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Siegwart German American Law

German employment law is vastly different from anything an American employer is usually prepared for. High standards of employee protection and a myriad of unexpected rules and regulations have a strong impact on the way human resources must be handled.

Holger Siegwart, Esq. has advised both, employers and employees and litigated employment cases in Germany for many years before he was admitted as an attorney in the United States.
Based on this unique experience SIEGWART GERMAN AMERICAN LAW advises US-based clients on German employment law from the hiring process through litigation.

  • Hiring Employees in Germany is a difficult process. Employee screening is restricted due to privacy laws and candidates may not be immediately available due to notice requirements stemming from their current employment. Germany offers a large pool of highly skilled and reliable workers who are known for delivering superior quality and services. However, employees should be selected very carefully since termination is complicated and subject to significant restrictions, although an initial probation period may be stipulated.

  • Employment Agreements: Detailed employment contracts are standard in most trades and industries in Germany. Employees have a right that their contract provisions be reduced to writing. Absent a specific agreement, employee friendly statutory provisions prevail. SIEGWART GERMAN AMERICAN LAW negotiates and drafts employment agreements and reviews existing contracts under German law.

  • Paid Vacation in Germany: Workers in Germany have a statutory right to a minimum of four weeks of paid vacation. Six weeks of paid vacation are standard in many trades and industries.

  • Paid Sick Time: German workers have a right to paid sick time. Generally, the employer must continue to pay wages and salaries for the first six weeks of absence due to illness or injury.

  • Independent Contractors: Employment laws are not applicable to independent contractors. However, employee status is defined by the law. Statutory rights and protections cannot be avoided by mislabeling an employee as an independent contractor. Attempts to bypass employment laws may expose the employer to significant liability for back taxes, back contributions, and employee benefits.

  • Exempt Employees: Most high level employees are exempt from wage and hour laws, and other statutory provisions. Termination is generally less complicated.

  • Temporary Employment is available in Germany. Certain statutory provisions do not apply to temporary employees and the overall cost for the employer is usually lower.

  • Terminating Employees in Germany is extremely complicated and subject to a myriad of formal and substantive requirements. Except for small businesses, employers as generally required to show cause and are not free to select whom to terminate. Social criteria such as seniority, age, and number of dependants must be considered. Termination of employees belonging to certain classes such as pregnant women and people with disabilities requires prior involvement of and approval from government agencies. If a workers’ council has been established, it must be heard prior to terminating an employee in most instances. It is good practice to involve counsel already in the preparation of any termination or layoff. Any termination or layoff will most likely trigger a lawsuit. Most judges are employee friendly and most employees have insurance to cover their attorney fees. SIEGWART GERMAN AMERICAN LAW advises employers on all issues regarding termination of employment and alternative buyout strategies in Germany.

  • Notice Requirements: Even if the employer can show cause, the employee must be given notice. Notice periods under German law, which can be found in statutes and collective bargaining agreements, vary depending on seniority and can be more than six months long.

  • Firing Employees in Germany: Employees can be fired for good cause under extraordinary circumstances. Counsel should be involved immediately since the right to fire an employee is waived if the employer does not act within two weeks. SIEGWART GERMAN AMERICAN LAW has the experience and expertise to evaluate the circumstances of your case, develop a strategy, and make sure all formal requirements are timely met.

  • Letters of Termination: Any unilateral or mutual termination of an employment relationship must be in writing. The content of termination letters is subject to strict requirements and will limit the issues in a subsequent wrongful termination action.

  • Warning Letters are a common reaction to employee misconduct and serve as a prerequisite for future termination if the specific instance of misconduct does not justify immediate termination. However, warning letters, which are not drafted carefully, may be thrown out in a wrongful termination suit and help the employee prevail. Moreover, a proactive employee may file suit immediately against an ill-drafted warning letter.

  • Wrongful Termination Claims in Germany must be filed with the labor courts within three weeks from the date a notice of termination is received. The employer has the burden of proof to show cause. Most employees have insurance covering their attorney fees and many unions offer free representation by the union’s in-house counsel. Most terminated employees file a wrongful termination suit and seek reinstatement or try to negotiate a severance pay. Settlements are more common in employment litigation than in other areas of civil litigation.

  • Reinstatement: A terminated employee has a right to reinstatement and back pay if the employer does not meet the burden of proof. The prospect of reinstating a disgruntled employee in addition to back pay is often a major factor in negotiating severance pays.

  • Severance pay: As a general rule, terminated employees have no statutory right to severance pay. Exceptions may apply during litigation and for certain exempt employees. However, many collective bargaining agreements and binding agreements with workers’ councils may create enforceable rights to severance pay for laid off employees.
  • Payroll Taxes are a significant factor of doing business in Germany. In addition to withholding income tax, employer contributions to health insurance and unemployment insurance are mandatory.

  • Health Insurance is mandatory for most employees and the employer is obligated to pay half of the cost. The other half is to be withheld from the paycheck. Failure to withhold and make contribution subjects the employer and acting officers and directors to civil and criminal liability. Enrollment in public health insurance programs is mandatory. Only employees who have earned at least 46.800 Euros for three straight years may opt out and buy private health insurance.

  • Income Tax: German income tax starts at 14% and quickly progresses to 42%. Higher incomes are taxed at 46% (for years 2009/2010). The income tax is increased by an additional 5.5% “solidarity surcharge” which is supposedly used for economic development etc. in former communist East Germany.

  • Unions: In comparison to the United States, Germany is heavily unionized and unions have significant political and public support. Collective bargaining agreements may be binding on entire trades and sectors of the industry, even if the specific employer was never involved in any negotiations with the union. Discrimination and retaliation based on union membership are illegal.

  • Workers’ councils, whose members are chosen by and from the workforce, are unique to German employment law. They exist in most mid-sized and practically all large companies in Germany and are involved in many aspects of operating a business. Besides funding them, the employer must consult with them on a number of issues and even needs the council’s approval for certain measures. As a matter of fact, many topics of internal day to day business, wage and hour, discipline, use of new technologies, and aspects of termination may be regulated by binding agreements between the employer and the workers’ council. Members of the workers’ council can only be terminated under extraordinary circumstances during their tenure and 12 months thereafter.

  • Restructurings and Mass Layoffs in Germany: In addition to the standard statutory provisions governing termination of employment, mass layoffs require administrative proceedings. Existing collective bargaining agreements and binding agreements with the workers’ council will further complicate any action. As a matter of fact you must be prepared and develop a strategy for lengthy negotiations with workers’ councils and labor unions, as well as media exposure and public pressure.

  • Strike: Unions have the right to strike and make frequent use of it. Non-union members may participate in strikes. Workers’ councils are not entitled to organize strikes. Employee discipline and discrimination based on strike participation are illegal.

  • Statute of limitations: Most collective bargaining agreements provide for very short periods, usually between two and six months, to assert claims arising out of an employment relationship. Late action waives all rights and relief is generally not available. Counsel should be involved immediately. We are able to find and interpret applicable statutes of limitations, and take timely action.