Conclusion of employment contracts by e-mail in future? - Back to the future

The German government is promising citizens a major step towards reducing bureaucracy with the Bureaucracy Reduction Act IV (BEG IV). We recently presented the content of this government project in our podcast episode "vangard spricht - in München". There were recent developments on 19.06.2024, when the Federal Ministry of Justice published an amended government draft of the BEG IV, which takes up proposals for amendments made by the Bundesrat and various associations. The focus is on the possibility of concluding employment contracts digitally in future, for example by email.

What is the current legal situation?

Although it is not a novelty that employment contracts can in principle be concluded without a specific form, this is sometimes unusual in practice. On the one hand, employers and employees are threatened with problems of proof in the event of discrepancies, and on the other hand, since August 2022, the so-called Evidence Act has obliged employers to document central contractual terms in writing for better traceability.

Furthermore, the freedom of form does not apply to every employment contract. For fixed-term contracts, which are widely used in practice, Section 14 (4) TzBfG requires the written form - i.e. the handwritten signature of both contracting parties on a paper document. This even applies to contracts that provide for the employment relationship to end when the standard retirement age is reached.

Also, the written form must be observed when agreeing post-contractual non-competition clauses and in the case of employee leasing agreements. Against this background, the conclusion of a written employment contract has so far been the pragmatic, albeit sometimes cumbersome, solution for both parties.

What adjustments does the new government draft provide for?

After the first government draft of 13.03.2024 stipulated that the employer would no longer have to provide evidence in writing, but only in electronic form, many concerns arose in practice regarding the practicability of this planned new regulation. The reason for these concerns was that the electronic form requires a so-called "qualified electronic signature", i.e. the signature requires a specially encrypted certificate. An ordinary email does not meet this requirement; the electronic form would therefore not help to reduce bureaucracy and the practical relevance of the new regulation would hardly be noticeable.

The revised draft law responds to this criticism by stipulating that proof of the contractual terms in text form will suffice in future. This would open up the possibility for employers and employees to conclude an employment contract while at the same time fulfilling the obligations to provide evidence under the Evidence Act by means of declarations made legibly on a durable medium, e.g. by email, certain messenger messages or comparable forms of communication. The contractual documents must be accessible to the employee, stored and printable and the employer must request the employee to provide proof of receipt upon transmission.

If the amended draft is passed, fixed-term employment contracts until the standard retirement age is reached and temporary employment contracts would also only require text form to be effective in future.

When must the written form still be complied?

However, no changes are planned for all other fixed-term contracts or contracts that provide for a post-contractual non-competition clause, meaning that the written form will continue to be required. Even if employees explicitly request written proof of the essential working conditions and in the economic sectors pursuant to Section 2a (1) of the Act to Combat Clandestine Employment - e.g. in the construction or catering industry - the new government draft stipulates that the employer must provide written proof as before. Dismissals and termination agreements are also excluded from the planned new regulations and still require the written form.

When will the amendments to the Bureaucracy Reduction Act IV come into force?

It is not yet possible to predict when the law will finally be passed. The first reading in the Bundestag is expected shortly. However, if the law is passed as the current government draft envisages, the changes would come into force on the first day of the quarter following its promulgation. Due to the unclear timeline so far, we assume that the changes will apply from October 1, 2024 at the earliest.

What are the practical consequences of the Bureaucracy Reduction Act IV?

The BEG IV will bring significant changes to the world of work. If the changes are adopted as planned, the extension of the form in the Evidence Act will allow companies to digitize processes and modernize personnel administration. The "digital employment contract" will be possible and represents a milestone towards the digitalization of the world of work. Companies and associations in particular are in favor of this development. However, employees will also be relieved by a reduction in bureaucracy, while ensuring that they can easily prove their working conditions in the event of a dispute.

In order to strengthen Germany's competitiveness in international business transactions and to relieve the burden on the economy, it is necessary to take effective measures to ensure the progressiveness of companies and guarantee a future-oriented, increasingly digitalized working day. If the law is passed as planned, it will be an important step in this direction.