Labour law: rights for employers and employees

Labour Law - Law firm Herfurtner

Labour law is a complex and wide-ranging area of law that affects both employers and employees. In this comprehensive article, we will discuss the legal basis of labour law in Germany and provide you, as a competent and experienced lawyer, with valuable information, examples, laws, current court decisions and FAQs. We will divide the article into the following main topics:

  • Employment contracts
  • Protection against dismissal
  • Working hours
  • Holidays and special leave
  • Pay and minimum wage
  • Occupational health and safety and working conditions
  • Industrial action and collective agreements
  • Labour jurisdiction and legal protection

Employment contracts

Employment contracts form the basis of the employment relationship between employer and employee. They regulate the essential terms of cooperation, including position, salary and working hours. In this section we will cover the different types of employment contracts, their legal requirements and common problems.

Types of employment contracts

  • Fixed-term employment contracts: These contracts are limited to a certain period of time and end automatically when the fixed term expires. The legal regulations on this can be found in § 14 TzBfG.
  • Permanent employment contracts: These contracts run for an indefinite period of time and can be terminated by either party with an appropriate period of notice.
  • Part-time contracts: These are employment contracts with less working time than the usual full-time work. The legal requirements for this are regulated in the TzBfG.
  • Mini-job contracts: These are marginal jobs where the monthly pay does not exceed a certain limit (currently 450 euros). Mini-jobbers are subject to special regulations, e.g. with regard to social insurance obligations.

Legal requirements for employment contracts

Employment contracts must meet certain legal requirements to be effective. These include in particular:

  • Written form: According to section 2 of the Verification Act (NachwG), the essential terms of the contract must be set down in writing and handed over to the employee no later than one month after the start of the employment relationship.
  • Probationary period: A probationary period may be agreed to give both parties the opportunity to try out the employment relationship for a limited period of time. The maximum duration of a probationary period is six months according to section 622 (3) BGB.
  • Notice periods: The statutory notice periods are regulated in section 622 BGB. The basic notice period is four weeks to the 15th or to the end of a calendar month. For employees who have been with the company for two years or more, the notice periods are extended on a staggered basis.

Common problems with employment contracts

Various legal issues and problems may arise in connection with employment contracts, such as:

Effectiveness of fixed-term contracts: Fixed-term contracts without an objective reason are only permissible up to a total duration of two years according to Section 14 (2) TzBfG, whereby a maximum of three extensions of the contract are permitted.

Competition clauses: Such clauses, which prohibit the employee from working for a competitor after termination of the employment relationship, must be narrowly defined and provide for adequate compensation for waiting in order to be effective (section 74 HGB).

Warnings and dismissals: As a rule, a warning is required before a termination for reasons of conduct. The effectiveness of a termination depends on various factors, such as compliance with the statutory notice periods and the consent of the works council.

Protection against dismissal

Protection against dismissal is a central element of German labour law and serves to protect employees against unjustified or socially unjustified dismissals. In this section we will explain the most important aspects of protection against dismissal, including the legal regulations, the Protection against Dismissal Act (KSchG) and the different types of dismissals.

The Protection against Dismissal Act (KSchG)

The KSchG regulates the special protection against dismissal for employees in companies with more than ten employees. After the end of the probationary period (or after six months of employment), employees can only be dismissed if the dismissal is socially justified, i.e. if it is based on operational, personal or behavioural reasons.

Types of dismissal

  • Ordinary dismissal: Ordinary notice of termination is given in compliance with the statutory or contractually agreed notice periods. It may be based on operational, personal or behavioural reasons.
  • Extraordinary termination: Extraordinary termination is termination of the employment relationship without notice for good cause, e.g. in the event of serious misconduct by the employee or the employer (section 626 BGB).
  • Change notice: In the case of a notice of change, the employment relationship is continued under changed conditions. The employee can reject the offer of change and bring an action for protection against dismissal.

Protection against dismissal for special groups of persons

Some groups of persons enjoy special protection against dismissal that goes beyond the general Dismissal Protection Act. These include:

  • Pregnant women and mothers on parental leave: according to § 17 MuSchG and § 18 BEEG, pregnant women and mothers on parental leave may not be dismissed in principle, unless the dismissal is exceptionally permitted after approval by the competent authority.
  • Severely disabled persons: Severely disabled persons enjoy special protection against dismissal under section 168 of Book IX of the Social Code, which requires the consent of the Integration Office for dismissal.
  • Works council members: Pursuant to section 15 KSchG, works council members are protected from ordinary dismissal during their term of office and for one year thereafter. Extraordinary dismissal is only possible with the consent of the works council.

Action for protection against dismissal and severance pay

Employees who consider a dismissal to be invalid may bring an action for protection against dismissal before the competent labour court within a period of three weeks after receipt of the written notice of dismissal (section 4 KSchG). If the action is declared well-founded, the employment relationship may continue or the employee may receive severance pay. Severance pay is not regulated by law, but is often agreed on the basis of 0.5 monthly salaries per year of employment.

