Germany

An employee is an individual who is obliged under a contract of employment to work under the direction and control of another (the employer) in return for a wage or salary.

2. How do you define an employment contract?

Pursuant to Art. 611 German Civil Code ("BGB") an employment contract is a contract between employer and employee. It constitutes the employment relationship.

3. What does an employment contract need to contain?

In general the parties of an employment contract are free to decide which terms and conditions their employment contract has to contain. By enacting the Act on the Obligation to inform Employees of the essential conditions applicable to the Employment Relationship ("Nachweisgesetz") the German legislator implemented the EU-directive 91/533/EWG ("Obligation to inform") into German law. This Act provides for the essential conditions applicable to any employment relationship. The minimum requirements of an employment contract are stipulated in Art. 2 of the Act on the Obligation to inform:

Name and adress of the contracting parties;

the date of the commencement of the employment relationship;

in case of a temporary contract the duration thereof;

the place of work; where there is no fixed place of work the principle that the employee is employed at various places;

a brief specification or description of the employee's work;

the component elements and the amount of the remuneration including extra charges, allowances, bonuses and special/supplementary remuneration and any other component element of the remuneration and the time when they become due;

the agreed working time;

the amount of the paid leave;

the length of the period of notice to be observed by the employer and the employee should their contract or relationship be terminated;

a general note in which reference is made to any relevant collective agreement, operating work agreement ("Betriebsvereinbarung") and service agreement applicable to the employment relationship.

4. Is there a legal requirement to provide an employee with a written contract and if so, when does this have to be provided?

The employee is entitled to be given a written declaration signed by the employer and containing the essential conditions (cf. 3) after the agreed commencement of the employment relationship. Nonetheless, the contract of employment does not become ineffective because the employer has not been given such declaration.

5. How would you define a redundancy / economic dismissal?

A redundancy / economic dismissal is one of the three ways to terminate an employment contract which may be socially justified and, therefore, effective under the Act on the Protection against unlawful Dismissal ("Kündigungsschutzgesetz").

The formal requirements of a redundancy / economic dismissal are:

it has to be made in writing;

it has to be clear;

it has to be served on the recipient;

In case of a redundancy / economic dismissal the contract of employment is not terminated for reasons caused by the employee, but to operational reasons the employment relationship may not be continued. Such operational reasons are for example:

Rationalization measures;

limitation of production;

sales difficulties;

slowdown of orders.

The requirementsa of a redundancy / economic dismissal are:

It has to be justified by urgent operational needs and

the employee in question may not be employed at a different place of work in the same business.

6. What is the procedure that an employer must follow when making an employee redundant / or dismissing on economic grounds?

If it is clear that the employer has to dismiss an employee due to operational reasons he has to make a social choice. In doing so the employer may only compare those employees with each other who may be exchanged. The employee who needs to be protected the least of all has to be dismissed. The employee may ask the employer to provide him with the reasons of the social choice.

Social choice has to consider the following three aspects:

Length of service;

age;

the employee's obligation to provide maintanance.

If no social choice has been made the dismissal does not take effect. Nonetheless, the discretionary decision of the employer (e.g. introduction of new technology) may not be reviewed by the Court.

In case of a redundancy / economic dismissal the employee may chose whether he wants to sue against the dismissal or to ask for a compensation for dismissal provided for by law to the amount of half of the monthly remuneration for each year of service. Such claim is subject to a clear note in the written notice of the employer according to which dismissal is due to operational reasons and the employee may ask for this compensation when the period for filling the action has expired.

7. Do you have laws against discrimination, if so, what types of discrimination do you have and how are they defined?

Art. 3 of the German Constitution provides for the principle of equality before the law. Art. 3 § 1 of the German Constitution provides for a right against the state for equal treatment. Collective or operational work agreements have to comply with the principle of equality. Accordingly, the parties of a collective agreement are bound by the principle of equality.

Pursuant to Art. 3 § 3 of the German Constitution no one must be discriminated against on grounds of gender, descent, race, langage, home and origin and religious or political opinion.

This general principle has been specified in the rules on labor law, in particular in Arts 611a, 611b Civil Code, Art. 75 Works Council Constitution Act ("Betriebsverfassungsgesetz"), Art. 67 Staff Representation Act ("Personalvertretungsgesetz"), Art. 2 § 1 Act on the Promotion of Employment ("Beschäftigungsförderungsgesetz").

The Gederal government has to implement four European directives providing for the protection against discrimination focusing on employment and profession. It is planned to adopt the so-called "Anti-discrimination Act" ("Antidiskriminierungsgesetz"). Antidiscrimination is the focus of these directives and, therefore, of the Anti-discrimination Act. To avoid any type of discrimination in employment and profession effectively it is provided for a prohibition of discrimination which covers all elements of discrimination of the EU-directives on equal Treatment (race or ethnic origin, gender, relogion or outlook on life, age, handicap and sexual identity).

