"Monthly Dose" Employment Law: September 2023

1. Equal pay entitlements for employees in marginal employments (BAG judgement dated 18 January 2023, 5 AZR 108/22)

Employees working in a marginal employment are part-time employees (Section 2 (2) German Part-Time Employment Act (Teilzeit- und Befristungsgesetz, TzBfG). According to Section 4 (1) sentence 1 TzBfG, a part-time employee may not be placed in a worse position than a comparable full-time employee due to the part-time employment, unless objective reasons justify a different treatment. This also expressly applies to remuneration (Section 4 (1) sentence 2 TzBfG). If part-time work differs from full-time work only quantitatively, but not qualitatively, a lower working time in general may only be compensated quantitatively, but not qualitatively different than full-time work.

In its judgment dated 18 January 2023 (5 AZR 108/22), the German Federal Labour Court (Bundesarbeitsgericht, BAG) once again clarifies this fact and illustrates the high standards that must be applied to the legality of unequal treatment.

In the case at issue the defendant employer employed paramedics on full time basis and on part-time basis. The paramedics described by the defendant as "full-time" (regardless of whether they worked full-time or part-time) were assigned to binding duties and paid an hourly remuneration of EUR 17 gross. In addition, marginally employed so-called "part-time" paramedics worked for the defendant and received an hourly wage of EUR 12 gross. The defendant did not solely assign the part-time paramedics to services; rather, they named desired dates for assignments and could refuse requests for services. The plaintiff was also one of these "part-time paramedics". Qualifications and content of the work did not differ from full-time paramedics.

In his lawsuit, the plaintiff sought differential compensation in the amount of
approximately EUR 3,300 gross for the period from January 2020 to April 2021
because, in his opinion, the different hourly compensation compared to the full-time employees constituted a disadvantage due to his part-time work. The defendant based the unequal treatment on the increased planning effort and the planning uncertainty associated with the work model regarding the deployment of the part-time employees who are not subject to directives with regard to working hours and scope.

The BAG confirmed the unjustified unequal treatment. By paying the part-time paramedics which are not assigned to schedules of service a lower remuneration, the defendant indirectly disadvantaged these part-time employees within the meaning of Section 4 (1) TzBfG.

Both groups performed identical work based on the same qualifications. The argument an employee is bindingly assigned to work by the defendant and must show up at a certain time bound by instructions does not justify the granting of a higher hourly remuneration in the overall view in comparison to an employee who can freely decide whether he accepts or refuses services. The work model, which only applies to marginally employed persons, thus leads - combined with lower remuneration - to indirect discrimination and unjustified unequal treatment.

Consequences for practice

In the case discussed, the discrimination determined by the BAG was not directly linked to the status of full-time or part-time employee and therefore not directly linked to working hours. However, the unequal treatment resulted from the fact that the defendant used the distinction in the work model only for marginally employed persons. This indirectly resulted in unequal treatment based on working hours. The facts of the case impressively show that every unequal treatment must be critically scrutinized and work models must be examined in detail for the existence of inadmissible discrimination and that employers should pay particular attention to indirect discrimination against part-time employees. Employers should also once again pay attention to the effectiveness of any forfeiture clauses in use, in order to counter the risk of being claimed occupancy, at least in part.

2. (Unilateral) Reduction of Christmas bonus in the event of continued incapacity for work? (BAG judgment dated 25 January 2023, 10 AZR 116/22)

In its judgment dated 25 January 2023 (10 AZR 116/22), the BAG continued its case law on the reduction of a Christmas bonus paid under a company practice (betriebliche Übung).

Subject of the lawsuit was the payment of a Christmas bonus for the calendar years 2018, 2019 and 2020 totalling EUR 4,500 gross.

The plaintiff employee had been employed by the defendant employer since 2003. He had been on continuous sick leave since 18 December 2017. Since the beginning of the employment, the defendant paid the plaintiff an annual Christmas bonus combined with the November salary. In the remuneration statements, the respective benefit was designated as "voluntary Christmas bonus". As of 2018, the employer did not pay the Christmas bonus to the plaintiff. The plaintiff requested the Christmas bonus payments for the calendar years of 2018, 2019 and 2020 in the amount of EUR 1,500 gross for year with the argumentation that the defendant had paid the Christmas bonus in such amount since 20211 and that the Christmas bonus had not been subject to any conditions, so that a claim had arisen based on the unconditional payment - irrespective of the continued incapacity for work.

