- The corona crisis continues to keep us on edge. Short-time work and government protective measures are often no longer sufficient to offset the economic effects due to the prolonged duration of the corona crisis.
Therefore, many companies now have to deal with the issue of personnel reductions in a concrete way. Against this background and the fact that a decision is to be made in September on whether the short-time working facilities associated with the Corona crisis will be retained in Germany beyond 31 December 2020, many employers are confronted with the question of whether short-time working and restructuring are mutually exclusive and what conditions and liability traps need to be paid particular attention to.
Problem: Terminations for operational reasons despite short-time working
The requirements and objectives of short-time work and redundancies for operational reasons are divergent. While the granting of short-time work requires a merely temporary loss of working hours and serves to secure jobs, operations-related terminations require a permanent loss of employment opportunities, which makes the permanent termination of employment relationships unavoidable. At first glance, this is difficult to reconcile.
From a legal point of view, it must therefore be noted that dismissals of employees on short-time work for operational reasons are socially unacceptable if they are justified by the same reason for which short-time work was ordered. In this case, a dismissal for operational reasons does not usually have the "urgent" operational requirement required under § 1 (Subsection 2, Sentence 1) of the German Dismissal Protection Act. Operations-related terminations during short-time work therefore require additional - beyond the reasons for short-time work - or changed circumstances. This is the case, for example, if the situation of the company has deteriorated further since the announcement of short-time work and the employer now assumes a permanent - instead of, as initially, merely temporary - loss of orders.
Taking this particular feature into account, short-time work and personnel reductions can be used as complementary means of successfully restructuring companies, which became necessary due to the Corona crisis and its economically sustainable effects - e.g. long-term decline in orders and crisis-related changes in processes. However, such an approach requires a well-thought-out concept and detailed documentation on the part of the employer.
Practical advice: In this starting position, dismissals by the employer must be carefully prepared.
- From a liability point of view, care must first be taken to ensure that no restrictions on dismissal are expressly promised or provided for in the underlying agreement (individual agreement, works agreement or collective agreement) when short-time working is introduced.
- It is unproblematic if short-time working is introduced in one company or department of a company, while another company or department is being restructured on the basis of an independent business decision. In this case, short-time work is used - to ease the economic burden on the company - only for those employees whose jobs are not to be cut. In other areas, which are clearly demarcated from this, a reduction in personnel can be implemented.
- The situation is more demanding from the point of view of employment law if short-time work was initially ordered in the company or department affected by short-time work and a restructuring with a reduction in personnel turns out to be necessary afterwards.
- In this constellation, extraordinary care must be taken to justify a permanent loss of working hours as of now, because according to law the introduction of short-time work indicates only a temporary lack of work.
- The restructuring concept must not be based on reasons which have already been used to justify the introduction of short-time working. Either new reasons or a restructuring concept completely detached from the causes of short-time work are required.
- If the employer takes the operational decision
- to close down a business or a certain part of a business or
- to carry out an operational change in the form of a substantial reduction in personnel (§ 17 KSchG),
the basis for the granting of short-time compensation ceases as soon as concrete implementation steps are taken, e.g. notice of termination, conclusion of reconciliation of interest agreements with final lists of names, etc.
Employment law challenges are being exacerbated by the economic impact of the ongoing corona crisis. The interaction of short-time work and dismissals for operational reasons requires careful preparation and documentation in the form of a restructuring concept in order to avoid possible liability traps.
Furthermore, specific follow-up questions are to be expected, in particular in connection with wage claims after a dismissal for operational reasons - is there now again a claim to the contractually agreed wage or do dismissed employees continue to receive only short-time working compensation?
We will be happy to keep you up to date on the coming developments. However, legal advice for individual cases is still recommended. We would be pleased to offer you our assistance and to inform you about your possibilities. Please do not hesitate to contact me.
- For many companies, staff cuts are unavoidable during the Corona crisis, when short-time work and government protective shielding measures are no longer sufficient. Is it possible to make redundancies during the current short-time work period? Which employment law pitfalls should be avoided?
The corona crisis is increasingly affecting the employment market: According to a survey conducted by the Ifo Institute in Munich, companies in numerous sectors are planning to lay off employees or not renew fixed-term contracts. More and more companies that were previously able to prevent staff cuts thanks to short-time work and government protective shield measures are now starting to think specifically about layoffs. Against this background, we answer the most important questions about staff cuts in the crisis.
