November 04, 2021

How will the 2021 German Federal Election Results Shape Labor and Employment Law?

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On September 26, 2021, the citizens of Germany elected a new Federal Parliament and thus decided how politics will be shaped during the next four years. What the polls had indicated in the run-up to the election has now been confirmed—the Christian Democrats have lost a good number of votes, while the clear winners of the election are the Social Democrats and the Greens, with the Social Democrats gaining the most votes and thus being called to take on the task of building a government.

This task is not an easy one due to the results of the election. The only possible coalition composed of two parties would be a so-called grand coalition of Social Democrats and Christian Democrats, which—until now under the leadership of the Christian Democrats and thus under opposite circumstances to the current election result—has already governed Germany since 2013. However, the Social Democrats have already rejected such an alliance, which means that for the first time since the 1950s, it is very likely that Germany will once again have a governing coalition of three parties.

At the moment, it is still unclear which three-party coalition will be formed. The most likely scenario is a so-called "traffic light coalition" based on the parties' colors (red, yellow, green) and involving the Social Democrats, Liberals and Greens. If such an alliance should not work out, however, a so-called "Jamaica alliance" (black, yellow, green) composed of Christian Democrats, Liberals and Greens would also be possible.

Impact on Labor & Employment Law

Based on the election programs of the parties with a promising start for government participation, we have analyzed what the election results and the possible coalitions may mean for the direction of labor and employment law in the four years ahead.

Since the Greens and the Liberals would be involved in both of the aforementioned coalitions, both parties have announced that they will first perform exploratory talks to identify common ground and work out critical issues in order to find possible solutions.

In the area of labor and employment law, the election programs already show that the two parties do not have much in common, but are instead characterized by their differences. First and foremost, the Greens would like to abolish fixed-term contracts without cause, thus making it much more difficult for employers to reduce the headcount of employees after a maximum six-month probationary period ends without a reason for dismissal. Here, however, the election program of the Greens coincides with that of the Social Democrats, while the Liberals do not have this topic on their agenda.

Like the Social Democrats, the Greens plan to introduce a right to a home office, so that employees—unlike before—would be granted an enforceable right to work from home on a permanent basis. The Liberals also included home office in their election program, but unlike the Greens, they do not want to impose an obligation on employers to offer a home office, but only a right to discuss this option. Under this proposal, the employer would be required to examine the employee's request for mobile work and home office and discuss it with the employee. Here, a compromise between the political parties can be expected. Therefore, it is likely that the topic of the employee's right to work from home will be regulated by law and that it will be more difficult for employers to refuse the employee's request in the future.

Both the Liberals and the Greens address the gender pay gap in their election programs. The Liberals plan to impose an obligation on companies to identify and publish the gender pay gap, whereas the Greens strive only to require companies and collective bargaining partners to monitor the gap. Due to this common ground, it is quite likely that companies will be held more accountable than before with regard to the gender pay gap in order to identify and address it.

The treatment of temporary workers and the regulations governing temporary employment are also included in the election programs of both parties. The Greens, like the Social Democrats, are committed to ensuring that temporary workers receive the same pay as the employees of the hiring company from day one. Currently, the equal pay principle can be deviated from for the first nine months by collective agreement. The Liberals, on the other hand, would like to lift the current maximum period of 18 months for temporary workers to work for the same hirer.  This once again shows the difference in perspective between the Social Democrats and the Greens (more employee-friendly) and the Liberals (more employer-friendly).

There is also clear common ground between the Greens and the Social Democrats as to the increase in the minimum wage. Both parties are in favor of an increase to €12.00 gross per hour (currently it is €9.60 gross per hour). The Liberals do not pursue a corresponding demand.

If—contrary to expectations—a "traffic light coalition" does not materialize, the election programs show that a Jamaica coalition would hardly have an easier time in forming a government.

The Liberals would like to link the mini- and midijob1 limits (currently €450.00 and €1,300.00 gross per month, respectively) to the statutory minimum wage, so that the maximum earnings limits would rise accordingly as the minimum wage increases. An increase in the mini-job limit to €550 per month is also envisaged in the Christian Democrats' election program, but without a link to the statutory minimum wage. "

Another common ground between the Liberals and the Christian Democrats can also be seen in the reform of the Working Hours Act, in which the previously applicable maximum working hours of ten hours a day would be changed to a maximum weekly working hours limit. In addition, the Christian Democrats prefer an increase in the maximum daily working hours for non-hazardous professions.

By contrast, the election programs of the Christian Democrats and the Greens show little agreement. It is only with regard to declarations of general applicability of collective agreements (the effect of which is that the legal norms of a collective agreement also become binding for employees and employers not previously bound by collective agreements within the material and territorial scope of a collective agreement) that both parties strive to facilitate the increase in the number of declarations of general applicability and thus increase collective agreement coverage for employers.

Overall, it becomes obvious that the election programs of the Social Democrats and the Greens in particular have some common ground. Moreover, it seems likely that the Liberals will find sufficient overlaps with both parties for a governing coalition, especially since the points of agreement on labor and employment law with the Christian Democrats do not appear to be broader. Therefore, it can be expected that labor and employment law in Germany will become even more employee-friendly under a new government led by the Social Democrats, and employers should keep a close eye on upcoming developments in order to be able to adapt to changes in good time.



1 A minijob is marginal employment with a maximum monthly remuneration of €450.00, or a work assignment lasting up to 70 days per calendar year, which is exempt from social security contributions. A midijob refers to an employment relationship with a salary in the range of €450.01 and €1,300.00 per month with a reduced contribution rate for social security.

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