The employer stated that the plaintiff was not entitled to any Christmas bonus since 2018 due to his continued inability to work. The Christmas bonus payments were dependent on factors such as "work performance, reliability and absenteeism". In 2010, only a reduced Christmas bonus in the amount of EUR 400 had been paid to the plaintiff already, as he had shown considerable
absences in the said year. Other employees of the defendant were also paid Christmas bonuses in proportion to their work performance.

The BAG upheld the claim with the argumentation, that the employee was entitled to such Christmas bonus payments due to a company practice.

A company practice is the regular repetition of certain conduct on the part of
the employer, due to which the employee can draw the conclusion that the benefit is granted to him on a permanent basis. This tacitly accepted (Section 151 of the German Civil Code (Bürgerliches Gesetzbuch, BGB) conduct on the part of the employer can give rise to a contractual claim to the repeatedly granted benefit. The decisive factor here is not the employer's intention to oblige, but how the employee had to understand his employer's conduct, taking into account all accompanying circumstances (Sections 133, 157 BGB), and whether he was entitled to conclude that the employer intended to educate him.

In its decision, the BAG emphasized that the contractual conditions regarding the payment of a Christmas bonus, which arose on the basis of a company practice, constitute a general business condition (Allgemeine Geschäftsbedingung, AGB) within the meaning of Sections 305 et seq. BGB which, according to their objective content and typical meaning, are to be interpreted uniformly as they would be understood by reasonable and honest (as well as average) contracting parties - after balancing their interests.

For the interpretation, the wording of the General Terms and Conditions is
predominantly decisive. If this is not clear, the perspective of an average contractual partner is to be taken as a basis. If, after applying all methods of interpretation, an irremediable doubt within the meaning of Section 305c (2) BGB remains, this is to the detriment of the user (in this case the employer). Thus, in the event of any ambiguity, the employer must accept the interpretation option that is least favourable to him.

In the opinion of the BAG, the designation of a benefit as a "Christmas bonus" allows two possible interpretations: In addition to a possible interpretation as a special benefit related to work performance, it can also be understood as the employer intending to participate in the typically increased expenses of the employees at Christmas - whereby there is no dependency on the work performed. Since the defendant paid the plaintiff a Christmas bonus every
year since the beginning of the employment without any further explanation and did not sufficiently specify the criteria relevant to it ("work performance, reliability and absences"), any doubts about interpretation are to its detriment pursuant to Section 305c (2) BGB. The obligation to pay a Christmas bonus on the part of the defendant as a result of the company practice is therefore not, or not exclusively, intended as remuneration for work performed.

A special payment, which does not exclusively serve to remunerate work performed, cannot be unilaterally reduced by the employer due to continued incapacity to work after the end of the period of continued payment. Such a reduction would require the existence of a separate agreement under individual or collective law within the meaning of Section 4a of the German Continuation of Remuneration Act (Entgeltzahlungsgesetz, EFZG). Since the parties did not reach such a reduction agreement, the reduction of the Christmas bonus due to periods of incapacity for work is not legally permissible.

Consequences for practice

The BAG's decision once again clarifies the employer's standard of care as far as the emergence of a company practice is to be counteracted. In this respect, an express reservation of voluntariness is indispensable when granting any special payment. Employers should take this decision as an opportunity to specifically define the purposes pursued with a special payment (e.g. sole reward for company loyalty).

For special remuneration not solely related to work performance, the BAG emphasizes the importance of the reduction agreement pursuant to Section 4a EFZG, which solely permits a reduction of the relevant payment in the legal framework of Section 4a EFZG. However, Section 4a EFZG does not allows a unilateral reduction on the part of the employer, but only opens the possibility of regulating a reduction through a corresponding agreement.

