Important: Far-reaching changes in the Act on Proof: What applies from August onward?

Dr. Yuanyuan Yin

Far-reaching changes in the Act on Proof

Until now, the Act on Proof of the Existence of an Employment Relationship (NachwG) has been barely relevant for companies on a day-to-day basis. However, the implementation of the EU directive on transparent and predictable working conditions in national law now has far-reaching consequences. As of August 1, 2022, violations of the amended Act on Proof will incur fines.

On June 23, 2022, the German Bundestag ratified the draft law implementing the EU Directive on transparent and predictable working conditions, which must be transferred to national law by July 31, 2022. The directive primarily aims to ensure uniform information for employees within the European Union concerning the key aspects of the employment relationship. In particular, Brussels intended to achieve greater transparency and predictability for platform workers in the gig economy, such as in the case of work on demand.

More bureaucracy instead of more progress

In Germany, this will now lead to far-reaching changes in labor law according to the Act on Proof. The greater administrative workload involved for HR is not the only regrettable aspect. Instead of taking digitization into account, and daring to promote progress in the spirit of the coalition agreement, German lawmakers continue to demand the strict written form requirement. It is not clear yet, whether an employment contract concluded with a qualified electronic signature is sufficient for the written form requirements of Section 2 (5) NachwG n.F.. According to Section 126 a (1) of the German Civil Code (BGB), a handwritten signature can in principle be replaced by a qualified electronic signature. Recital 24 and Art. 3 of Directive 2019/1152/EU also clarify in this respect that, due to the increased use of digital means of communication, the written information provided for in the Directive can also be transmitted electronically. However, to avoid legal disputes in practice, it is safer to conclude employment contracts with handwritten name signatures.

Proof requirements extended

The catalog of proof requirements for key conditions in the working relationship has primarily been expanded pursuant to the new Section 2 of the Act on Proof (NachwG) to include the following points:

  • Foreseeable duration in the case of fixed-term employment contracts,
  • Place of work or the option of choosing this freely,
  • Duration of the probationary period, if one is agreed,
  • Compensation for overtime, supplements, allowances, bonuses and any special payments,
  • Type and date of payment of wages and salaries,
  • Agreed rest breaks and rest periods,
  • In the case of shift work: Shift cycle and prerequisites for shift changes,
  • Key details regarding work on call, such as the time windows during which the company can demand work,
  • The option of ordering overtime and the corresponding conditions,
  • Entitlement to further training by the employer, if applicable,
  • The name and address of the company’s pension provider, if such exists,
  • Procedure in the event of termination: As a minimum, employers must inform employees of the written form requirement and the statutory, collectively agreed or individual contractual notice periods. In addition, reference to the three-week period must be made to be able to bring an action for protection against dismissal pursuant to Section 4 of the German Employment Protection Act (KSchG). At least the legislator clarifies in the explanatory memorandum that an incorrect or missing reference to the time limit for filing an action does not make termination by the employer invalid.
  • Reference to applicable collective bargaining agreements, works or service agreements.

More information regarding working abroad and posting

If an employee works abroad for more than four weeks, HR managers will have to provide information not only about the duration, any additional remuneration such as secondment allowances or travel, food and accommodation costs in future, they will also have to include information regarding the country or countries of assignment, the currency in which remuneration is paid, and the return conditions.

Shortened deadlines

Significantly shortened deadlines now apply for handing over the key terms and conditions of employment after commencing employment with regard to employment relationships formed on or after August 1, 2022:

  • Instead of after one month, as was previously the case, information concerning the key working conditions must now be provided in writing on the first day of work. This includes the name and address of the contracting parties, the composition and amount of the wages and salaries, as well as the working hours.
  • The information concerning the commencement of the employment relationship, the duration of the probationary period, any fixed term, the place of work, as well as a description of work to be performed and overtime regulations, must be provided in written form no later than seven days after the employee starts work.
  • The one-month deadline continues to apply to everything else.
  • If significant contractual conditions of an existing employment relationship change, the employees will have to be informed thereof in writing in future on the day these become effective.

Against this background, HR professionals need to include all of the information required by the Act on Proof in the written employment contract, and have it signed by hand before the employee begins work.

What applies to old contracts?

The new law does not apply to employment contracts concluded by companies prior to August 1, 2022. However, employers are obliged to provide employees with the key terms of their employment relationship in writing within seven days upon request. Given this short deadline, proactively preparing for cases like these and creating a copy of the key contractual conditions for old contracts is advisable.

Fines will be levied for violations of the Act on Proof

This is all the more important given that violations can now be santctioned as administrative offenses pursuant to the new Section 4 of the Act on Proof (NachwG): Each violation may incur a fine of up to 2,000 euros. This also applies if an employer fails to document the key conditions of the employment relationship in writing and instead stores them digitally with a qualified electronic signature, for example. Nevertheless, the employment relationship remains effective even if the employer fails to comply with the obligations to provide proof.

Changes to the Temporary Employment Act

The German Temporary Employment Act (Arbeitnehmerüberlassungsgesetz) has also been amended: For example, the company leasing the employee will be obliged to provide temporary staff with a justified response in text form within one month if they have been leased to the company for at least six months, and the employee notifies the company of their desire to conclude an employment contract in writing.

Amendments to the Part-Time and Fixed-Term Employment Contracts Act and other laws
The fact that, in future, the probationary period will have to be reasonably proportionate to the duration of the fixed-term employment relationship is one important aspect for shorter fixed-term employment relationships. Furthermore, HR will have to respond in text form within one month stating reasons if an employee hired on a fixed-term basis expresses the desire for permanent employment after six months. Other laws, such as the Trade, Commerce and Industry Regulation Act and the Vocational Training Act have also seen amendments.

These changes place a noticeable burden on small and medium-sized companies in particular. They now need to modify their standard contracts and include provisions arising from the Employment Protection Act into future employment contracts, for example. It is particularly important for companies to take action and be prepared given that the short, seven-day deadline also applies to existing contracts. This makes it all the more incomprehensible that the legislator has not at least ventured to ensure greater progress by permitting a qualified electronic signature and, consequently, digital archiving. This would at least have served to save resources, work and costs for printing, filing and storage.