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July 11, 2022

Urgent Need for Adaptation of Employment Contracts in Germany Due to the Law Reform

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The Verification Act (NachwG) regulates which contractual terms employers must provide to their employees in writing. Until now, this had to be done no later than one month after the start of the contract. 

The Act on the Reform of the NachwG, which was passed on June 23, 2022, will bring numerous changes into force on August 1, 2022. A central change for employers is that in future, violations of the NachwG can be fined with up to EUR 2,000. However, the scope of the contractual conditions which need to be provided to employees and the deadlines for implementing the evidence will also be changed:

Changes to the catalog of contractual conditions

According to Section 2 (1) NachwG-New, there are additional information obligations. The employer must provide the following information on contractual terms: 

  • In the case of fixed-term employment relationships, the end date of the employment relationship, i.e. not just the fixed-term period
  • The information if the employee may freely choose his/her place of work
  • The duration of an agreed probationary period
  • The composition and amount of remuneration, including bonuses, allowances and special payments, remuneration for overtime as well as other components of remuneration; as well as the due date for each component, and the method of payment (e.g. cash/transfer) 
  • The agreed working time, agreed rest breaks and rest periods and, in the case of agreed shift work, the shift system, shift rhythm and prerequisites for shift changes
  • In the case of agreed work upon call, further details of the call option
  • The possibility and conditions of requiring overtime 
  • Any entitlement to training courses provided by the employer 
  • The name and address of the pension provider if the employer promises the employee a company pension through a pension provider (the obligation to provide this does not apply if the pension provider is obliged to provide this information)
  • The procedure to be followed when terminating the employment, at least the written form requirement and the notice periods as well as the period for bringing an action for protection against dismissal; with regard to the latter, however, the legislation materials make it clear that the failure to provide this information or incorrect information shall have no consequences for the action for protection against dismissal. 

The option of referring to applicable collective bargaining agreements or works council agreements instead of providing individual details continues to exist. 

Changes in the groups of employees covered

The amended law now also provides for extensive, but substantively different, information requirements when employees are posted abroad. In addition, the provisions of the NachwG must now also be observed if employees are only hired as temporary help for a maximum of one month.

Sanctioning through fines

The amended law additionally includes a provision on administrative offenses. Employers risk a fine of up to EUR 2,000 if they fail to comply with their obligation to provide evidence, or fail to do so correctly, completely, in the prescribed manner or in good time.

However, as before, the validity of the employment contract shall remain unaffected by a breach.

Written form requirement and need for implementation

Particularly in view of the risk of fines, it should be noted that the requirements of the NachwG can still only be met in writing. The written form requirement that already existed was retained and the electronic form is still excluded. This is particularly regrettable because the underlying EU Directive had expressly permitted this under certain conditions.

It is therefore still possible to effectively conclude employment contracts using a simple electronic signature (exception: fixed-term contracts and non-competition clauses). However, in order to avoid the risk of a fine, employers would have to additionally print out the electronically signed employment contract, sign it in wet ink and hand it over to the employee. Alternatively, the information required by the NachwG could be listed in a separate notification letter and this could be handed over in written form - i.e. with a handwritten signature.

How urgent is the need for change?

The deadlines for compliance with the NachwG have been shortened considerably in some cases. In the future, the information must be handed over by the following dates at the latest: 

  • On the 1st working day: Certain essential information such as the names of the contracting parties, the remuneration and the agreed working time arrangements
  • No later than the 7th calendar day after the agreed start of the employment: Information on the probationary period, work on call, and overtime 
  • No later than 1 month after the agreed start of the employment: All other information according to § 2 para. 1 NachwG-Neu 

Subsequent amendments to the material terms and conditions of the contract shall also be notified in writing latest on the day on which the amendment shall take effect. 

What applies to existing contracts?

For employment relationships that already existed prior to August 1, 2022, employers will only have to comply with the new information requirements if requested to do so by employees - but then generally within seven days; a few specific items of information need to be provided within one month. Employers should individually assess whether it makes sense to prophylactically draft information letters or to wait for possible requests.

However, employees who start work on August 1, 2022, but have already received their employment contract before that date are likely not covered by this exception. In such cases, the NachwG must also be fulfilled without a request as of August 1, 2022, which may require the conclusion of an updated employment contract. 

Further changes 

In addition to the amendment to the NachwG, further legislative amendments were adopted, in particular to the Part-Time and Fixed-Term Employment Act (TzBfG). 

This extends the employer's existing obligation to inform part-time employees who wish to change the duration and time of their working hours (i.e. primarily part-time employees who wish to work more hours) about jobs suitable for this purpose or, in general, about permanent jobs. 

For employees with agreed work upon call, the employer must in future also specify reference days and reference hours for their possible deployment. 

For the probationary period, it has now been expressly regulated that for fixed-term employment contracts, a probationary period must always be proportionate to the duration of the fixed term and the type of activity. Particularly in the case of fixed-term employment relationships of twelve months' duration or less, it may be inadmissible to set six months as a probationary period. 

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