Dealing with the Corona Consequences under German Labour Law

In Germany, too, the coronavirus means that companies have to find solutions to unusual problems such as the state-ordered closure of retail and catering businesses or the collapse of supply chains and sales opportunities, and considerable loss of workload that these entail. Where work could actually still be carried out, companies and employees are confronted with the relocation of activities to the home office, quarantine orders and employment bans, and above all the temporary loss of all childcare facilities. Legislators have reacted to these challenges in record time and set up a wide range of labour law instruments and subsidies. Short-time work plays a key role in this. These are the most important labour law aspects that companies operating in Germany should be aware of at the present time:

Home Office

In Germany, there is neither a legally guaranteed right to a home office nor an obligation to work from home on the instructions of the employer. Deviating agreements are possible, but were not very common, at least until the corona crisis. Where employers now increasingly allow their employees to work from their home office, they voluntarily fulfil their duty of care to protect the health of their employees. However, if there are reasons why an employee is required to be present in the workplace, the employer can refuse to allow the employee to work from their home office.

Employee Absences

• Illness

Employees who are incapacitated continue to receive remuneration from their employer for a period of six weeks. If they are absent from work for more than three days, they must prove their incapacity to work by means of a medical certificate. At the moment, the requirements for this certificate have been relaxed: in the case of minor complaints of the upper respiratory tract, a call to the doctor is sufficient to obtain a sick note for up to 14 days.

• Quarantine

Employees who are in domestic quarantine in connection with covid-19 and therefore cannot work are also generally entitled to continued remuneration for a period of six weeks. If the quarantine was ordered by the health authorities, the employer may be entitled to reimbursement from the state under the Infection Protection Act.

• Lack of childcare

Employees who suffer a loss of earnings because they have to look after their children under 12 years of age themselves as a result of the closure of childcare facilities and schools can also receive compensation under the Infection Protection Act. This amounts to 67% of the net loss of earnings, and a maximum of EUR 2,016 per month. It is paid by the employer, who can apply for reimbursement from state authorities.

Short-time work and short-time allowance

Short-time work means that due to a considerable loss of workload, the working time and, as a consequence, the remuneration are temporarily reduced. The particular advantage is that the loss of remuneration is partly compensated by the employment agency in the form of short-time work compensation. The framework conditions for short-time working were modified in the course of the corona crisis in order to make it more attractive. With success: the number of companies making use of short-time work has literally exploded and will continue to grow. Experience from the 2008/2009 banking crisis shows that short-time working can be used in many cases to prevent job cuts. It is therefore worth taking a closer look:

• How will short-time work be introduced?

Employers cannot introduce short-time work, i.e. the reduction of working hours and remuneration, on their own authority, nor can they force it. It requires either a regulation in a collective bargaining agreement, an agreement between employer and works council, in the employment contract or the conclusion of a supplementary agreement with the employees.

• Which requirements must be met in order to receive short-time work compensation?

Companies can apply for short-time work compensation for some or all employees if the workload is significantly reduced, e.g. because the companies are not allowed to open, or supply chains or sales opportunities collapse due to epidemics. The extent of the reduction in working time can vary depending on the employee. It is even possible to reduce the working time to zero. However, at least 10% of the employees in the company or a company department must suffer a loss of earnings of more than 10%.

Remaining leave entitlements from 2019 and working time credits must generally be reduced first before short-time working compensation can be drawn. In addition, a number of operational and personal conditions, such as the continued existence of the employment relationship without notice, must be observed. Finally, the employer must properly notify the employment agency of the loss of work.

• How much is the short-time working allowance?

For employees without children, the short-time working allowance is 60% of the net pay difference; for employees with children it is 67%. Net pay difference is the difference between net income without short-time work and net income with short-time work. For the new legislative initiative to increase the scope of the short-time-work compensation please see the article “Lockdown” by Müller-Machwirth/Allmendinger in this newsletter, page 7.

• What costs remain for the employer?

The employer continues to pay the remuneration together with the related social security contributions for the remaining working time.

He or she calculates the short-time work compensation and pays it to the employees. In addition, the employer must pay social insurance contributions on part of the remuneration lost as a result of short-time work. However, upon application, the Employment Agency will reimburse the company both the short-time work allowance and the additional social insurance contributions.

Some collective bargaining agreements, company agreements or individual agreements oblige the employer to make additional payments on top of the short-time allowance. However, this is not the rule.

Dismissals

If the employer assumes that the workload will decrease not only temporarily but permanently as a result of the corona crisis, short-time work is not an option, as it may only used to bridge temporary shortfalls. In this case, companies can decide to cut jobs and dismiss employees. In companies with more than ten employees, the provisions of the Dismissal Protection Act must be observed, particularly with regard to the social selection between several employees who are eligible for dismissal and the submission of a mass dismissal notice. In companies with a works council, it may also be necessary to negotiate a reconciliation of interests and conclude a social compensation plan.

Dr Corinne Klapper
(Lawyer, Licensed Specialist for Labour Law)