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Federal Labour Court on mandatory recording of working hours - What do companies have to observe from now on?

In what is probably one of the most sensational decisions of the year, the Federal Labor Court (BAG) introduces - practically overnight - the employer's obligation to record working hours. This has significant implications for all companies in Germany. While the traffic light coalition has only announced that it will examine the need for adjustments to working time law, the Federal Labour Court is now going ahead: Employers will be required to systematically record the working hours of their employees. This results from an interpretation of the Occupational Safety and Health Act (Arbeitsschutzgesetz "ArbSchG”) in line with a 2019 ECJ ruling requiring employers to establish an objective, reliable and accessible system for measuring the daily working time of each employee (Federal Labour Court decision dated 13 September 2022 - 1 ABR 22/21). Following the reform of the Documentation Act (Nachweisgesetz – "NachwG"), companies now face the next challenge.

1. What was it about?

This far-reaching decision was triggered by a dispute between the parties in the workplace about the principles of mandatory co-determination.

In the area of enforceable "genuine" co-determination, the works council basically has not only a right of consent but also a right of initiative. This means that not only the employer but also the works council itself can propose the implementation of measures subject to co-determination or the regulation of such matters - for example, in the form of a works agreement - and, in the event of refusal, can also call upon the conciliation body for a binding decision. In social matters, this applies in particular to working time regulations, the granting of vacation or occupational health and safety measures. A restriction of the right of initiative may result from the content of the respective right of co-determination and its meaning and purpose. For example, in a decision in 1989, the Federal Labour Court took the view that there is no right of initiative for the introduction of technical control equipment because the right of co-determination only has a defensive function. A further limit results directly from the introductory sentence of sec. 87 para. 1 Works Constitution Act (Betriebsverfassungsgesetz "BetrVG"): According to this, the works council cannot have a say in social matters if a statutory regulation or regulation of a collective agreement exists. 

In the underlying case, the works council had demanded the introduction of a working time logging system by invoking such a right of initiative and therefore appealed to the conciliation body. While the Labor Court rejected the works council's request for a declaratory judgment, the Regional Labour Court granted it. Due to the associated deviation of the Regional Labour Court from the decision of the Federal Labour Court (28 November 1989 - 1 ABR 97/88), it allowed the appeal to the Federal Labour Court.

2. The decision of the Federal Labour Court

In its current decision, the Federal Labour Court no longer rejected such a right of initiative of the works council with regard to the meaning and purpose of the right of co-determination, but already dropped out of the examination one mental step before: 

In the opinion of the Federal Labour Court, employers are already legally obligated to systematically record the working hours of their employees so that there is no longer any room for a right of initiative on the part of the works council. 

This obligation - according to the press release, which has so far only been published - results from an interpretation of sec. 3 para. 2 no. 1 Occupational Health and Safety Act in conformity with EU law. According to this, the employer is obliged to take the necessary measures of occupational health and safety, taking into account the circumstances that influence the safety and health of employees at work. They have to check the effectiveness of the measures and, if necessary, adapt them to changing circumstances. In order to plan and implement these measures, the employer has to ensure, among other things, suitable organization and provide the necessary resources, taking into account the nature of the activities and the number of employees.

This statutory duty excludes the works council's right of initiative - which may be enforced with the help of the conciliation body - to introduce a system for (electronic) recording of working time in the company.

3. Background: The so-called time clock ruling of the ECJ

The Federal Labour Court is thus relying on a decision of the European Court of Justice (ECJ) which has already caused a lot of stir and discussion in 2019 but has not yet been implemented by the German legislator.  

In this so-called time clock ruling (ECJ ruling dated 14 May 2019 - C-55/18), the ECJ ruled that Member States have to oblige employers to establish an objective, reliable and accessible system to measure the daily working time worked by each employee. Only in this way could the rights under the EU Working Time Directive (Directive 2003/88) be implemented, i.e. in particular compliance with the maximum weekly working time and daily and weekly rest periods could be ensured.

4. What was applicable until now?

The obligation to record working hours is not per se alien to German law. Employers are already required to record the start, end and duration of daily working hours if they employ marginal workers or if they are active in one of the sectors or branches of the economy listed in sec. 2a of the Act to Combat Clandestine Employment (Schwarzarbeitsbekämpfungsgesetz "SchwarzArbG") (sec. 17 Minimum Wage Act (Mindestlohngesetz "MiLoG”)).

However, there has not yet been a corresponding general regulation. German law only provided for an obligation to record working time for overtime, i.e. for any working time in excess of the standard working time of eight hours on working days, and for working time on Sundays and public holidays (sec. 16 para. 2 Working Time Act (Arbeitszeitgesetz "ArbZG")), but not for all working time. 

5. What are the implications of the decision for companies?

Even though the reasons for the decision are still pending, the Federal Labour Court's ruling means that employers will hardly be able to avoid introducing a suitable (electronic) system for recording working hours in the future.

What does this system need to look like?

According to the ECJ's requirements, employers have to introduce an "objective, reliable and accessible system" for measuring daily working time. What is meant exactly by the terms "objective" and "reliable" can best be answered with a view to the purpose of the working time recording obligation constituted by the ECJ: The system has to enable the certain determination of how long employees have (already) worked and the assessment without further ado whether the relevant working time limits are (still) observed. In this respect, it will probably be necessary – similar to the working time recording obligations that already exist for certain areas – to record the beginning, end and duration of daily working time in any case.  

