Written form does not always mean written form – formal requirements in labour law

Principles

By no means every (labour law) contract or every labour law document requires written form in order to be effective. Under German law, the general principle of freedom of form applies. In principle, contracts and other documents only have to be signed in writing if this is either prescribed by law or the parties have mutually (and effectively) agreed to comply with the written form requirement. The purpose of these formal requirements is to protect the individual and to make sure the contracting parties do not act in haste, and also the preservation of interests in clarity and evidence.

Pursuant to sec. 125 para. 1 of the German Civil Code (Bürgerliches Gesetzbuch "BGB"), non-compliance with a legally prescribed form generally nullifies the legal transaction in question. Pursuant to sec. 125 para. 2 of the German Civil Code, this legal consequence also applies in cases of doubt regarding formal requirements agreed by way of legal transaction. Exceptions are only conceivable in a few constellations, for example, if invoking the invalidity of the form would be an abuse of rights.

The various formal requirements 

The law provides for various formal requirements, which can be summarised as follows:

Written form, sec. 126 of the German Civil Code

The statutory written form is regulated in sec. 126 of the German Civil Code. According to para. 1, the document must be signed by the issuer in person by means of a signature by name (or by means of a notarised mark). If a document is to fulfil the statutory requirement for written form, it must therefore usually be signed by hand (wet ink). It must be possible to identify the issuer without doubt. Abbreviations (in the sense of marks or initials) are not sufficient. In this respect, the handwritten signature fulfils both a closing and an assignment function. It means that the text is to be spatially completed and confirmed in terms of content; it also attests to the identity of the issuer and the authenticity of the origin of the content. If two or more documents with the same wording are recorded in relation to the recorded contract, it is sufficient for each party to sign (only) the document intended for the other party.

Electronic form, sec. 126a of the German Civil Code

Sec. 126a of the German Civil Code provides for the possibility of electronic form by means of a qualified electronic signature.

There are three types of electronic signature: the simple electronic signature, the advanced electronic signature and the qualified electronic signature. Only the qualified electronic signature fulfils the requirement for electronic form pursuant to sec. 126a of the German Civil Code. The other two variants do not meet the (strict) requirements for electronic form as defined in sec. 126a of the German Civil Code, but at most those for text form.

A qualified electronic signature is only possible through the use of suitable signature software. In addition, advance identification with a qualified trust service provider displayed on the homepage of the Federal Network Agency is required; this is done either by in-person identification or by video identification. Furthermore, validation takes place during the signing process (e.g., through a code sent via SMS on a mobile phone in the case of so-called cloud-based solutions or through a PIN entry on a card reader). Not every electronic signature can therefore replace the written form. The signing providers used predominantly in business legal transactions, such as "DocuSign" or "Adobe Sign", are in principle also able to guarantee the qualified electronic signature. However, as already explained, this requires the signatory to be identified beforehand by means of in-person identification or video identification. In practice, this is rarely the case.

Text form, sec. 126b of the German Civil Code

To meet the requirements of text form, the declaration must be recorded as a legible text document (not necessarily on paper, but on a "durable medium" within the meaning of sec. 126b para. 2 of the German Civil Code, such as a USB stick, e-mail or SMS). A signature is not required as long as the person of the issuer is designated. In addition, the conclusion of the declaration must be recognisable. The focus of the text form is therefore on the information and documentation function. Text form can be replaced by any stricter form of the German Civil Code, but conversely it cannot replace written form or electronic form.

Agreed written form, sec. 127 of the German Civil Code

Finally, it is possible, and also common in practice in a wide variety of cases, for the contracting parties to agree on individual "arbitrary formal requirements" for a legal transaction that is not subject to any formal requirement by law. The law gives the parties this freedom and, in sec. 127 para. 1 of the German Civil Code, merely sets out a rule of interpretation in the event that the parties' agreement does not contain more detailed requirements for the chosen form. Sec. 127 paras. 2 and 3 of the German Civil Code also contain simplifications of the legal formal requirement. Such "arbitrary formal requirements" have also always played a – prone to dispute - role in labour law.

Replacing written form with electronic form 

Pursuant to sec. 126 para. 3 of the German Civil Code, written form can be replaced by electronic form unless the law stipulates otherwise. However, it is necessary that the purposes associated with the written form are complied with, at least in essence. However, the associated legal hurdles and complications have ensured that the practical significance of electronic form in day-to-day legal transactions has remained low to date.

A statutory exclusion of electronic form can be found, for example, in sec. 2 para. 1 sentence 3 of the Documentation Act. According to this, the employer must hand over the essential contractual conditions signed by hand to employees. This excludes the possibility of transmission in electronic form. Only time will tell whether this actually takes greater account of the objectives pursued by written form than would have been the case had the legislature approved proof in electronic or text form. For the time being, a change in the law is not (or is no longer) to be expected.

Summary of the main formal requirements in legal relationships under labour law 

In legal relationships under labour law, there is a plethora of legal transactions are subject to formal requirements of varying strictness. For this reason, this article can only deal with a selection of legal transactions under employment law that are subject to a formal requirement.

