The Reform Of The German Nachweisgesetz And Its Consequences For Employment Contracts

With effect from 1 August 2022, the German Act on Proof of the Essential Working Conditions (Nachweisgesetz – “Act on Proof) will undergo the most comprehensive reform since it entered into force in 1995. The government draft now presented provides a clear picture of the planned changes and, with regard to the existing written form requirement, of the legislator's lack of will to reform. The planned changes will have an impact on drafting and concluding employment contracts and provide for fines in case employers do not comply with the reformed Act on Proof in the future. An overview in the course of the ongoing reform of the Act on Proof.

Status of the reform

The underlying reason for the reform of the Act on Proof is the Directive (EU) 2019/1152 on transparent and predictable working conditions in the European Union ("Directive") adopted by the European legislator, which the German legislator must transfer into national law by 1 August 2022. A first outlook on the reform of the Act on Proof was already provided by the draft bill of the Federal Ministry of Labour and Social Affairs from January 2022.

Based on the draft bill, a government draft has now been published. On 23 June 2022, the German Bundestag is scheduled to vote on the legislative reform, which, inter alia, affects the Act on Proof. According to the current status, no significant changes to the government draft are to be expected and it is most likely that the draft will be cast into law as currently proposed. Entry into force of the main regulations is planned for 1 August 2022.

Extension of the obligations to provide proof

The current Act on Proof contains a comprehensive catalogue of essential working conditions that employers must set out in writing and hand over to their employees. As a result of the reform, these obligation to provide proof on working conditions will be significantly expanded.

In addition to the current list of proof, information on the duration of the probationary period, extended information on breaks, requirements for the request and payment of overtime, any entitlement to training and the procedure in the event of termination, including a reference to the time limit for filling a claim for unfair dismissal, must be included. This means, for example, that employers must inform their employees in writing that they have three weeks’ time to file a claim for unfair dismissal at the labour court after they have received notice of termination. The government draft does not specify whether such information must be updated whenever there is a change in the law to which reference must be made. Here, (labour court) practice will have to develop a direction.

The deadline for providing written proof to the employee will be shortened to the first day of work for selected criteria. This tightens the law. Previously, proof had to be provided one month after the start of the employment relationship at the latest.

Adherence to the written form

Although the Directive allows for the use of modern means of communication for the provision of proof using electronic form, the German legislator wants to stick to the traditional written form. Employers in Germany can therefore only fulfil their obligations under the Act on Proof by recording all the required information on paper, signing it by hand and handing it over to the individual employee. This is an excessive bureaucratic burden that is out of date. No valid reason can be seen for not complying with the desire of many companies to digitalise and speed up formal processes. In practice, this will continue to lead to employment contracts regularly being signed by hand by representatives of the employer in order to comply with the requirements of the Act on Proof. This is despite the fact that, with a few exceptions, German law does not provide for a formal requirement for the conclusion of employment contracts.

Fines for violations of the Act on Proof

The reform of the Act on Proof is accompanied by new sanctions. Until now, a breach of the obligation to provide proof by employers had primarily indirect disadvantages for them, for example with regard to the burden of proof in any labour court proceedings. The draft bill provided for an administrative offence for each individual case of a breach of the obligations under the Act on Proof for the first time. In the latest government draft, the threatened fine is increased to up to EUR 2,000 per violation.

Impact on contract management in the company

The extension of the obligation to provide proof, accompanied by the risk of a fine, while at the same time adhering to the strict written form, represents a considerable burden for employers. Employers regularly comply with the requirements under the Act on Proof by means of written employment contracts in which the essential working conditions are set out. Contract templates that do not cover the newly included criteria should therefore be adapted to comply with the law in the future. The government draft provides for an exception for employment relationships concluded before 1 August 2022. Here, employers only have to provide any missing proof at the request of affected employees.

Updating employment contracts is all the more important because in future, non-compliance with the requirements of the Evidence Act can be punished with fines. It remains to be seen to what extent the usually understaffed authorities will carry out inspections to detect any violations. The reasoning behind the law expects about 31,400 inspections per year - within a number of about three million companies in Germany.

Outlook

The government draft is only a draft and no law yet. However, it is to be expected that the reform of the Act on Proof will be passed to the extent envisaged in the government draft before the end of June 2022.

For companies, the extension of the catalogue on essential working conditions increases the administrative burden. The threatened administrative offence intensifies this burden by subjecting incompliance the Act to fines. As the legislator, however, does not allow electronic form to provide proof to employees, the increased effort is not compensated for by increased flexibility.

We will inform you about the implications of the reformed Act on Proof for the employment practice in our webinar on 29 June 2022 (10 am CEST, in German language), to which we cordially invite you. Registration is possible here.

 

 

 

Authored by Eckard Schwarz, and Paul Single.

 

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