8. Do you recognize harassment and again, how is this defined?

The most important case of harassment is sexual harassment at the place of work. According to the law sexual harassment is defined as "any willful sexual behavior that violates the dignity of employees at their place of work". It covers

any sexual activity and behavior that is subject to penalty under the penal code

any activity with a sexual flavor which is considered to constitute an offense under the penal code, particularly sexually driven contacts

any remark with a sexual flavor provided that the harassed person has clearly rejected such remark.

There is an Act on the Protection against sexual Harassment at the Place of work ("Beschäftigungsschutzgesetz"). Pursuant to Art. 2 § 1 of this Act employer and superior have to protect employees against sexual harassment at their place of work and have to take the relevant measures to do so. Sexual harassment at the place of work constitutes a violation of the employment contract.

9. What can an employee do about discrimination?

The employee who has become victim of a sexual harassment offense may first of all raise a complaint. If such complaint is of no avail he or she may under partucular circumstances refuse to work. If this is of no avails as well he or she may terminate the employment relationship, if necessary without notice. In case of a sexual harassment offense committed by a colleague the employee may complain to the immediate superior or the staff department, if a sexual harassment offense has been committed by the superior he or she may complain to the management board.

If the employer does not initiate any activity and does not take any measures to stop the harassment effectively upon receipt of the employee's complaint the harassed person is entitled to completely or partly refuse to work (depending upon the particular circumstances of the case).

If the employer may work at a different place in the same business without having contacts to the harassing person he has to chose such option. By contrast, if it is not possible to avoid any contact with the harassing person because of the business structure or its organization the harassed person is entitled to work at home after having duly informed the employer and to payment.

In the event that the employer receives a complaint with the regard to a sexual harassment offense he has to review the facts and to interrogate the accused person and any witness presented by the harassed person. Thereafter, he has to take the relevant measures to stop harassment for the future.

10. What is an unfair dismissal?

Pursuant to Art. 1 Act on the Protection against unfair Dismissal a dismissal is unfair unless it is justified by the employee himself or his behavior or by urgent operational needs which make it possible to continue the employment relationship with that employee in that particular business.

11. What can an employee do about an unfair dismissal?

The employee may sue the employer for unjustified dismissal. He has to do so within a three-weeks period upon receipt of the dismissal notice (Art. 4 Act on the Protection against unfair Dismissal). He has to ask the employment tribunal to hold that the employment agreement has not been terminated by the dismissal because the dismissal is not socially justified. He then has to substantiate his claim by presenting facts so showing.

12. If a dismissal is found to be unfair, what compensation can the employee obtain?

Provided that the employment tribunal holds that the dismissal has not been socially justified the employee is entitled to continue his work.

Furthermore, the employee is entitled to remuneration from the time he had to quit the enterprise due to the dismissal until his re-entry.

If it would be unreasonable to require the employee to continue the employment relationship the Court upon application of the employee has to terminate the employment relationship and to ask the employer to pay a reasonable compensation.

13. Do you have a collective / trade union law?

Yes, both employers and employees may organize themselves in associations / unions.

14. If so, what rights does an employee have?

The employer may become member of a union upon payment of a contribution. The unions may negotiate collective agreements on behalf and in favor of their members. Those collective agreements become part of the employment contracts.

15. Does the employer have to accept collective / trade union laws?

Collective agreements constitute substantive law and may be declared generally binding. By doing so they are also binding for those employers / employees who are not member of the parties to a collective agreement.

16. Can any individual from another country come and work in your country?

Yes.

17. If so, is there immigration controls / work permits that need to be applied?

An individual from another EU state does not need a labor permit in Germany. This also applies for individuals from Switzerland. Any other individual has to apply for a labor permit.

Such permit may only be granted if the individual is able to present a residence permit. In that case in general the foreigner's department contacts the relevant employment office.

18. What criteria are used for any such application?

A labor permit may be granted taking into consideration the current situation and the development of the labor market and after review of any particular case. It is permitted by law to restrict the permit as to particular enterprises, professional groups, sectors of the economy districts.

Under particular circumstances non EU-residents may be exempted from the obligation to apply for a labor permit (especially with regard to activities as executive director being granted general power of attorney).

Another very famous exemption is the German "Green-Card" for specialists in the Information- and Communications Technology Sector which may be obtained separately from the employer. Those employees either have to present an examination of higher technical college ("Fachhochschulabschluss") that constitutes an equivalent to a German examination or an employment contract providing for a minimum annual remuneration of 50.000,- €.

