German Labor Law
Overview of German Labour Law
German labour law, known as Arbeitsrecht, is distinguished by a formal division between individual labour law (Individualarbeitsrecht) and collective labour law (Kollektivarbeitsrecht). The legal framework is characterised by extensive statutory codification, a dual system of employee representation through works councils and trade unions, and a strong protection against dismissal. The sources of German labour law include the Civil Code, the Commercial Code, specialised labour statutes, collective bargaining agreements, works agreements, and the jurisprudence of the Federal Labour Court (Bundesarbeitsgericht).
Individual Labour Law
The employment relationship in German law is governed primarily by the Civil Code (Bürgerliches Gesetzbuch), which regulates the Dienstvertrag as the contractual basis for employment. The Commercial Code (Handelsgesetzbuch) contains special provisions for commercial employees. The Trade Regulation Act (Gewerbeordnung) establishes the employer’s duty to protect employees’ safety and health. The Part-Time and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz) regulates fixed-term contracts and part-time work. The Federal Leave Act (Bundesurlaubsgesetz) entitles employees to a minimum of 24 working days of paid annual leave. The Continued Remuneration Act (Entgeltfortzahlungsgesetz) requires the employer to continue paying remuneration for up to six weeks during illness. The Working Time Act (Arbeitszeitgesetz) establishes maximum working hours, rest periods, and break requirements.
The employment contract imposes reciprocal obligations: the employee’s duty to perform the contracted work and the employer’s duty to pay remuneration. The employer owes a duty of care (Fürsorgepflicht) encompassing protection of the employee’s life, health, and personality. The employee owes a duty of loyalty including the obligation to refrain from competing with the employer. Section 622 of the Civil Code establishes statutory notice periods that increase with length of service. The General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz) prohibits discrimination on grounds of race, ethnic origin, gender, religion, belief, disability, age, and sexual orientation.
Protection Against Dismissal
The Protection against Dismissal Act (Kündigungsschutzgesetz) of 1969 applies to establishments employing more than ten workers where the employee has completed six months of continuous service. An ordinary dismissal must be socially justified by reasons relating to the employee’s person, conduct, or urgent operational requirements. Extraordinary dismissals without notice require a compelling reason making continued employment intolerable. In redundancy dismissals, the employer must conduct a social selection (Sozialauswahl) comparing employees based on age, length of service, maintenance obligations, and disability status. The works council has a statutory right to object to a dismissal on specified grounds. An employee who believes a dismissal is socially unjustified must bring an action for protection against unfair dismissal (Kündigungsschutzklage) within three weeks of receipt of the written notice. The primary remedy is reinstatement, though in practice the employer may opt for a severance payment under section 9 of the KSchG.
Works Constitution
The Works Constitution Act (Betriebsverfassungsgesetz) of 1972 establishes the works council (Betriebsrat) as the representative body for employees at the establishment level. Works councils are elected by the workforce and possess extensive co-determination rights (Mitbestimmungsrechte) in social matters including working hours, overtime, holiday scheduling, and health and safety measures. In personnel matters, the works council has rights of consent and consultation regarding recruitment, transfers, and dismissals. In economic matters, the works council has rights to information and consultation concerning business changes that may substantially affect employees, and may negotiate a social plan (Sozialplan) to compensate for economic disadvantages.
Collective Bargaining
The Collective Bargaining Act (Tarifvertragsgesetz) governs the system of collective agreements between trade unions (Gewerkschaften) and employer associations (Arbeitgeberverbände). Collective agreements regulate terms and conditions of employment including wages, working hours, holiday entitlement, and additional benefits. The principle of favourable treatment (Günstigkeitsprinzip) provides that individual employment contracts may derogate from collective agreements only in favour of the employee. Collective agreements may be declared generally binding (Allgemeinverbindlicherklärung) by the Federal Ministry of Labour, extending their application to non-party employers and employees in the relevant industry.
Codetermination at Board Level
The Codetermination Act (Mitbestimmungsgesetz) of 1976 requires companies with more than 2,000 employees to have a supervisory board (Aufsichtsrat) composed equally of shareholder and employee representatives. The chairperson, typically representing shareholders, holds a casting vote. The One-Third Participation Act (Drittelbeteiligungsgesetz) applies to companies with between 500 and 2,000 employees, requiring that one-third of supervisory board members be employee representatives. This system of board-level codetermination is distinctive to German corporate governance and provides employee representatives with direct influence over strategic business decisions.