The status of a managing director (Geschäftsführer) of a German limited liability company (GmbH) is determined (i) by the appointment as managing director and, thus, the corporate office as a legal representative of the company and (ii) by the underlying service agreement. If a company intends to separate from a managing director, both, the appointment and the service agreement have to be terminated. It’s important to realize that these are two different issues that need to be addressed when parting ways with a managing director. READ MORE
Very recently, the European Court of Justice (ECJ) held that an automatic forfeiture of vacation entitlements or vacation compensation entitlements without prior notification of the employee contravenes EU law. The German Federal Labor Court (Bundesarbeitsgericht, BAG) now has joined this case law in its decision of February 19, 2019. This requires employers to take action. READ MORE
The German Federal Vacation Act (Bundesurlaubsgesetz) provides that vacation has to be approved and taken in the current calendar year. The employee is meant to actually take the vacation and enjoy a rest. READ MORE
Undoubtedly driven by an interest in drawing UK-based banks to Frankfurt and becoming an EU hub for US banks post-Brexit, the German government recently picked up a proposal to relax dismissal protection for high-earning bankers. So it may very well soon be easier for banks in Frankfurt to part with their top employees. READ MORE
Germany’s Federal Constitutional Court (Bundesverfassungsgericht, BVerfG) has ruled that there must be the option of registering a gender that is neither male nor female on birth certificates. The introduction of a third gender will raise questions for employers too, in particular with regard to gender discrimination.
In late 2017, the BVerfG held that the constitutional rights of individuals who cannot be permanently categorized as belonging to either the male or the female gender are being violated if the law on civil status requires them to register their gender while not allowing any entry other than a positive gender definition as either male or female.
The case was brought by a registered female whose chromosome testing revealed that they were neither of female or male sex. The plaintiff had brought the action after several lower courts had ruled against a bid to introduce the gender options “inter” or “diverse” in the birth register.
In Germany it has been possible since 2013 to leave the gender box blank on the birth certificate or refer to the option “not stated” for people born with characteristics of both males and females. However, the court held that referring those affected to these options does not suffice and is unconstitutional.
According to the grounds, the German constitution protects the sexual identity of a person given that this is at the core of an individual’s personal identity and social perception. This protection also covers the positive description of one’s gender.
Now, the German legislature has until December 31, 2018, to implement new regulations in line with the BVerfG’s guidelines. The category could be called “inter” or “diverse.” Once the law is passed, Germany would become the first European country to offer intersex people the option of identifying as a designation other than male or female.
Some countries, including Australia and New Zealand, do recognize intersex as an option on official documents. In 2015, a law introduced in New York resulted in more than 700 people changing their birth certificates to “intersex.” In 2017, California became the second U.S. state to allow for such change.
Until the new law has passed, according to the court, courts and state authorities should no longer compel intersex people to choose between identifying as male or female. It is highly likely that a third gender will be introduced by such law. In employment law, too, this raises new questions, particularly in relation to discrimination on grounds of gender.
Gender-Neutral Job Advertisements
Discrimination on the grounds of gender must be prevented in accordance with the German General Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz, AGG). If employers disregard this rule, they face strict liability damages claims and compensation claims on the part of an affected employee. Also, the intangible damage suffered in the form of damage to a company’s reputation in case of gender discrimination is not to be underestimated, especially given the new power of social media where everyone is in the position to cause a PR crisis (aka shitstorm) for a company by just one tweet or post.
Employers must, in particular, design job advertisements in a gender-neutral manner. Since the ruling of the BVerfG, it must be assumed that the term “gender” no longer solely refers to men and women but includes individuals who do not belong to either the male or the female gender.
If one interprets section 1 AGG against the background of the recent ruling, the prohibition of gender discrimination will now no longer only apply to men and women but also to individuals who do not belong to either the male or the female gender. Consequently, there is a strong argument in favor of no longer addressing job advertisements only to women or men but also to a third gender in order to comply with the principle of gender neutrality as newly established by the BVerfG.
What Does the Ruling Mean in Practice?
Employers are well advised to review their current practice regarding job advertisements now and, in any event, no later than when the new law enters into force, presumably on January 1, 2019. The adjustment of job advertisements is also advisable in view of the reversal of the burden of proof under the AGG. If a job advertisement is placed without reference to the third gender, this will likely constitute a fact that gives rise to the presumption that this gender has been discriminated against. As a result, in the event of a dispute, the employer would have to rebut this presumption.
