Coronavirus (COVID-19) Q & A – Short Time Work

Response options to order declines due to the coronavirus crisis: Short-time work as a useful instrument against imminent job cuts

The spread of the coronavirus has still not been stopped. Germany is also affected in the meantime. Companies are already feeling the economic consequences of this crisis. In some companies, full-time employment is therefore no longer possible. This crisis has to be borne by the company within the scope of its entrepreneurial risk, which results in that the employer remains obliged to pay the full remuneration. The instrument of short-time work is available to reduce the state of ‘remuneration without work’ and the resulting damage and, if possible, even to avoid dismissals for operational reasons.

What is short-time work and what is its objective?

Short-time work is the temporary reduction of regular working hours with a corresponding reduction in remuneration due to a considerable loss of work. The working hours can be reduced proportionally or completely (so-called ‘zero short-time work’). Short-time work may affect all employees of a company or only parts of the workforce. The aim of short-time work is to overcome economic crises and avoid dismissals for operational reasons.

How is the employer awarded so-called ‘short-time work allowance (in German: Kurzarbeitergeld)?

The short-time work allowance is granted by the responsible German job agency (in German: Agentur für Arbeit). The social insurance law basis for short-time work allowance is found in Sections 95 et seq. German Social Security Code 3 (in German: SGB III). The first requirement for the granting of short-time work allowance is a "considerable loss of working hours", Sec. 95 sentence 1 no. 1, Sec. 96 SGB III.

This requirement is met if the loss of working hours

  • is based on economic reasons or an unavoidable event,
  • it exists only temporarily, and
  • is not avoidable.
  • In addition, at least one third of employees must be affected by a loss of earnings of more than 10%. (Attention: this last requirement will be changed because of Corona crisis. Only 10% of all employees must be affected by the loss earnings).

At present, the trend is for employment agencies, that a loss of working hours due to or as a result of the coronavirus and/or the associated safety measures is normally due to an ‘unavoidable event’ or to ‘economic reasons’ within the meaning of Sec. 96 para. 1 No. SGB III.

Politics is also reacting: For example, the legislator has passed the "Act on Temporary Crisis-Related Improvement of the Regulations for Short-Time Work Allowance", which facilitates access to short-time work due to the coronavirus. This law will come into force at the beginning of April 2020 at the latest.

Nevertheless, it remains to be seen whether the previous recommendation for action and the corresponding positive decision by the Employment Agency will be implemented.

What are the labour law implications of introducing short-time work?

In principle, the main performance obligations of the parties to the employment contract are based on an exchange relationship: the employee performs the contractually owed work, the employer pays the contractually agreed remuneration.

The introduction of short-time work means that the main obli gations of the parties under the employment contract are partially or completely suspended, i.e. suspended.

The employee is (partially) released from his or her work obligations within the agreed working hours and receives short-time working allowance for the suspended part. The short-time allowance, which employees receive in addition to the reduced wage during the period of short-time work, is a benefit from unemployment insurance. The short-time allowance is intended to compensate at least partially for the loss of earnings.

NOTE

Since the employee, according to the jurisdiction of the Federal Labor Court (BAG, ruling dated January 25, 2012, 5 AZR 671/10, BAG, ruling dated April 22, 2009, 5 AZR 310/08) retains his wage entitlement in the amount of the short-time working allowance, the employer must absolutely ensure that the entitlement to short-time working allowance actually exists and is not revoked.

Is a legal basis needed for the introduction of short-time work or can the employer introduce it unilaterally on the basis of his right of direction?

Due to the above-mentioned intervention in the main duties, the employer cannot introduce short-time work unilaterally. A legal basis is required.

It could be:

  • contractual employment agreement
  • Works council agreement a Collective bargaining agreement
  • Sec. 19 KSchG (German Act against Unfair Dismissals) for previous collective redundancies

We would be happy to check your employment contracts to see whether such regulations are included in the regulations you use.

What exactly does the employer have to do in order to receive short-time working to receive? Is it possible to give notice during short-time work?

According to Sec. 99 SGB III, the employer must notify the responsible employment agency in writing or electronically of the workload and provide credible evidence that a considerable amount of work is lost. Furthermore, it must be made plausible that the operational requirements for the short-time work allowance are fulfilled.

Please use the forms of the agency for work they do.

When deciding how high the loss of working hours will be, the following must be taken into account:

In principle, dismissals can also be declared during short-time working. However, dismissals for operational reasons, on which short-time work is based, are not permitted, since there is no urgent operational requirement for the dismissal. This means that you could be blocked with operational terminations, since the underlying reason for termination also led to reduced working hours. You must therefore make a realistic forecast of the further development of your economic situation before applying for short-time work. Admittedly, this will not be possible without further ado in the current situation. Of course we are happy to assist to determine such forecast.

How much is the short-time working allowance?

The short-time allowance currently amounts to 67% of the net difference in remuneration (parents) or 60% of the net difference in remuneration. Short-time work compensation is currently granted for a maximum period of twelve months. As mentioned at the beginning, there are also currently political considerations to increase the amount of short-time working compensation. This is not yet the case, but could change.

It is important that the employer first makes advance payments with the short-time working allowance and then has the corresponding amounts refunded by the Federal Employment Agency does not have to go to the employment agency to apply for the appropriate performance. This is exclusively on the part of the employer.

Can the employer order overtime during short-time work?

No, because the ordering of overtime while receiving short-time working compensation would be an indication that the loss of work was not unavoidable.

Exceptionally, overtime is permitted in cases of emergency or urgency. However, you should avoid overtime during reduced working hours if possible.

Can vacation be taken during short-time work? Can the employer reduce newly accrued vacation during short-time work?

Yes, your employees can also take leave during short-time work.

However, any salary reductions due to short-time work are not taken into account when calculating the vacation pay pursuant to Sec. 11 (1) 3 BUrlG (German Vacation Act): The employee receives holiday pay in the amount of his usual salary.

And yes, you can shorten the newly created leave: According to the case law of the European Court of Justice (ECJ, judgment of 22.4.2010, C-486/08, NZA 2010 p. 557), you can cancel or reduce the new leave accrued during the short-time work. This is because: The short-time worker is insofar for which it is recognised that the leave is equivalent to the leave Federal Employment Agency.

Please also inform your payroll accountant.

CURRENT DEVELOPMENT

German federal government is expected to release a regulation on the new short-time working rules at very short notice. The aim is to facilitate the transition to short-time working and to relieve the companies' financial burden. The German legislator has already adopted the basis for such an ordinance with the "Act on the Temporary Crisis-Related Improvement of the Regulations for Short-Time Working Benefits". There will be the following innovations:

  • It is no longer necessary for 30%, but only at least 10% of the employees to be affected by the loss of working hours.
  • There is no need to build up / use negative working time balances to avoid short-time work.
  • Reimbursement, in whole or in part, of social security contributions payable by employers alone for employees receiving short-time working benefits.
  • Temporary employees are also to receive short-time compensation in the future.

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