Are dismissals permitted despite short-time work?
There are no special provisions for dismissals for conduct and personal reasons during the current short-time working period. Employees can therefore be dismissed under the previous conditions if they violate their contractual obligations or if there is a personal reason for dismissal. The situation is different for terminations for operational reasons necessitated by the effects of the Corona crisis.
A dismissal for operational reasons during short-time work is socially unacceptable if it is justified on the same grounds on which short-time work was ordered in the first place. In this case there is generally not the "urgent" operational necessity for a dismissal for operational reasons as required by §1, Subsection 2, Sentence 1, of the Dismissal Protection Act. In addition, a dismissal for operational reasons presupposes a permanent loss of work. However, this will not be the case when short-time work is ordered, as short-time work always requires only the temporary loss of work.
A dismissal for operational reasons during short-time work therefore requires additional - beyond the reasons for short-time working - or even changed circumstances. This is the case, for example, if the situation of the company has deteriorated further since the announcement of short-time work and the employer now assumes a permanent - instead of, as initially, merely temporary - discontinuation of the workload. In addition, collective law requirements must also be observed: Company agreements and collective bargaining agreements may contain provisions that generally exclude dismissals for operational reasons during short-time work.
What are the requirements for a dismissal for operational reasons?
If the Dismissal Protection Act applies, a dismissal for operational reasons presupposes that there are urgent operational requirements which make it permanently impossible to continue the employment of the employee in the affected company. There are no special or facilitated conditions due to the corona pandemic:
- A business decision leads to a probable permanent loss of the need for employment.
- There is no possibility of continued employment throughout the company (!) for the employee whose job is cancelled.
- If there are comparable employees, a company-related (!) social selection is carried out.
What should be considered if a comparatively large number of employees are to be dismissed?
If more than 20 employees are employed in a company and more than 5 employees are to be dismissed within 30 days, it must be checked whether there is a mass dismissal that must be notified to the Federal Employment Agency.
Depending on the number of employees, § 17 KSchG provides for the following graduation regarding the obligation to notify mass dismissal:
Number of redundancies within 30 calendar days
Usually more than 20 and less than 60 employees
More than 5 redundancies
Usually at least 60 and less than 500 employees
10% of regularly employed workers or more than 25 redundancies
At least 500 employees
At least 30 redundancies
Termination agreements and employees' own terminations must be taken into account when determining the above-mentioned thresholds if they were "initiated" by the employer. An inducement by the employer exists if the employer makes it sufficiently clear to the employee that he/she will terminate the employment relationship (at the same time as the employee's notice of termination or the termination agreement is requested).
What kind of special conditions must be considered when a works council exists?
If a works council exists, participation rights must be observed in any case. Which co-determination and participation rights the works council has in particular depends on the scope of the concrete personnel reduction measure:
- The works council must be consulted before each termination of employment in accordance with § 102 of the Works Constitution Act (BetrVG).
- In the case of mass dismissals within the meaning of Section 17 (1) KschG, the works council must be fully involved (obligation to provide information and advice).
- Insofar as the personnel reduction measure meets the requirements of a change in operations within the meaning of § 111 BetrVG, a reconciliation of interests and social plan obligation exists in principle.
The works council has numerous possibilities to delay the negotiations - and thus the implementation of the personnel adjustment measure. Not least against this background, a thorough preparation of the planned measure is absolutely essential.
- Home office was already in vogue prior to the Corona crisis. Due to the current situation, the German minister of employment, Mr. Hubertus Heil, wants to legally establish the right to work from home. This right is planned to be valid also once the crisis is over. But what needs to be considered from a employment law perspective in order to introduce home office legally?
In times of COVID-19 it is recommended to anyone who can work from home to do so, regardless of whether someone shows any symptoms or features of groups at-risk. In order to prevent a collapse of the health care system, it is highly important to keep the infection curve as flat as possible from the very beginning.
Due to modern technology, such as laptops, broadband internet, cloud-based systems and more, barely anyone is still bound to a fixed workplace anymore. Even prior to the crisis, more and more employers started to give their employees the choice of where to work. The possibility of working from home makes a job more attractive and might increase the employee’s satisfaction. Apart from pandemics, home office can be an interesting option as it enhances flexibility, greater self-determination and work-life balance.