Written form only (cannot be replaced by electronic form)

• Proof of the essential working conditions according to sec. 2 para. 1 of the Documentation Act
  
  Pursuant to sec. 2 para. 1 sentence 1 of the Documentation Act, the employer must record the essential contractual conditions in writing, sign the record and hand it over to employees. Pursuant to sec. 2 para. 1 sentence 3 of the Documentation Act, proof of the essential contractual conditions by means of electronic form is excluded. However, this does not necessarily mean that the employment contract itself must be in writing. In principle, it can still be concluded informally. In this case, employees who begin their employment relationship after 1 August 2022 must be provided with hand-signed proof of the essential terms and conditions of employment within the meaning of sec. 2 para. 1 of the Documentation Act on their first working day. Due to this administrative effort, it may be advisable to provide the employment contract with the essential contractual conditions by itself and subsequently sign it by hand. However, the provisions of the Documentation Act only oblige the employer, so that only the employer has to sign wet-ink. 
  
  
• Termination of the employment relationship and termination agreement pursuant to sec. 623 of the German Civil Code
  
  The written form is also required for the conclusion of a termination agreement and a notice of termination. Electronic form is expressly excluded. When concluding a termination agreement, both parties must therefore sign the termination agreement by hand. The notice of termination must also be signed by hand by the employer. It is not possible to waive this requirement either by the contracting parties themselves or through collective agreements (works agreement or collective bargaining agreement).
  
  
• Work/service reference according to sec. 630 of the German Civil Code, sec. 109 of the Commercial Code (Gewerbeordnung "GewO")
  
  In accordance with secs. 630 sentence 4 of the German Civil Code, 109 para. 3 of the Commercial Code, the reference must be signed in writing. Electronic form is excluded. This also applies to other obligated persons, who are not classified as employees but as "employee like persons", according to sec. 630 sentence 3 of the German Civil Code.

Written form (but substitution by electronic form possible)

• Objection to the transfer of the employment relationship in the event of a transfer of business, sec. 613a of the German Civil Code
  
  Employees' objection to the transfer of their employment relationship to the acquirer of the business must be declared in writing pursuant to sec. 613a para. 6 of the German Civil Code. The general view is that it can be replaced by electronic form, although according to current practice (particularly in view of the technical requirements described above), this will be even less common for individual employees than for employers.
  
  
• Employee leasing contract pursuant to sec. 12 of the Temporary Employment Act (Arbeitnehmerüberlassungsgesetz "AÜG")
  
  Sec. 12 para. 1 sentence 1 of the Temporary Employment Act stipulates that employee leasing contracts must be in writing, but there is no provision excluding the substitution of electronic form.
  
  
• Limitation or condition subsequent of an employment contract pursuant to the Part-Time and Fixed-term Employment Act (Teilzeit- und Befristungsgesetz "TzBfG")
  
  The written form requirement in the case of a time limitation follows from sec. 14 para. 4 of the Part-Time and Fixed-term Employment Act and, according to the Federal Labour Court, extends to both the conclusion and the extension of a fixed-term employment contract or a fixed-term agreement. In principle, only the fixed-term agreement is covered by this formal requirement. However, since most employment contracts contain a fixed-term agreement (employment relationship ends without notice at the end of the month in which the employee reaches the standard retirement age), the employment contract containing this agreement must also regularly be concluded in writing in order to ensure the validity of the fixed-term agreement. Again, there is no exclusion provision as in sec. 623 of the German Civil Code, so it can be assumed that substitution by electronic form is acceptable.
  
  
• Conclusion of works agreements, sec. 77 of the Works Constitution Act (Betriebsverfassungsgesetz "BetrVG")
  
  Pursuant to sec. 77 para. 2 of the Works Constitution Act, works agreements must be "set down in writing" by the parties and signed by both parties. At first glance, this indicates that compliance with the written form is mandatory. Since 18 June 2021, however, the provision contains a new p. 3, which expressly sets out that works agreements can also be concluded in electronic form. In deviation from sec. 126a para. 2 of the German Civil Code, the employer and the works council must electronically sign the same document. A separate, identical document electronically signed by the respective works partner is not sufficient, as employees should be able to understand that an identical text has been signed by both parties.
  
  The same also applies to resolutions of the conciliation board, which since 18 June 2021 can also be recorded in electronic form in accordance with sec. 76 para. 3 sentence 4 of the Works Constitution Act and provided with a qualified electronic signature by the chairman or chairlady of the conciliation board.
  
  

Text form

• Informing employees about the transfer of business, sec. 613a of the German Civil Code
  
  While employees' objections in the context of a transfer of business must generally be in writing, text form is sufficient to inform the affected employees by the previous employer or the new owner according to sec. 613a para. 5 of the German Civil Code. As the information and documentation function is the main focus of the notification, the legislator has deemed the text form to be sufficient in this case. 
  
  
• Payslips, sec. 108 of the Commercial Code (Gewerbeordnung "GewO")
  
  Of practical relevance, although comparatively less problematic from a legal point of view, is the payslip, which employees are entitled to receive pursuant to sec. 108 para. 1 sentence 1 of the Commercial Code. This must be in text form. The payslip must at least contain information on the payroll period and the composition of the remuneration. The provision loses some of its relevance, as the obligation to submit a payslip pursuant to sec. 108 para. 2 of the Commercial Code does not apply if the information has not changed since the last proper payroll. 

Conclusion

The bottom line is this: written form does not always mean written form. In the employment relationship, there is an abundance of formal requirements of varying strictness for a considerable range of possible legal transactions that are carried out in practice on a daily basis. When processing such legal transactions, care should always be taken to ensure that the chosen form actually complies with the requirements of the statutory or contractually agreed form regulation. In particular, the strict requirements for electronic form pursuant to sec. 126a of the German Civil Code render replacing written form with electronic form extremely costly and unattractive from a practical point of view.