Digitalisation in employment law – Formal requirements and reducing bureaucracy

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HR departments can’t avoid formal requirements in their day-to-day work, in particular written form requirements. The issue is once again coming to the fore, not least as a result of Federal Minister of Justice, Marco Buschmann’s statement on 21 March 2024 on the Breakthrough in the Evidence Act.

What formal requirements apply?

Depending on the type of declaration in question, legal transactions require written form (Section 126 German Civil Code), electronic form with a qualified electronic signature (Section 126a German Civil Code) or text form (Section 126b German Civil Code). The electronic form can replace the written form unless this is excluded by law. If no specific form is prescribed by law and there’s no other agreement on form, declarations can also be made informally, ie orally. But declarations should at least be made in text form for documentation purposes. Notices of termination, termination agreements and employment references must be made in writing. Electronic form is not excluded for fixed-term agreements, post-contractual non-competition clauses and works agreements, meaning that these can generally also be effectively concluded in electronic form (Section 126a German Civil Code).

Reform of the Evidence Act 2022

Evidence of the essential contractual terms and conditions in accordance with the Evidence Act (still) requires the written form. As the word “evidence” already implies, this is not a constitutive act. Rather, the proof is of a purely declaratory nature – the agreed conditions apply regardless of the written proof.

This is particularly important in connection with fixed-term agreements. A fixed-term agreement must be made in the prescribed form before the start of employment, as otherwise an unlimited employment relationship is created. It should also be noted that intentional violations of the Evidence Act constitute administrative offenses. A fine of EUR2,000 per employee can be imposed if the essential contractual conditions are not communicated in writing.

Bureaucracy Relief Act IV (BEG IV)

The Federal Minister of Justice’s statement says that “proof of the essential contractual conditions should be made possible in text form, provided that the document is accessible to the employee, can be saved and printed out and the employer receives proof of transmission or receipt.” Only at the employee's request and in economic sectors or branches pursuant to Section 2a para. 1 of the Act to Combat Illegal Employment, must proof be provided in writing. Formal simplifications are also planned for temporary employment.¹

Special requirements for internationally managed companies

The written form requirement for terminating employment poses a challenge for internationally managed companies. The handwritten signature of a legal representative is generally required on the notice of termination. But there’s often no local legal representative, for example because they’re employed by the foreign parent company. In practice, there are two options:

• Companies keep handwritten powers of attorney signed by the legal representative with sole power of representation “on hand” locally, which the authorized representative can then send together with notices of termination signed by hand.
• Employees are informed of the authorization before the notice of termination is issued. In principle, there are no formal requirements for this. It’s even possible to give notice by implication. This presupposes that the person giving notice of termination holds a position that’s regularly associated with the corresponding power of attorney and that the employee is aware of this (eg through appointment as HR manager with corresponding communication to the workforce).

Practical advice

As long as the Bureaucracy Relief Act IV has not yet been implemented, companies should continue to comply with the written documentation requirements. They should take care to ensure that they comply with the respective validity requirements for declarations (such as the agreement on a fixed term).

Even informal statements, such as warnings, should be documented for evidentiary purposes to prepare for any further steps under employment law. Internationally managed companies and companies with legal representatives who are frequently away on business trips for long periods of time should take precautions by issuing appropriate powers of attorney.

¹Please also see our blog post here