Approximately 20% of employees in Germany are used to work remotely from home several times a month – home office became already popular before COVID-19 caused to re-think. However, anyone who is considering home office as an option must keep the legal and organizational framework in mind.
1. Who decides whether employees may work from home or not?
Currently, employees are not entitled to a mobile or home-based workplace. Ultimately, it is the employers who decide about how their employees are organized – even in times of a crisis. However, if home office is – to a certain extent - already granted or tolerated without the legal basis, the demand for home office might grow due to the so-called operational practice (“betriebliche Übung”).
2. What has to be legally considered if employees take their work home?
Employees who take home sensitive information, such as printouts, files or forwarded e-mails, risk to face employment law related sanctions - depending on the scale of sensitivity even their termination of employment. Therefore, employees are well advised to consult their employer in advance in order to determine whether and which company documents they are permitted to take home. Employers, on the other hand, should bear in mind that even a tacit acceptance of home office can cause an increase of demands to work from home. In case there are no rules, home office should only be an exception.
3. Which conditions must be met for home office?
Principally, the employee's working field must be considered as suitable for home office. Company schedules, external customer appointments or meetings still should have priority. If home office can be integrated properly into the company processes without any disturbances, work efficiency will not be affected and the employee’s performance at home can absolutely be as successful as in office. However, an absolute must is the availability of adequate and properly functioning hardware, such as a pre-set mobile device and a sufficiently fast internet connection. Hardware and software conditions must guarantee a secure connection to the corporate database and the communication network as well as a safe way for data backups.
4. How to record the employee’s working hours?
According to the decision of the European Court of Justice of 14 May 2019, working hours from home must be recorded accurately as well.
The usual requirements, such as maximum working hours per day (maximum 10 hours), sufficient rest periods (at least 11 hours) and the ban on working on Sundays or public holidays have to be carefully attended to. A small hint: Compared to employees who work in the office, those who are working from home or on the move do work about four hours more per week on average.
In addition to the Working Hours Act, the employer is also responsible for occupational safety measures, including risk assessment, protective measures, instructions and regulations for computer workstations – especially with regards to home office workplaces. The employees themselves are obliged to ensure the requirements for a safe workplace.
5. Which measurements have to be followed to ensure data protection in times of GDPA
The employer is obliged to take the required preventive measures to ensure the corporate data protection. Safe approaches include for example VPN connections for secure data transfers and the only use of software or files that are approved by the employer himself. Further, the employee has to ensure that no unauthorized person, including family members, have access to any mobile device in use. In addition, passwords must not be passed on and must be kept inaccessible to third parties. It is recommended to not install unsafe (social media) applications or services, such as WhatsApp on the work mobile, as this way confidential (contact) data might be revealed.
Apart from the obligation to protect corporate data the employees themselves have also the right to protection of their own data and privacy. This means, that the employer may only control equipment and work performance in compliance with applicable data protection regulations.
6. Does the works council have a voice in the topic of home office?
The works council has no say when it comes to the decision for or against mobile working as such. However, the works council does have an influence in some factors, such as working hours, the use of technical equipment (not yet subject to co-determination), the prevention of work-related accidents or transfers. Therefore, the works council has to be involved in the planning process. The employer on the other hand is obliged to provide respective information to the works council which then has to ensure proper conditions of the (mobile) workplace.
7. Who has to bear the costs of mobile equipment?
In case the employee is allowed to work from home, the employer has to bear the respective costs This includes the costs for office and technical equipment as well as telecommunication costs. No matter if the employer is providing all necessary equipment, the employees are using their own devices (“BYOD - Bring your own device”) or both parties agree on a mixture of own and corporate equipment, a contractual basis of the conditions is essential.
- Overview of short-time work and short-time compensation for employers and employees.
While readers outside of Germany may not have heard of “short-time work” (Kurzarbeit), within Germany the use of this tried-and-tested tool is on the rise again. With the rapid spread of coronavirus now virtually paralyzing Germany, tens of thousands of employers are currently announcing they would switch employees to shorter work hours due to coronavirus outbreak in order to manage HR-costs and preserve jobs during the crisis. A large part of the employees’ lost income will be replaced by short-time work compensation (Kurzarbeitergeld) granted by the Federal Employment Agency if the workload is temporarily reduced due to the COVID-19 pandemic. This month the Bundestag rushed through legislation to expand the scheme and ease access to short-time work compensation taking effect retroactively as of 1 March 2020.
