Overview of German Employment Law

1. Overview of German Employment Law Friday, June 8 Beijing 2007

2. Power Point Availability • www.studylawinchina.net/2007/ • Log in: • User: Beijing • Password: 2007 • Befort Employment Law Assignments

3. Facts About Germany • Most populous country in Europe (82 million) • World’s third largest national economy • Unemployment rate of about 8% • Establishes legal rules primarily through “codes” rather than cases

4. Germany: Provides Greater Worker Rights Than U.S. or China • Strong job security by statute • Broad range of mandated benefits • Collective bargaining agreements cover a broad range of employees • Works councils supplement employee voice at local level • Co-determination

5. Hypothetical • A German employer who believes that a worker is committing too many dumb mistakes would like to terminate that employee’s employment. • What are the respective rights of the employer and employee in this context?

6. Presumptive Rule • German law, by statute, adopts the general rule that dismissal “is socially unjustified and therefore unlawful.” • Accordingly, the burden is on the employer to show circumstances sufficient to overcome that presumption

7. Routine Termination • Employer can justify termination if it shows • Employee failed to meet legitimate work performance expectations, or • Continued employment is economically infeasible • If employer prevails, employee still entitled to work and pay through end of notice period

8. Notice Period • General Rule: Employer must give employee four weeks notice for a routine dismissal • Notice period increases with seniority to seven months for an employee with 20 years of service with that employer

9. If Employee Prevails • Court will order continuance of employment relationship along with the provision of any lost back pay • If reinstatement is unreasonable or employee so requests, labor court can order severance pay instead. • Amount increases with seniority up to 50% of 12 months salary

10. Extraordinary Dismissal • Immediate termination w/o notice justified only for “a particularly egregious wrongdoing” • Such as • Intentional misconduct • Very significant level of incompetence

11. Works Council Role • Reviews termination decision • If works council objects • Employee untitled to pay through end of lawsuit regardless or outcome • Objection is admissible in proceedings challenging dismissal

12. Policy Questions • How would you rate the German termination system in terms of • Efficiency • Equity, and • Voice? • Does the German system unduly deter hiring and contribute to high rates of unemployment?

13. Compare • United States: • Most employees not protected against dismissal • But a few win large damage amounts in tort and discrimination cases • Germany: • Virtually all employees protected • Relatively modest monetary awards

14. Impact of Seniority • Notice period increases with seniority • Seniority is to be considered as a factor in selecting employees for an economic lay-off • Monetary awards increase w/ seniority • What impact does this have on employment policy?

15. Compare • United States: Disputes heard in courts of general jurisdiction • Germany: Disputes heard in tripartite labor courts • What are the respective pro’s and con’s of these two approaches?

16. United States More due process, such as use of discovery and juries Courts may view employment disputes in broader context Germany Specialized expertise Quicker More structured opportunities for settlement Forum Factors

17. Germany Paid family & sick leave Compulsory health insurance and pension system Minimum 4 weeks vacation/year United States Unpaid family & sick leave Optional health system; compulsory social security No minimum vacation period Employee Benefits

18. Germany Near universal coverage Contributions from employers, employees, and government United States Optional coverage, usually employer-sponsored Paid by employers, possible contributions from employees Health Insurance

19. Part-Time Work • EU Directive and German statute provides that jobs shall be full-time unless employer has reasonable cause for part-time status • Part-time and fixed-term workers are to be treated same as full-time workers as to employment terms unless different treatment justified on objective grounds

20. Modified Work Schedules • German employees have the right to request modified work schedules, such as part-time or flex-time arrangements • German employers must grant employee request in absence of valid business reason to the contrary

21. Covered Workers • United States: Employment laws only apply to “employees” subject to employer’s right of control • Germany: Employment laws (other than dismissal and minimum wage) apply to “dependent” workers as well as employees

22. Dependent Workers • Work predominately for one entity • With no employees of his or her own • Receives more than 50% of income from work for one entity

23. Policy Questions • Does this high level of worker protection cause “Euro-sclerosis?” • Yet, Germany is a high GDP country that manages to compete relatively well in the global economy. • How is this possible?