Such labor permit is valid for the length of the employment only and to a maximum period of 5 years.

The provisions on the Green Card have been an incentive to the recent adoption of the Immigration Act ("Zuwanderungsgesetz") and the affiliated rules on the employment of immigrants ("Recht zur Ausländerbeschäftigung").

19. What does an employer have to do if he receives an application from someone who is not a national in your country for a job?

The employee is in charge. He has to do the following: He is obliged to personally apply for a visa for the purpose of working before the relevant German diplomatic representation.

The employee has to present the following documents abroad:

A valid passport;

employment contract;

rent contract;

proof of health insurance.

20. What is the tax position for a foreign employee?

Foreign employees are only subject to income tax in the Federal Republic of Germany if they work for a German employer or a foreign hirer out. In that event the tax rate corresponds to the tax rate of a German employee. If the employee is resident abroad he may become subject to limited tax liability. Taxation of cross-border employees is subject to any relevant taxation agreement between the Federal Republic of Germany and the country in which the employee has his place of residence.

21. Are employees protected in the event of a sale or purchase of a business?

Yes. In general, transfer of business does not constitute a ground for dismissal. Nevertheless, pursuant to the jurisprudence of the Federal Labor Court ("Bundesarbeitsgericht") a so-called dismissal in accordance with the buyer's plan is permitted. Hence, the seller of a business is entitled to give notice if the business plan of the potential buyer provides for a smaller number of employees currently working in the business. Given that the potential buyer wants to reduce the staff for urgent operational reasons in the sense of Art. 1 § 2 (S.1) Act on the Protection against unfair Dismissal in the moment he takes the business over such dismissal is justified. However, to do so there has to be a concept or a reorganization plan. It does not suffice if the buyer only asks for a reduction of staff.

22. If so, what rights do employees have and what can they do about it?

Pursuant to Art. 613a Civil Code the new employer assumes any right and obligation of his predecessor. Any provision resulting from a collective or operational work agreement becomes part of the employment contract and may not be amended to the detriment of the employee until after one year of the transfer of business.

23. What does the employer have to do in the event of a sale or purchase of a business, which includes employees?

Given that all employment relationships are transferred to the buyer by law the employer does not have to do anything to that end.

24. What is the position regarding agents in your country, briefly outline how agents are dealt with and what documentation is required.

Arts 84 following of the German Commercial Code relate to agents. It is necessary to distinguish between self-employed and employed commercial agents. The latter is to be dealt with under the relevant labor law rules as any other employee.

Distinction has to be made in accordance with the concept of Art. 84 § 1 (S.2) and Art. 84 § 2 Commercial Code. Pursuant to Art. 84 § 1 (S.2) Commercial Code an agent is self-employed if he may arrange his professional activities at his own discretion and decide when he performs the work. Those agents who are entrusted to negotiate contracts for the principal or to conclude contracts on behalf of and for him without being self-employed in the sense of Art 84 § 1 (S.2) Commercial Code are considered to be employees, Art. 84 § 2 Commercial Code.

In addition, the general principals do apply taking into consideration the whole nature of the contractual relationship. If the agent is more or less free to decide how to do his work and if he furthermore is free from instructions with regard to time and place the agent is deemed to be self-employed.

According to Art. 85 Commercial Code any party of a commercial agent contract may ask the other party to establish a duly signed document containing the terms of the contract and any subsequent agreement relating thereto.

The commercial agent has to make efforts to negotiate and to enter into transactions whilst taking into consideration the interests of the principal, Art 86 § 1 Commercial Code. He has to duly inform the principal about any relevant matter, particularly about negotiations and transactions already carried out , Art. 86 § 2 Commercial Code.

The principal has to provide the agent with any relevant documentation, such as patterns, drawings, price schedules, advertising material and general terms and conditions. He furthermore has to provide the agent with any relevant information (e.g. acceptance or refusal of a transaction), Art 86a §§ 1, 2 Commercial Code.

The Agent is entitled to commission for any negotiated and effected transaction upon performance of such transaction by the principal, Art. 87 § 1 Commercial Code. In the event that the principal is liable for the non-conclusion of a transaction the agent remains entitled to commission.

Both parties may terminate the commercial agent agreement upon the legal period of notice. Notice has to be given within one month after the first contracting year, within two months after the second contracting year, within five months after the third up to the fifth contracting year and six months thereafter, Art. 89 § 1 Commercial Code.

In the event that the commercial agent agreement has been terminated for good cause no notice has to be given, Art. 89a Commercial Code.

Pia Reinartz

Eimer Heuschmid Mehle