What is short-time work?
Short-time work is a temporary reduction in the regular working hours due to a considerable but temporary shortage of work. The working hours can be reduced partially or completely (so-called “zero short-time work”). Thus, the employees are temporarily partially or completely released from their obligation to perform their duties under the employment agreement and their remuneration is reduced accordingly.
What is short-time work compensation?
Short-time work compensation is granted by the Federal Employment Agency and is intended to mitigate the disadvantages suffered by employees as a result of the reduction in remuneration. The short-time work compensation amounts to 60% of the net pay difference for employees without a child and for employees with at least one child to 67% of the net pay difference. As of 1 March 2020, the Federal Employment Agency will fully refund employers’ social security contributions.
How to introduce short-time work?
The employer cannot unilaterally order short-time work unless this has been agreed in advance. Short-time work may be introduced on the basis of a collective bargaining agreement, a works agreement or an agreement with the employee. If the employment contract does not provide for the employer’s right to unilaterally order short-time work, the employer must first agree the envisaged short-time work with the employees concerned individually.
What are the prerequisites and the procedure for short-time work compensation?
Taking into account the legislative measures of March 13, 2020, short-time work compensation in connection with a temporary reduction of workload due to the COVID-19 pandemic will be granted if the following prerequisites are met:
- Notification of short-time work to the local employment agency (first step). Employers should ensure to submit complete documents to prove that the prerequisites for short-time work are met.
- At least 10% (previously 30%, as of 1 March 2020 only 10%) of the employees of the company are affected by a loss of working hours of at least 10%.
- Positive working time accounts – if any - must be reduced to zero. As of 1 March 2020, employees are no longer required to build-up a negative balance in their working accounts.
- Eligible employees: Only employee whose employment relationship is not terminated and who are subject to payment of social security contributions. As of 1 March 2020, temporary agency workers are also entitled to short-time work compensation.
If the employment agency confirms that these prerequisites are met, the employer must - in a second step - apply for short-time work compensation within three months.
- The software start-up Nitrobox GmbH from Germany announced to have completed a financing round in the single-digit million euro range.
The financing round was led by "NeueCapital Partners" fund from Silicon Valley and Porsche Ventures, the venture capital unit of the Stuttgart-based sports car manufacturer. LUTZ | ABEL advised on the transaction.
The German software start-up Nitrobox GmbH closed a financing round in the single-digit million euro range. "NeueCapital Partners" fund from Silicon Valley and Porsche Ventures, the venture capital unit of the Stuttgart-based sports car manufacturer, took a stake in the company.
Nitrobox has developed a cloud platform which can be used in several sectors for automatic monetization and billing of digital business models. In the field of mobility, Nitrobox is already working with several car manufacturers, including Porsche. The start-up supports the order-to-cash process of new business models: services such as car sharing, functions-on-demand, digital parking tickets or charging services can be fully automated via the Nitrobox platform. The company intends to use the funds from the financing round primarily to further expand its market position in Germany and to prepare for its entry to the US market.
As in previous rounds, LUTZ | ABEL provided legal advice to Nitrobox. The team included the following attorneys: Dr. Lorenz Jellinghaus (Partner, Hamburg) Dr. Sebastian Sumalvico (VC, Munich) and Nina Sophie Osten (VC, Hamburg).
- AlphaPet Ventures GmbH secures equity financing led by capiton AG and acquires Healthfood24.
LUTZ | ABEL advises Munich based premium pet food company AlphaPet Ventures in both equity financing and acquisition.
The LUTZ | ABEL team led by Dr. Marco Eickmann and Philipp Hoene (both M&A/VC, Munich) included Dr. Sebastian Sumalvico (M&A/VC, Munich), Frank Hahn (M&A/VC, Hamburg), Dr. Marius Mann (Commercial, Stuttgart), Dr. André Schmidt (IP/IT, Hamburg), Claudia Knuth (Employment, Hamburg) and Sebastian Schreiber (Real Estate, Hamburg).