Gender-neutral broader language and job descriptions continue to be safe in view of a possible discrimination on the basis of gender. There is a strong tendency amongst legal advisors, however, to expressly make reference to the third gender in job advertisements. Employers should make it clear in their job advertisements that they are open to all kinds of people, regardless of their gender, and that they welcome their applications.
In this context, if no neutral job title can be found, it may be appropriate to include designations in brackets. The previous addition “(m/f)” does not take account of the third gender and therefore will likely give rise to a presumption of discrimination on the grounds of gender. The mere notice that “m/f” is deemed to include all individuals will likely not suffice to avoid any sanctions under anti-discrimination law. Based on the term “inter/diverse” suggested by the BVerfG, the designation in brackets should be extended to read “(m/f/d),” “(m/f/i)” or “(m/f/x)”.
Action to Take for Employers
Regardless of the need for action which has now clearly arisen on the part of the legislature, employers should pay closer intention to potential gender discrimination and look into the practical consequences of the ruling. Regardless of the decision, employers should create a work environment that is free from discrimination by also taking into account different gender identities.
As the law in this area continues to develop, here are some tips for employers looking to be proactive and minimize risk:
- If you have not already, consider rewriting non-discrimination and anti-harassment policies to include gender identity and train employees on it.
- Re-examining gender-based dress codes is a good idea.
- Employees should have access to restrooms consistent with their gender identity: If possible, add a gender-neutral option or a single-occupant restroom.
- Keep tabs on case law and legislation so you are prepared.
In practice, managing directors (Geschäftsführer) frequently try to attack the validity of a dismissal and bring unfair dismissal claims. In a recent decision, the Federal Labor Court (Bundesarbeitsgericht) has again rejected such claims. The court reiterates that managing directors do not enjoy rights of protection against dismissal if their appointment as managing director has been in place at the time notice of termination was given.
The German Dismissal Protection Act Does Not Apply to Managing Directors
Pursuant to section 14(1) no. 1 of the German Dismissal Protection Act (Kündigungsschutzgesetz, KSchG), the provisions on dismissal protection
“do not apply, within the operation of a legal entity, to the members of a corporate body which has been appointed to legally represent the legal entity“.
Every Chinese investor not only needs to be aware of cultural differences when considering investing in Germany, but also has to have a basic understanding of legal issues.
German employment law provides for a good level of employee protection, for example in case of termination of employment. Being familiar with some basic principles of German employment law can help Chinese investors avoid pitfalls that may lead to severe sanctions by authorities as well as financial obligations towards employees.
Our Orrick Germany China Desk gives a brief outline of German employment law and what Chinese investors and businesses investing or doing business in Germany need to know in our bilingual English-Chinese guideline.
Germany’s Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) has overturned the controversial case law of the Federal Labour Court (Bundesarbeitsgericht – BAG) on fixed-term contracts. The controversial judgment handed down by the BAG in 2011 with regard to what is known as the “prohibition of subsequent contracts” exceeds the limits of what is permitted under the German constitution in terms of judge-made law.
Back in 2011 the BAG had decided that a previous employment with the same employer did not preclude a fixed-term contract without objective justification as per section 14(2) of the German Act on Part-Time Work and Fixed-Term Employment (Teilzeit- und Befristungsgesetz – TzBfG), provided that such previous employment dates back more than three years. The Federal Constitutional Court has now quashed this case-law. This is expected to have substantial repercussions in practice.
Implementation of major restructurings in a time- and cost-effective manner involves a variety of challenges, not only under German employment law. If used correctly and structured in a creative and tailored way, voluntary leaver programs can constitute an attractive and effective tool for staff reductions. There are, however, a number of potential legal pitfalls that must be avoided. READ MORE
After months of exhausting, on-off negotiations with changing negotiation partners at the table, Angela Merkel’s center-right Christian Democratic Union (CDU/CSU) and the center-left Social Democratic Party (SPD) agreed on a new coalition agreement for a third grand coalition – usually referred to as “GroKo” in Germany. The deal still has now been formally approved by the 460,000 SPD members in a postal vote, the new government has taken up work a couple of days ago. Our previous blog gives a summary of upcoming changes for employers that are addressed in the coalition agreement. READ MORE