Three minutes to adjust labor contracts – really?

June 2022 · Estimated read time: mins

Planned law likely to cause considerable additional work in HR departments

The German government assumes a time requirement of three minutes to adjust employment contracts due to planned new legal regulations. This assumption has nothing to do with employment contract practice. On the contrary, the intended law will result in considerable additional work for HR departments. Practically all employment contracts will require revision by August 01, 2022, should the law come into force by then. Especially during the school holiday and vacation period, this will be almost impossible to accomplish without support. But now let's take it one step at a time.


What is it about?

In spring 2022, the German government launched a draft bill (BT-Drucksache 20/1636) to implement Directive (EU) 2019/1152 of June 20, 2019 on transparent and predictable working conditions in the European Union in the area of civil law ("Working Conditions Directive"). The Working Conditions Directive stipulates that the rights and obligations set out therein must apply to all employment relationships by August 01, 2022, at the latest. It is difficult to understand why policymakers are only acting now, even though the directive has been in place for almost three years.


To implement the Working Conditions Directive, the current draft provides for numerous amendments to existing laws. At its core, however, are far-reaching changes to the Verification Act, which is the focus of this article.


What is already valid today?

According to the current legal situation, employers must set down the essential contractual conditions – e.g. commencement, place of work, pay, working time, notice periods - in writing, sign the documentation and hand it over to the employees. The Documentation Act stipulates strict written form (Section 126 (1) of the German Civil Code (BGB)), i.e. the handwritten signature of the person drawing up the minutes. Electronic form is expressly excluded. In addition, the documentation must be handed over to the employees no later than one month after the agreed start of the employment relationship. In purely practical terms, employers usually fulfill these obligations by concluding a written employment contract that contains the essential contractual terms.


In the event of a change in material contractual terms and conditions, employees must also be informed of this in writing no later than one month after the change; however, this is not required in the case of a change in statutory provisions, collective agreements, works or service agreements and similar regulations that apply to the employment relationship.


What does the German government plan to do?

The bill provides for a significant expansion of the employer's obligation to provide documentation. In the future, documentation needs to include

  • the duration of an agreed probationary period,

  • the method of payment of wages,

  • agreed rest breaks and rest periods and, in the case of agreed shift work, the shift system, shift rhythm and conditions for shift changes,

  • details of on-call work (Section 12 of the Part-Time and Fixed-Term Employment Act),

  • the agreed possibility of ordering overtime and its conditions,

  • on any entitlement to training provided by the employer,

  • the name and address of the pension provider, if the employer agrees to provide a company pension through a pension provider (however, the obligation to provide documentation does not apply if the pension provider is obliged to provide this information),

  • the procedure to be followed by the employer and the employee when terminating the employment relationship, at least the written form requirement and the time limits for terminating the employment relationship, as well as the time limit for bringing an action for unfair dismissal; Section 7 of the Dismissal Protection Act shall also apply if the time limit for bringing an action for unfair dismissal has not been properly proven.

  • Further obligations to provide documentation in the case of foreign assignments of employees.


In addition, the following deadlines are to apply in the future for the fulfillment of the obligations to provide documentation. From the first day of work, employers are to provide employees with the name and address of the contracting parties, the required information on remuneration and working hours. Other documentation obligations (e.g. the beginning and duration of the employment relationship, the place(s) of work or a characterization or description of the work to be performed by the employee) should be handed over to the employee by the employer no later than on the seventh day after the agreed beginning of the employment relationship. Only in a few cases shall the existing one-month period remain. In the future, employees must be informed in writing of any changes in working conditions on the day on which they take effect.


Unfortunately, electronic form is to remain excluded. This is disappointing and disregards today's contractual reality. We have already reported on the associated digitization obstacles elsewhere.
The exclusion of electronic form is all the more surprising because the Working Conditions Directive expressly permits it, provided that the information is accessible to employees, can be stored and printed out, and employers receive proof of transmission or receipt.


What applies to old contracts? 

In this regard, the bill clarifies that in the case of employment relationships that already existed prior to August 01, 2022 - all of these are old contracts (!) - employees shall be provided with the transcript containing the information on the material contractual terms upon their request no later than on the seventh day after receipt of the request by the employer. For certain essential contractual conditions, the deadline shall be no later than one month after receipt of the request.


Attention: Fines loom

Another new aspect is that if, contrary to the statutory provisions, employers fail to hand over essential contractual terms and conditions correctly, in full, in the prescribed manner or in good time, this will constitute an administrative offense punishable by a fine of up to EUR 2,000 per employment contract (!). For this reason alone, there is a particular need for employers to take action.


Status of the legislative process

Currently, the law is not yet in force. After the first reading in the German Bundestag, the public hearing in the Committee for Labor and Social Affairs took place on June 20, 2022. It remains to be seen what proof requirements the legislature will actually adopt. Despite the old rule that no law leaves the German Bundestag in the same form as it enters, one thing is clear: tighter proof requirements are coming.


What do employers need to do?

In all likelihood, the effort will be high. It is already important to prepare for the need for action and to create the corresponding capacities. Employers will have to comprehensively review and adapt employment contracts, in particular as the documentation of deadlines to bring complaint against dismissal are rarely included in current employment contracts. Alternatively, employers can provide employees with a separate letter containing all essential contractual terms and conditions in order to fulfill the (new) legal obligations to provide documentation.


Of course, transparent contract design makes sense for the contracting parties. However, it is questionable whether ever longer and more comprehensive employment contracts will actually ensure the desired transparency. Incidentally, employment contracts must withstand the ever stricter requirements of general terms and conditions control. One thing is clear: the three-minute timeframe for amending employment contracts mentioned in the explanatory memorandum to the law is absurd. We are monitoring the legislative process and will stay on the ball for you.

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