The transaction is subject to pending merger control approval.
- The healthcare start-up Temedica GmbH from Germany announced to have completed a € 17 million Series B financing round.
The financing round was led by different MIG-Fonds, Santo Venture Capital, G+J Digital Ventures, Salvia and Bernd Wendeln as investors. LUTZ | ABEL advised on the transaction.
The German healthcare start-up Temedica GmbH, which is based in Munich and was founded by Gloria Seibert and Clemens Kofler, closed a € 17 million Series B financing round. MIG-Fonds, Santo Venture Capital and Salvia lead the round – existing shareholders like G+J Digital Ventures and Bernd Wendeln were additional investors.
Founded in 2016, the start-up develops digital companions (such as apps) to support patients in their healing process and to improve their medical care. Until today Temedica came up with the products pelvina (to strengthen the pelvic base), Mineo (to strengthen the back) as well as Waya (for a healthy nutrition and motion sequence). Further product developments are in the process of planning.
The LUTZ | ABEL team included the following attorneys: The partners Dr. Bernhard Noreisch (Munich) and Dr. Lorenz Jellinghaus (Hamburg) led the transaction. The team further consisted of Claudia Knuth (Employment Law, Hamburg), Andreas Kössel (Employment Law, Munich), Jan-Phillip Kunz (VC, Munich), Nina Sophie Osten (VC, Hamburg), Dr. Cornelius Renner (IT, Data Protection Law, Berlin), Ute Schenn (Commercial, Stuttgart), Dr. André Schmidt (IT, Data Protection Law, Hamburg).
The investors Santo Venture Capital and Salvia were represented by honert + partner (Sven Fritsche, Munich).
- The start-up Price f(x) managed to score EUR 23 million within the extension of the series B-financing. Leading investors are Digital + Partners and Bain & Company, while Talis Capital increased their investment. LUTZ | ABEL again acted as company counsel of Price f(x) in this transaction.
Founded in 2011, the Munich-based start-up provides a modular SaaS solution for price optimisation management (PO&M) and configure-price-quote (CPQ) for enterprises of any size. The extended investment was let by Digital + Partners, a European B2B technology growth investor and the management consulting firm Bain & Company. Talis Capital, the initial series A investor, followed with a raise, while it brings the series B-financing as a whole to EUR 48 million.
The new funding allows Price f(x) to further expand their platform capabilities, add new functionality, introduce several new products to the market and place a special focus on sales and marketing in 2020. The start-up expects continued global expansion through organic and partner-enabled growth as well as strategic developments. According to the company, Price f(x) could triple their valuation within the last 12 months.
LUTZ | ABEL VC experts assisted Price f(x) again in this financing round. Dr. Bernhard Noreisch and Jan-Phillip Kunz provided comprehensive legal advice.
- Fintech Tomorrow closed EUR 8.5 Mio series A equity financing. The Hamburg-based sustainable mobile banking provider plans to expand to the European market within the next year.
The financing round was led by British VC Fonds ETF Partners. Amongst Tomorrow’s investors are former N26 CFO and entrepreneur Christian Rebernik, green power pioneer Matthias Willenbacher and Vitafy founder Georg Bader.
Dr. Marco Eickmann, LL.M., Philipp Hoene and Dr. Sebastian Sumalvico assisted Tomorrow with comprehensive legal advice.
- CoachHub, located in Berlin, managed to secure EUR 10 million within the frame of a series A2-financing round. Leading investor is the international early stage investor RTP Global, while the current investors HV Holtzbrinck Ventures, Partech and Speedinvest increase their investment. LUTZ | ABEL advised RTP Global as part of the financing round.
CoachHub operates a digital training platform. The Berlin-based company aims at offering different kind of trainings, such as time management, stress reduction and leadership skills for anybody throughout entire businesses rather than to managers only. CoachHub is already working with over 400 qualified coaches and employs 70 people. The platform does not only make trainings available for more clients around the world but also helps coaches to enlarge their customer circle worldwide and improve their expert skills. CoachHub will focus on its international sales program during the upcoming year. The company expects an increase of its number of employees up to 200 until mid-2020.
Consulting lawyers RTP Global
LUTZ | ABEL Rechtsanwalts PartG mbB
Dr. Marco Eickmann, Partner
Dr. Sebastian Sumalvico