3. Undermining the probative value of a certificate of incapacity for work (LAG Schleswig-Holstein judgment of 2 May 2023, 2 Sa 203/22)

In its judgment of 2 May 2023 (2 Sa 203/22), the Regional Labour Court (Landesarbeitsgericht, LAG) Schleswig-Holstein had the opportunity to continue the recent case law of the BAG (i.a. in its judgement dated 8 September 2021 (5 AZR 149/21) to the question of the extent to which a medical certificate of incapacity for work during the notice period has probative value within the meaning of Section 3 (1) sentence 1 EFZG. The LAG Schleswig-Holstein decided that if an employee is absent from work during the entire notice period in direct connection with his notice of termination of the employment due to submitted certificates of incapacity for work, he must expect that he may not be able to claim continued payment of remuneration.

The facts underlying the decision concerned a dispute between the parties regarding continued payment of remuneration for certain periods (from 5 May 2022 to 31 May 2022 and from 1 June 2022 to 15 June 2022) and compensation for five days of vacation. The plaintiff was employed as a nursing assistant from 1 May 2019 until 15 June 2022.Her employment ended by ordinary self- termination. The termination letter with stated date of 4 May 2022 contained the following wording: "[...] Please send a confirmation of receipt of this letter, my work papers as well as a qualified reference to the address listed above. I thank you for the previous cooperation and wish your companies all the best" [translation]

The plaintiff did not appear for work as of 5 May 2022 and submitted certificates of incapacity for work continuously until 15 June 2022, her last working day, and thus for exactly six weeks. The defendant employer did not pay continued remuneration.

The plaintiff claimed that she wrote the termination letter on 5 May 2022 and
handed it in person to the employer on 11 May 2022. Due to psychological
job-specific stress, she had been incapacitated for work from 5 May 2022 up to
and including 15 June 2022. This had also manifested physically in the form of
stomach pains.

The employer disputed the alleged handover of the notice on 11 May 2022. The employer argued that the employee at the same time with the writing of the self-notice as of 5 May 2022 had written herself incapacitated for work and this incapacity for work had existed fittingly up to the end of the employment, the employee however had not been really incapacitated for work. The employer supported this argument by referring to the fact that another employee had given notice of her own termination at the same time and had also been written off as unfit for work by the same doctor until the end of her employment.

The LAG Schleswig-Holstein decided that the employee was not entitled to continued payment of remuneration for the above-mentioned periods. Pursuant to Section 3 (1) sentence 1 EFZG, an employee is entitled to continued payment of remuneration in the event of illness for up to six weeks if he is prevented from working due to illness. The employee bears the burden of proof for this. A doctor's certificate of incapacity for work is important evidence of incapacity for work due to illness (see Section 7 (1) no. 1 EFZG in conjunction with Section 5 (1) sentence 2 EFZG). The properly issued certificate has a high
probative value, but no legal presumption of an actual incapacity to work within the meaning of Section 292 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO). The employer can only shake this probative value by presenting and, in the event of dispute, proving actual circumstances that give rise to doubts about the employee's illness. Since the presentation does not trigger any statutory presumption or reversal of the burden of proof, no excessive requirements may be placed on the employer's presentation in this regard.

In the present case, the employer was able to shake the probative value of the medical certificate to the effect that there were doubts about the plaintiff's illness: The employee was written off sick with five certificates of incapacity to work precisely until the expiry of the notice period on 15 June 2022, and the
content of the termination letter would also speak against an illness of the plaintiff. From the wording of the notice letter it results that the employee on 5 May 2022, had already not the intention to return to the enterprise of the deplored one and would no longer perform their work. Due to these doubts, the medical certificate would no longer have any probative value. The employee was unable to present and prove (further) sufficient facts that she was actually (mentally) ill and was therefore not entitled to continued payment of remuneration.

Consequences for practice

The decision of the LAG Schleswig-Holstein fits seamlessly into the recent case law on the undermining of the probative value of medical certificates of incapacity for work (precisely) related to the notice period after an employee has given notice of termination. Also helpful for company practice - and here above all for the employee side - is the remark of the LAG Schleswig-Holstein that the submission of a "medical certificate of incapacity for work without
incapacity for work" can also have criminal law related consequences for the concerned employees (fraud under Section 263 of the German Criminal Code). Finally, it should be noted that this case law cannot be directly transferred to the evidentiary value of medical certificates of incapacity for work in the case of the employee's illness after a termination by the employer. Thus, the Hamburg Labour Court in its judgement of 23 March 2023 (28 Ca 109/22) ruled that the presumption that the employee - without being ill - has already internally said goodbye to the employment and wants to escape the unpleasant work until the end of the notice period, which was established for the dismissal of the employee himself, could not apply in the same way in the case of a dismissal by the employer; in particular if the employee brings an action for protection against dismissal against the dismissal (and wins the action as in the case decided by the Hamburg Labour Court).