Working hours

Working time is a central element of labour law and is regulated by the Working Time Act (ArbZG). In this section we will explain the most important provisions on working time, breaks and rest periods as well as work on Sundays and public holidays.

Working Hours Act (ArbZG)

The ArbZG regulates the maximum permissible working time and contains provisions on breaks, rest periods and work on Sundays and public holidays. The most important regulations are:

  1. Maximum working time: The regular weekly working time may not exceed 48 hours and the daily working time may not exceed 8 hours (§ 3 ArbZG). An extension to up to 10 hours a day is possible under certain conditions if an average of 8 hours a day is not exceeded within 6 months (§ 3 ArbZG).
  2. Rest breaks: If the working time exceeds 6 hours, a break of at least 30 minutes is mandatory; if the working time exceeds 9 hours, the break is at least 45 minutes (§ 4 ArbZG).
  3. Rest periods: Between two working days, workers must have an uninterrupted rest period of at least 11 hours (§ 5 ArbZG).
  4. Work on Sundays and public holidays: In principle, work on Sundays and public holidays is prohibited (§ 9 ArbZG). Exceptions apply to certain industries and activities, but in these cases substitute rest days must be granted.

Working time models and overtime

Flexible working time models, such as flexitime, trust-based working time or part-time work, are increasingly being used. These models require careful documentation of working time to ensure compliance with the Working Hours Act.

Overtime must be paid separately or compensated by time off in lieu, unless a lump-sum payment for overtime is expressly agreed in the employment contract. However, even with such an agreement, the statutory maximum working time may not be exceeded.

Leave and special leave

Employees’ holiday entitlement is an important part of labour law and is regulated by the Federal Holiday Act (BUrlG). In this section we explain the legal regulations on recreational leave, special leave and holiday pay.

Recreational leave

According to § 3 BUrlG, employees are entitled to at least 24 working days of paid recreational leave per calendar year with a 6-day week. In the case of a 5-day week, the statutory minimum holiday entitlement is 20 days. Collective agreements or employment contracts may provide for longer holiday entitlements. The leave must be granted and taken in the current calendar year, unless it is necessary to carry it over to the next year for urgent operational or personal reasons (§ 7 BUrlG).

Special leave

Special leave is time off from work for special occasions, such as marriage, birth of a child or death in the family. There is no statutory regulation for special leave, but many collective agreements or employment contracts contain corresponding provisions. Special leave can be paid or unpaid, depending on the agreement or company practice.

Holiday pay

During leave, employees are entitled to the so-called holiday pay, which corresponds to the average earnings of the last 13 weeks before the start of the leave (§ 11 BUrlG). Holiday pay must be paid before the start of the holiday.

Remuneration and minimum wage

Remuneration is the consideration paid by the employer for the employee’s work. It can be paid in the form of wages, salaries, commissions or other remuneration components. In this section we explain the statutory minimum wage, collectively agreed regulations and the Continued Remuneration Act.

Statutory minimum wage

A statutory minimum wage has been in force in Germany since 2015, regulated by the Minimum Wage Act (MiLoG). The current minimum wage is 9.60 euros per hour (as of January 2022) and is regularly adjusted. The minimum wage applies in principle to all workers aged 18 and over, with exceptions for the long-term unemployed, trainees, apprentices and volunteers.

Collective agreements

In many sectors, wages and salaries are regulated by collective agreements. Collective agreements are agreements between trade unions and employers’ associations that are binding for all employees in the respective area of application. Collective agreements can also set wage floors above the statutory minimum wage.

Continued payment of wages in case of illness and on public holidays

In the event of incapacity to work due to illness, employees are entitled to continued payment of wages by the employer for a period of up to six weeks under the Continuation of Remuneration Act (EFZG). The prerequisite is that the employee is continuously employed in the company for at least four weeks and the inability to work is proven by a medical certificate.

Employees are also entitled to continued payment of remuneration on public holidays if the holiday falls on a regular working day (section 2 EFZG).

Occupational safety and working conditions

The purpose of occupational safety and health is to ensure and improve the safety and health of workers at work. In this section we will explain the legal basis of OSH, the employer’s obligations and the role of the OSH authorities.

Legal basis of occupational safety and health

Occupational safety and health is regulated in various laws and ordinances, in particular the Occupational Safety and Health Act (ArbSchG), the Workplace Ordinance (ArbStättV) and the Industrial Safety and Health Ordinance (BetrSichV). These regulations implement European directives and apply to all companies and employment relationships.

Duties of the employer

Employers are legally obliged to ensure the safety and health protection of their employees. This includes in particular:

Risk assessment: Employers must carry out an assessment of the working conditions and the associated hazards for workers and take appropriate protective measures (§ 5 ArbSchG).
Instruction: Employers must instruct their workers on safety and health risks and the necessary protective measures (§ 12 ArbSchG).
Occupational health screening: Employers must offer occupational health screening for specific activities and working conditions (§ 11 ArbSchG).
Provision of personal protective equipment: Employers must provide their workers with personal protective equipment as required (section 3 BetrSichV).

