The European Court of Justice (ECJ) yesterday, Thursday, has made its decision, which was awaited by many with great nervousness and which represents a partly expected, partly feared bang. In July 2019 when the hearing in the Schrems / Facebook II case (C 311/18) took place the data protection commissioner of Baden-Württemberg at that time called the case "Rumble in the Jungle" (in reference to a legendary Muhammad Ali boxing match). Yesterday the match ended with a knockout.
At a first glance the German economy seems to be quite robust despite ongoing Covid crisis. A closer look – however – reveals a number of warning signs that the situation is not quite as rosy as it portrayed by the government.
In June 2020 about 2.9 million employees (= 6.2 %) were unemployed, another 6.83 million employees where covered by the short time work scheme and about 4 million persons where covered by the basic subsidy system Hartz IV. Another one million employees are not included in the statistics due to sickness or government programs, often not at all registered are self-employed persons (since they are regularly not entitled to any benefits of the unemployment insurance). Taking into account that the regular number of employed persons is 44.8 million (out of 81 million inhabitants) and that only 27 million out of those employees are net tax payers (including 12 Million state employees) it becomes clear, that the financial burden of the crisis must be borne by a relatively small basis of employees.
As other countries Germany accompanied lockdown measures with huge financial programs trying to alleviate the burden for companies and employees. Among the most notable non-financial emergency measures were the temporary suspension of the obligation to pay rent, to pay for certain essential services (e.g. telephone, electricity, gas) and the extension of loan contracts. Many companies made use of these options as well as offered tax breaks and the possibility to defer social security contributions.
Although unpaid bills of the kind mentioned above generally can be settled over time (e.g. the next 3 years) the importance to punctually resume all current payments as of July 1st 2020 cannot be underestimated. Especially in hardly hit industries and service sectors the burden to pay rent without having any sufficient income will likely lead to a new financial calculation by financial departments all over the country, whether the suspension of salary payments alone (due the continued short time work scheme) is sufficient for the survival of the business.
More important for many companies is the temporary suspension of the duty for management of a company to immediately file for insolvency, if Corona is the reason for the difficult financial situation of the company. This suspension will end on September 30th 2020 and it is generally expected that a wave of insolvencies might immediately follow that date (if the government does not renew the suspension for another 6 months (which is provided for in the originally law)).
It needs to be pointed out – however – that many companies seem to be a under a wrong impression when looking at their legal obligations. The fact, that the management must not immediately file for insolvency does only apply, if Corona is the reason for the financial difficulties and there must be a positive business prognosis for the remainder of 2020 and thereafter. A company, which is not sure or even assumes, that after September 30th 2020 bills cannot be paid anymore, might even be subject to criminal liability e.g. by ordering goods or services in the current situation. Since all insolvency proceedings under German law trigger a criminal investigation there is a real danger that many officers of German companies already are in the precarious situation without knowing.
Taking it into account the above many companies currently are in the process of seriously reconsidering the business options. Despite the ongoing short time work, which takes some burden of salary payments from businesses, companies will have to look realistically at their business prospects for the current and oncoming years. In many cases this must lead to a restructuring plan involving a substantial reduction of the work force. German newspaper these days are full of company news announcing the layoff of tens of thousands of employees, including workforce reductions at large companies, such as Commerzbank, Lufthansa, Bosch and Airbus.
Any reduction of the work force immediately leads to employment law questions.
Although German law has a certain reputation for being difficult as regards individual employee terminations in a situation such as the Corona crisis the process to issue a notice of termination is ultimately quite straightforward.
Things get considerably more difficult, when a works council or a trade union is involved. In these cases much more time and financial planning is needed to ensure a success of a restructuring project.
Companies and their advisors interested in more detailed information about the labour and employment law issues at stake, useful strategic considerations and time and budget planning should take look at our new brochure “Practical Guide to Redundancy and Restructuring in Germany”. Available as free download:
2017 is an election year in Germany. Usually this means that parties change into the campaign modus and legislative amendments are rare. This is not the case in 2017, partly due to the fact that most pundits expect the grand coalition to continue after the election.
The evaluation of employee performance and quality of work is essential for employees in all industries. Deficits can lead to complaints of customers and clients and thus may seriously endanger the success of the business enterprise. Specific issues arise in call centers, where main task of employees is answering calls in order to deal with the customer problems or to create new business. The solicitation of new business through calls initiated by the employee is a main line of business for many companies. Employers in such situation have a valid interest in monitoring and / or recording both the verbal communication between the employees and the customers and to record the details of calls that have been made. Employees on the other hand have a valid interest to protect their personality rights, the same applies to customers who call or are contacted.
2016 promises to be an interesting year in German employment law. Only a few days after a draft law on new regulations for temporary work and the differentiation between employment relationships and freelance and works contracts have been published (although it has been meanwhile been withdrawn and will be newly discussed in January) a new draft law on equal pay for men and women has been published by the competent Ministry for Families, Senior persons, Women and Youth. Further the government announced to prepare a further law giving employees the right to return to a fulltime job after having reduced the work time previously.