Spectacular Turn of Events in Erfurt: Employers are Now Obliged to Record Staff's Working Hours After All

German Federal Labour Court as of 13 September 2022 – 1 ABR 22/21

It is safe to say that this is the most important decision of the year in labour law and a true surprise for the companies: the Federal Labour Court (BAG) made it clear that all employers are obliged to record the working hours of their employees irrespective of whether there is a works council or not.

Case Background

The proceedings were originally about the scope of the co-determination rights of the works council. The employer and the works council were in dispute over whether the works council had the right to pro-actively request the introduction of electronic time recordings. Negotiations between the parties regarding the conclusion of a company agreement on working time recording were behind the dispute. The employer had even purchased the hardware required for recording time electronically already. When the company decided not to introduce time recording after all, however, and the negotiations with the works council were abandoned, the works council was set on obtaining confirmation by court that it has a right of initiative regarding the introduction of an electronic time-recording system.

The BAG had already rejected such right of initiative with reference to the purpose of the statute in 1989. The Regional Labour Court of Hamm, however, opposed this decision with judgement dated 27 July 2021 (7 TaBV 79/20) stating that works councils were indeed allowed to request the introduction of electronic time recording on their own initiatives. The employer lodged a legal appeal against this. While this appeal was generally successful, the BAG bases its decision on completely different reasons than in 1989 and is therefore expected to cause far-reaching repercussions for the day-to-day running of businesses.

The Decision

The BAG determined that companies are legally obliged to record working hours based on the application of the Occupational Safety and Health Act in compliance with European law alone. Therefore, this judgement constitutes an aftermath of the highly publicised ECJ ruling dated 14 May 2019 in the matter CCOO versus Deutsche Bank SAE (C-55/18) which obliges the member states to introduce statutory provisions for recording working hours.

The BAG had already addressed this ruling only a few month ago when it determined  that the considerations of the ECJ do not make a difference when it comes to the burden of proof in lawsuits concerning overtime hours (4 May 2022 - 5 AZR 359/21). The following still applies: if an employee wants to bring an action regarding the payment of overtime work, the employee continues to be obliged to present and prove the overtime hours worked as well as the employer's orders to work overtime.

Practical Implications

Even though it does not appear so at first glance, the decision also contains good news for employers. For it leads to legal clarity for companies, as it rejects the extension of the co-determination rights of the works council in an important regard. It has now been determined that work councils do not have a right of initiative and, therefore, cannot demand the introduction of electronic time-recording systems against the will of the companies. According to the press release, the BAG does not require the employer to record time technologically or electronically either. It must only meet the requirements of the ECJ which requires an objective, reliable and accessible system to record time.

Practical Advice and Outlook

Employers are now obligated to introduce a system with which they can record the hours worked by their employees. In our view, however, this does not mean a comeback of time clocks nor the end of trust-based working time. It will still be possible for companies to delegate the documentation of working time to the employees with regular plausibility checks probably being required. If and in how far the BAG will make more detailed specifications in this regard remains to be seen. In addition, employers - if not already done - should set clear regulations for ordering and working potential overtime hours to avoid potential lawsuits concerning overtime hours. It will also be interesting to watch whether the German legislator, who was "overtaken" by the BAG with this decision, will dare to approach the very important topic "Reform of laws on working hours" pursuant to the specifications of the coalition agreement.

Dr Wolfgang Lipinski, Benedikt Holzapfel