German employment law is known for its complexity and employee-friendly orientation. As an HR expert or entrepreneur, it is therefore essential to understand the basic aspects of HR compliance in order to avoid legal pitfalls and costly litigation. In the following, we take a closer look at five of the biggest sources of error in connection with HR compliance and German employment law.
#5 The post-contractual non-compete clause
The post-contractual non-compete clause is an agreement which, after termination of his employment relationship, prohibits an employee from competing with the former employer.
But even before the — admittedly complex — clause drafting, HRlers should pay attention: A post-contractual non-compete clause always comes at a price, namely that of the so-called Maternity allowance!
Employers are therefore well advised to consider carefully whether a non-compete clause, based on the know-how and position of the employee, is actually proportionate.
Once agreed, a unilateral solution by the employer to the non-compete clause is only possible under certain conditions and compliance with certain deadlines!
Once the employer has overcome the hurdle of “whether” and, after careful consideration, has come to the conclusion that a post-contractual non-compete clause is desired, the next stumbling blocks lurk with the “how”.
Because: Competition clauses are prone to errors!
Errors in competition clauses regularly result in the invalidity or non-binding nature of such clauses. This either means that neither employee nor employer are bound by the agreement, or that the employee can choose whether he complies with the non-competition clause and is therefore entitled to payment of the waiting allowance, or whether he ignores it.
Claims for damages on the part of the employee are also possible in the event of invalidity!
#4 The ineffective time limit
The fixed-term term of employment contracts in Germany is subject to strict legal requirements. Under German law, employment contracts can be limited in time, with or without factual reason.
If there is a time limit without cause, this is possible for a maximum of 2 years: within this period, the contract may be extended three times.
But beware: Make a few changes at the same time as an extension? It's a bad idea.
In addition, do not forget: When concluding a fixed-term employment contract without factual reason, no previous employment relationship must have existed!
Quickly digitally sign the fixed-term employment contract? Bad news.
Even when it comes to fixed-term contracts with factual reasons, mistakes can occur quickly. Although the Act contains a list of factual reasons, this is not exhaustive; other reasons not mentioned in the Act may also in principle justify the admissibility of a time limit.
However, extreme caution is required here, as the reason should be at least equivalent to the reasons set out in the Act.
In the event of a dispute, the competent court may assess the facts differently than the employer; a successful action for a time limit by the employee results in the employment relationship being Closed indefinitely applies.
#3 bonus, bonus
How can something that sounds so beautiful cause so many headaches? Simply put, bonus payments are a complex matter.
Although bonus payments are common practice to motivate and/or retain employees with the company, it is also one of the areas where the most legal mistakes occur. And these mistakes quickly become very expensive.
First of all, when it comes to bonuses, it is important to differentiate between bonuses, commissions and special payments, because not all bonuses are the same.
Performance-based bonus payments relate to individual/company benefits and grant the employee a variable additional compensation claim.
Performance-related bonuses cannot be voluntary — if the set goals are achieved, the employee is entitled to compensation.
If these are recurring payments, a bonus agreement should be concluded.
Bonus agreements are prone to errors: The regulations must not be contradictory or opaque. Unclear or vague wording repeatedly means that employees can assert claims that were not intended in this way.
Bonus agreements should also include additional provisions, such as the option to cancel the agreement, which must be carefully worded to be lawful.
Other special payments (“gratifications”), on the other hand, are one-off payments that are linked, for example, to length of service or loyalty to the company. These should always be subject to the condition that they are voluntary so that there is no entitlement (e.g. vacation pay, Christmas bonus).
However, if the additional payment is paid regularly, the employee may be entitled to it.
Employment contracts often include a so-called “voluntary requirement” for benefits, which is intended to prevent such a claim from arising. However, any bonus (e.g. in a cover letter) should indicate that this payment is voluntary and that there is no entitlement.
#2 Fake self-employment
Pseudo self-employment refers to a situation in which a person is working as a self-employed person or freelancer but should in reality be considered an addict.
If, as part of a tax audit, the existence of bogus self-employment is established, this is associated with serious legal and financial consequences for the company concerned.
Criminal liability under Section 266a StGB is also considered.
What is relevant is how the collaboration is actually lived out and not what is in the freelancer contract.
Bogus self-employment can be established even after the freelancing has ended.
It is important to note that the assessment of bogus self-employment depends on various factors, so for an initial risk evaluation and best practices, twinwin customers can use our Freelancer check use.
# 1 The dismissal protection lawsuit
After expiry of the probationary period and the protection against dismissal, termination of the employment relationship is regularly only possible if there are special reasons (operational, personal, behavioral) and subject to compliance with the period of notice. Effective dismissal by the employer is subject to stringent legal requirements and ineffective terminations exposed the company to both significant legal and financial risks.
Within three weeks of receipt of a notice of dismissal, the dismissed employee has the opportunity to file an action for protection against dismissal with the competent labor court.
Such a lawsuit not only costs the employer a lot of money, but also nerves. On the other hand, how not only fair but also legally secure can separate, Twinwin customers find with our Breakup manager out.
Last but not least:
Perhaps the biggest source of errors in German employment law is not staying up to date.
In this and last year alone, the legal situation in employment law changed drastically, meaning that expensive mistakes lurk around every corner, even with the best intentions.
How do you rate your knowledge of employment law? Are you just getting started or are you already an expert? Figure it out with the twinwin employment law quiz upon German or english! Attention, difficult! ;-)
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