4. Advance notification obligation to authority does not serve to protect individual rights in mass dismissal proceedings (ECJ judgment of 13 July 2023, C-134/22)

The European Court of Justice (ECJ has decided in its judgment dated 13 July 2023 (C-134/22) on the interpretation of the Mass Dismissal Directive (98/59/EG, MDD) that employer’s obligation to forward the information letter to the works council to the Employment Agency pursuant to Section 17 (3) of the German Unfair Dismissals Act (Kündigungsschutzgesetz, KSchG) does not provide individual legal protection to employees.

Employers who carry out a mass dismissal in his company, are obligated under Section 17 (1) KSchG to notify the Employment Agency and in this regard to provide the Employment Agency with the information and consultation letter to the works council in accordance with Section 17 (2) KSchG. The German legislator has with these statutory provisions implemented the corresponding provisions of Art. 2 (3) MERL to the KSchG.

The proceedings before the ECJ were based on dismissal protection lawsuit due to a mass dismissal of the employer who had, within insolvency procedures, decided to close its business and therefore to dismiss all employees, whereby the staff redundancy fulfilled the provision for a mass dismissal according to Section 27 KSchG. In the course of the mass dismissal procedures, the employer provided the works council with the information and consultation procedure in accordance with Section 17 (2) KSchG. Contrary to the legal requirements, however, the employer did not provide the Employment Agency with a copy of the information and consultation letter that was handed over to the works council.

Neither the KSchG nor the MERL contain a legal consequence for this case. However, the BAG has consistently held that violations of the notification and information obligations imposed on employers in connection with mass layoffs lead to the invalidity of the termination pursuant to Section 134 BGB (at the latest i.a. in its judgement dated 14 May 2020, 6 AZR 235/19). A prerequisite for this, however, is that the obligatory norm has an individual-protecting effect. Within the framework of a preliminary ruling procedure, the BAG submitted with its decision dated 27 January 2022 (6 AZR 155/21) the question to the ECJ, which is solely responsible for interpreting the MERL, as to whether the invalidity of the termination in the absence of notification is compatible with the purpose of the MERL.

The ECJ decided against an individual-rights-protecting character of the advance notification obligation. This was purely an administrative regulation intended to enable the authority to prepare for mass redundancies at an early stage. However, this does not affect the individual rights of an employee. The regulation grants collective protection to the employees and enables a more fluid procedure. Moreover, the responsible authority has no active role in the consultation procedure. Due to the lack of individual protection, the invalidity of the termination pursuant to Section 134 BGB is according to ECJ’ opinion not compatible with the purpose of the directive.

It has to be noted in this regard that the ECJ did not comment as sweepingly and comprehensively on the sanctions procedure, but
instead clarified in a differentiated manner that the consultation procedure
and the mass dismissal procedure are two procedural stages with different
objectives that are to be distinguished from one another and essentially refers
to the procedural stages of consultation and information. However, the ECJ kept it open whether or not the directive grants individual legal protection in
later procedural stages.

Consequences for practice

For case law and employers, the ECJ ruling means for the time being only that Section 17 (3) KSchG does not grant any protection of individual rights and thus a violation of the provision may not lead to the invalidity of the dismissals issued. It remains to be seen whether the BAG will generally deduce from the present ECJ decision that the Directive does not grant individual rights protection in later procedural stages either and revise its previous sanction system. It is more likely that the BAG will again submit the question to the ECJ in order to clarify whether the directive grants individual legal protection in a later stage of the proceedings, for example if the mass dismissal notification was completely omitted. Insofar, employers are still recommended to continue to prepare and conduct mass dismissal proceedings very carefully, particularly regarding the mass dismissal notification pursuant to Section 17 (2) KSchG, which it is imperative to continue to observe.

_{Published: September 2023}