24. Internal Policy Debates • CDU Party pushing for relaxation of legal requirements (flexibilization) • SPD Party seeks to preserve social safety net • Current “grand coalition” results in a regulatory stalemate

25. European Union Basics Monday, June 11 Beijing 2007

26. European Union • Initially formed in 1957 as a six-nation free trade bloc known as the “Common Market” • It added a “social” agenda in the Maastricht Treaty adopted in 1992 • Today, it is a 27-nation regional organization with some attributes of federal sovereignty

27. Relative Population • China: 1.3 billion • European Union: 500 million • United States: 300 million

28. Four EU Objectives • To promote economic and social progress (including high employment) • An eventual common foreign and security policy • To protect the rights of EU “citizens” • To develop close cooperation on justice and home affairs

29. EU Legislative Process • Commission: Independent body that may propose legislation • Council: Representatives of nation members w/ power to adopt legislation • European Parliament: Popularly elected body that has right to approve or veto many legislative items

30. Types of Legislation • Primary: EU Treaties • Secondary: • Regulations: Binding legislation that supersedes national law • Directives: Binding legislation that sets a mandatory goal, but leaves method of attainment to member nations • Recommendations: Non-binding acts

31. The Social Partners • Multi-national employer federations • Multi-national trade union federations • These organizations have consultative “clout” on EU matters of employment policy

32. Free Movement of Workers • EU Treaty establishes right of workers to accept employment and move anywhere within EU • Forbids discrimination on basis of worker’s nationality • Allows workers to remain in other country post-employment under certain conditions

33. Free Movement Principle • Generally trumps national laws that limit immigration and work visas, at least with respect to other EU countries • But does not trump limitations on movement related to enforcement of national criminal laws

34. URBSFA v. Bosman • Free movement principle trumps sports federation rules that • Require payment of a transfer fee as a condition of movement, and • Establish national origin quotas on teams • But safety valve for pressing legitimate reasons of public interest

35. Free Movement Practicalities • Who are the workers most likely to take advantage of the free movement principle? • At this point, 5.5 million workers have moved to other EU countries. Why have not more workers taken advantage of this privilege?

36. North American Free Trade Association (NAFTA) • NAFTA does not similarly provide for the free movement of workers between U.S., Canada, and Mexico. • Should it? What would be the likely effect of such a step?

37. Working Time Directive • Sets maximum work week of 48 hours • Limits night work to eight-hour shift • Requires minimum of four weeks of annual vacation

38. Parental Leave Directive • Requires leaves of absence for at least three months upon birth or adoption of a child • Requires leaves of absence where necessary to care for sick or injured family members • Directive does not mention pay

39. Non-Standard Work • EU Directive provides that jobs shall be full-time unless employer has reasonable cause for part-time status • Part-time and fixed-term workers are to be treated same as full-time workers as to employment terms unless different treatment justified on objective grounds

40. Mass Lay-offs (Redundancies) • Directive requires employers contemplating lay-offs to notify worker representatives and discuss • Possible means for avoiding lay-offs • Possible means to mitigate consequences • Employer must provide all relevant information before decision made

41. European Social Model • Fundamental social safety net • Involvement of social partners in setting employment policy, primarily through collective brgaining • Employee participation in decisions that effect them

42. ESM Vision • EU treaties and directives do embody elements of this social model • But, social policy is only a secondary priority to economic policy and the protection of shareholder interests

43. Limits on EU Competence • Some core employment issues beyond competence of EU (collective bargaining) • Other key issues require unanimity in voting (job security and social security) • Remaining issues still require qualified majority voting (equal treatment)

44. Blainpain Concludes No ESM • Lack of competence • Lack of political will • Tide of market forces

45. Big Picture • EU has played a growing role in the development of transnational labor standards • But principal labor and employment rules remain national in scope • Future: Who knows?

46. EU and German Anti-Discrimination Law Tuesday, June 12 Beijing 2007

47. EU Treaty • Authorizes EU Council to enact measures prohibiting discrimination based on: • Sex, racial or ethnic origin, religion or belief, disability, age, & sexual orientation • How does this list compare to those traits protected by U. S. anti-discrimination laws?

48. Germany • Constitution and various statutes ban discrimination on each of traits listed in EU Treaty • Statutes also add ban discrimination based on language, political opinion, and “philosophy of life” • What does the latter factor preclude?

49. How Important? • In the U.S., anti-discrimination statutes ban conduct that otherwise would be lawful under the at-will rule • Since EU citizens are already protected by statutory just cause provisions, what independent purposes do anti-discrimination provisions serve?

50. EU Directive on Sex Discrimination Bans • Direct discrimination • Indirect discrimination • Harassment related to sex • Sexual harassment of a sexual nature