Occupational safety authorities and employers’ liability insurance associations

Compliance with occupational health and safety regulations is monitored by the competent occupational health and safety authorities of the Länder and the employers’ liability insurance associations. In the event of violations of occupational health and safety law, employers may be subject to fines or criminal sanctions.

Industrial action and collective agreements

Industrial action is an instrument used by the parties to collective bargaining (trade unions and employers’ associations) to enforce their demands in collective bargaining. In this section we will explain the legal basis of industrial action, the right to strike and the role of collective agreements.

Legal basis of industrial action

The right to industrial action, in particular the right to strike for trade unions and the right to lock out for employers, is protected in Germany by the Basic Law (Art. 9 para. 3 GG). However, industrial action must meet certain legal requirements to be lawful:

  1. Industrial action may only be taken in connection with collective bargaining (so-called collective action).
  2. Industrial action must be proportionate, i.e. it may only be used as a last resort when collective bargaining has failed.
  3. Industrial action must be decided and organised by the competent collective bargaining parties (trade unions or employers’ associations).

Right to strike and strikebreaking

Workers taking part in a lawful strike enjoy special protection against dismissal, i.e. they may not be dismissed during the strike. However, striking workers are not entitled to continued payment of wages for the duration of the strike.

Workers who continue to work during a strike (so-called strikebreakers) may be legally prosecuted by their striking colleagues and the union, e.g. for violating trade union solidarity.

Collective agreements and their effect

Collective agreements are agreements between trade unions and employers’ associations that regulate working conditions, wages, salaries and other rights and obligations of workers and employers. Collective agreements can be declared generally binding, i.e. they then apply to all employers and employees in the respective sector, irrespective of their membership in a trade union or employers’ association (section 5 TVG).

Workers covered by a collective agreement are entitled to the collectively agreed benefits, such as higher wages, longer holidays or shorter working hours. Employers are obliged to comply with and implement the provisions of collective agreements.

Labour jurisdiction and legal protection

The labour courts are responsible for deciding disputes arising from employment relationships and collective agreements. In this section we explain the structure of labour jurisdiction, the process of labour court proceedings and the possibilities of legal protection for employees and employers.

Structure of the labour courts

The labour court system in Germany is divided into three instances:

Labour courts: the labour courts generally have first-instance jurisdiction over all labour law disputes.
Land Labour Courts: The Land Labour Courts are appellate bodies that hear appeals against decisions of the Labour Courts.
Federal Labour Court: The Federal Labour Court is the highest labour court in Germany and decides on appeals against the decisions of the regional labour courts.

Procedure of labour court proceedings

Labour court proceedings usually begin with the employee or the employer filing a claim. There is no requirement to be represented by a lawyer before the labour court, i.e. the parties can represent themselves. However, it is recommended to consult an experienced lawyer in order to represent one’s own interests in the best possible way.

After the complaint has been filed, a conciliation hearing is first held, in which the court tries to reach an amicable settlement between the parties. If the conciliation hearing fails, the proceedings are usually ended by a judgement or a settlement.

Legal protection for employees and employers

Employees and employers can be represented before labour courts by lawyers, trade unions or employers’ associations. Legal expenses insurance can cover the costs of labour court proceedings if labour disputes are included in the scope of insurance.

Employees who have a low income may be able to apply for legal aid to have all or part of the costs of the proceedings and of a lawyer covered by the state.

FAQ – How is labour law structured in Germany?

Labour law in Germany is divided into individual labour law and collective labour law. Individual labour law regulates the relationship between employer and employee, while collective labour law concerns the relationship between the collective bargaining partners (trade unions and employers’ associations).

How is an employment contract concluded?

An employment contract is brought about by an offer and an acceptance between the employer and the employee. It can be concluded in writing, orally or tacitly. In Germany, however, a written employment contract is required by law (§ 2 Verification Act).

What periods of notice apply in labour law?

The statutory notice periods in labour law for employees and employers are four weeks to the 15th or to the end of a calendar month (§ 622 BGB). For employers, the notice periods are extended depending on the employee’s length of service. Collective agreements or individual agreements may provide for different notice periods.

What are the essential duties of an employer in labour law?

The essential duties of an employer in labour law include the payment of wages, the granting of leave, compliance with occupational health and safety regulations and the duty of care towards employees.

What rights do workers have in industrial disputes?

Workers have the right to participate in lawful industrial action, in particular strikes. They enjoy special protection against dismissal during the strike, but may not expect continued payment of wages for the duration of the strike.

Labour law in summary

Labour law is a complex area of law that affects both employers and employees. It regulates the legal basis of employment relationships, including employment contracts, protection against dismissal, working hours, leave, pay and occupational health and safety. In addition, industrial disputes and collective agreements play an important role in shaping working conditions and industrial relations.

Employees and employers should consult an experienced lawyer who can competently advise and represent them on labour law issues and problems. The labour courts offer parties effective legal protection and the possibility to enforce their rights and claims in court.