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Global employment briefing: Germany, October 2018

  • Germany
  • Employment law

03-10-2018

Labour Court decision: German employers should urgently revise their employment contracts

Limitation periods

In its decision dated 18 September 2018, the Federal Labour Court has ruled that limitation periods, which do not exclude a claim for the Minimum Wage (Mindestlohn) according to the Minimum Wage Act (Mindestlohngesetz), are invalid.

This means that thousands of limitation periods in employment contracts are ineffective. In Germany, limitation periods are commonly agreed in employment contracts. These generally amount to three months and are therefore considerably lower than the limitation periods provided by law. Companies should urgently revise their employment contracts and include an appropriate clause.

Minimum wage

The statutory minimum wage in Germany (currently € 8.84 per hour) will increase to EUR 9.19 per hour on 1 January 2019 and to EUR 9.35 on 1 January 2020. The increase is higher than expected. Every two years, the Minimum Wage Commission (which consists of representatives of employers, unions and science) advise on adjusting the amount. In doing so, it examines the level of the minimum wage that is suitable for contributing to an adequate minimum protection of employees, to enable fair and efficient conditions of competition and not to jeopardize employment.

Employers face heavy penalties if they fail to pay the minimum wage in Germany to their staff. When the wage originally came in to law in 2015, the Tax Enforcement Unit for Undeclared Work (Finanzkontrolle Schwarzarbeit) expanded its staff considerably to deal with companies breaking the rules.

Works councils and employee unions also monitor underpayment at an industry level and, in theory, companies can be fined as much as €500,000 if they fail to comply with the regulations.

Workers who believe they are being paid less than the German minimum wage should first speak to their employer to try and resolve the issue before escalating it to a third party. However, employees can also approach their union (if applicable) and if the employer still fails to remedy the underpayment, legal action may follow. Employees have three years to make a claim for underpayment of less than the minimum wage in Germany.

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