengel, LL.M. (Columbia) Dr. Axel Boysen Partner, ALTENBURG Fachanwälte für Arbeitsrecht Partner, Fragomen Global LLP Französische Str. 2–4, DE-10117 Berlin Neue Mainzer Str. 75, DE-60311 Frankfurt/Main

[email protected] [email protected] www.altenburg.net www.fragomen.com

Markus Künzel Caroline Bitsch Partner, Beiten Burkhardt Rechtsanwaltsgesellschaft mbH Partner, JUSTEM Rechtsanwälte Ganghoferstr. 33, DE-80339 Munich Neue Mainzer Str. 26, DE-60311 Frankfurt/Main

[email protected] [email protected] www.bblaw.com www.justem.de

Dr. Thilo Mahnhold Partner, JUSTEM Rechtsanwälte Sabine Feindura Neue Mainzer Str. 26, DE-60311 Frankfurt/Main Partner, Buse Heberer Fromm Kurfürstendamm 237, DE-10719 Berlin

[email protected] www.justem.de [email protected] www.buse.de

Dr. Jan Tibor Lelley Dr. Martin Trayer, LL.M. (Edinburgh) Partner, Buse Heberer Fromm Director, KPMG Rechtsanwaltsgesellschaft mbH Bockenheimer Landstr. 101, DE-60325 Frankfurt/Main THE SQUAIRE, Am Flughafen, DE-60549 Frankfurt/Main

[email protected] [email protected] www.buse.de www.kpmg-law.com

Pascal R. Kremp, LL.M. Axel Braun Partner, DLA PIPER UK LLP Partner, Luther Rechtsanwaltsgesellschaft mbH Maximilianstr. 2, DE-80539 Munich Anna-Schneider-Steig 22, DE-50678 Cologne

[email protected] [email protected] www.dlapiper.com www.luther-lawfirm.com 31 – Strategic partners – LLM – No. 4 – December 4, 2017

Prof. Dr. Robert von Steinau-Steinrück Partner Employment, Luther Rechtsanwaltsgesellschaft mbH Friedrichstr. 140, DE-10117 Berlin

[email protected] www.luther-lawfirm.com

Dr. Guido Zeppenfeld Managing Partner, Mayer Brown LLP Friedrich-Ebert-Anlage 35-37, DE-60327 Frankfurt/Main

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Marc André Gimmy Partner, Taylor Wessing Benrather Str. 15, DE-40213 Düsseldorf

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