In addition, it is important to ensure that the system is designed and implemented in compliance with data protection requirements. In particular, the system should be set up to be as data-saving as possible, access rights should be limited on a need-to-know basis, and any further processing of the recorded data for other purposes should be strictly reviewed.

Who is subject to this obligation?

The obligation to record working time applies to all employees, regardless of whether they are blue-collar workers, white-collar workers or trainees - irrespective of the size of the company and whether there is a works council. 

In addition, the question arises as to whether the obligation to record working time will in future also apply to executive employees who are also covered by the scope of the Occupational Health and Safety Act. Since the ECJ is essentially concerned with compliance with the requirements of the Working Time Directive, which allows an exemption for "executive employees or other persons with independent decision-making authority", it is at least conceivable that executive employees will also be exempt in the future. Similar questions also arise for outside directors who are to be regarded as employees under EU law, and persons similar to employees (economically dependent persons). There will only be clarity in this respect when the reasons for the decision have been published.

In what form has the working time to be recorded?

The Federal Labour Court's press release does not contain any information on the question of how working time has to be recorded. In its 2019 decision, the ECJ also did not formulate any more detailed requirements for the design of the working time recording system; rather, it emphasized that it is up to the Member States, within the scope of the leeway available to them in this respect, to determine the concrete modalities for implementing such a system, in particular its form. In his opinion, the Advocate General at the ECJ considered recording in paper form (e.g. time sheets) or via "any other suitable instrument" (e.g. time clock) to be possible in addition to recording in electronic form.

In this respect, it is also worth taking a look beyond national borders: for example, employees in Luxembourg are required to state their working hours in concrete terms or - alternatively - only to confirm in blanket terms that they have worked eight hours. Overtime must be justified and approved by the supervisor. If necessary, such a query could be implemented via Outlook. Whether such or similar models are also permissible in Germany, however, can only be assessed once the written reasons for the decision are available, which will probably not be for a few weeks at the earliest.

Can there still be trust-based working time models?

In view of this, it would also be premature to declare trust-based working time models obsolete at this point in time. At least according to the prevailing opinion, the delegation of the recording of working time to the employee is still possible, but the employer has organizational and control obligations (e.g. random checks).

Finally, the coalition agreement also gives hope, in which the traffic light coalition clearly commits itself to maintaining trust-based working time: "In dialogue with the social partners, we are examining what need for adjustment we see in view of the case law of the European Court of Justice on working time law. In this context, flexible working time models (e.g. trust-based working time) must continue to be possible." In this respect, the legislator is now called upon more than ever.

Does the works council need to be involved?

Even if the Federal Labour Court has decided that the works council does not have a formal right of initiative with which it can demand the introduction of a working time recording system, the co-determination rights of the works council also have to be taken into account. In particular, the works council has a right of co-determination in the case of the introduction of an electronic working time recording system, as this is a technical device which is suitable for monitoring employees (sec. 87 para. 1 no. 6 Works Constitution Act).

As of when does this obligation apply?

Since the Federal Labour Court bases the obligation to record working time on an interpretation of the already applicable Occupational Health and Safety Act in conformity with European law, the obligation to introduce an (electronic) system suitable for recording working time applies with immediate effect.

In case of a breach of these obligations, what are the consequences?

If the employer does not react to the decision, the employees can turn to a possibly existing works council. On the basis of its general monitoring duties (sec. 80 para. 1 no. 1 Works Constitution Act), the works council can assert a breach by the employer of the obligation to introduce a corresponding working time recording system. Alternatively, employees may also directly contact the employer. If the employer does not remedy the complaints, both the employees and the works council can turn to the competent occupational health and safety authority.

However, direct - official - consequences are not (yet) to be expected if the obligation to record working hours is not implemented. If the responsible occupational health and safety authority detects a violation, it can order the measures to be taken by the employer in individual cases. Only if the authority's order is violated, a fine of up to EUR 30,000; in the case of persistent, repeated violations, even a prison sentence or fine, can be imposed. In view of the fact that the Federal Ministry of Labor and Social Affairs (BMAS) itself states that it will first wait for the reasons for the decision and examine them in detail, it is unlikely that the authorities will take such measures before the reasons for the decision are available. 

6. What to do now?

The Federal Labour Court's decision certainly is a major challenge for employers. However, as is so often the case, at this point in time composure is required rather than wild actionism. 

In any case, employers should avoid a rushed implementation - especially before publication of the reasons for the decision. In view of the Member States' considerable scope for decision-making in the national implementation of the Directive, it is not yet foreseeable for which employees and in which forms a record of working time will ultimately be required.

Even though there is talk of big “bang” everywhere, the decision should first be understood as a wake-up call. Employers should now proactively approach employees and make it clear that nothing will change for the time being, but that the topics of occupational health and safety and mental health are of course taken very seriously and that they will therefore now examine (together with the works council, if necessary) how the decision can be implemented in the future without this leading to restrictions in flexibility for employees. 

Employers are also advised to use the ruling as an opportunity to take stock of the situation in their own company and to discuss implementation options (if necessary with the works council): What systems and (company) agreements already exist that could be used for time recording? Finally, fundamental questions about working time (recording) should already be clarified: What counts as working time – which times must be recorded? How should regular mini-breaks in the home office be handled instead of the legally required breaks? How do you deal with the fact that the actual recorded working time is less than the contractually agreed working time, or if it is more than the contractually agreed working time – is this then automatically considered as overtime and subject to payment? 

We will be happy to discuss all these and other questions with you, as well as possible solutions for your company.