Will the “digital employment contract” soon be a reality?

Companies are to be given the opportunity to conclude employment contracts by e-mail. A revision of the Verification Act makes this possible.

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In principle, it is up to the employer to decide the form in which an employment contract is to be concluded. Even the conclusion of a contract with a handshake can be effective as the conclusion of an employment contract.

However, the German Act on Evidence (NachwG) presents employers with a hurdle. According to the current legal situation, employers are obliged to set out the essential contractual terms of the employment relationship in writing. The prerequisite for the fulfillment of the obligations of the Nachweisgesetz is therefore compliance with the written form pursuant to Section 126 para. 1 BGB, i.e. a handwritten signature of the evidence by the employer. In today’s digital and fast-moving world with employees working from home or operating globally, this de facto written form requirement creates a bureaucratic burden for companies.

The aim of the Evidence Act is to inform the employee about essential elements of the contract

In principle, a contract can even be concluded without the essential elements of the contract, such as the amount of remuneration, being set out in writing. This results in gaps in information and transparency that employees have sometimes had to accept. The primary aim of the Evidence Act is to create greater legal certainty in the employment relationship, particularly for employees who do not have a written employment contract.

As is so often the case, the Verification Act has its origins in an EU directive. It was created as a result of the implementation of the now obsolete Evidence Directive (Council Directive 91/533/EEC of October 14, 1991). The current version, on the other hand, is based on the provisions of the so-called Working Conditions Directive (Directive (EU) 2019/1152 of the European Parliament and of the Council of 20 June 2019 on transparent and predictable working conditions in the European Union).

Initially, the NachweisG was considered useless for enforcing the legal interests of employees, as violations could not be sanctioned. However, in connection with the national implementation of the Working Conditions Directive within the NachwG (Implementation Act of 20 July 2022, Federal Law Gazette 2022 I No. 27, p. 1174), certain violations of the NachwG were defined as administrative offences punishable by fines. This amendment gave the NachwG its intended power to enforce the interests of employers.

The main purpose of the NachwG is to inform the employee in writing of the essential – usually verbally agreed – contents of the employment relationship. This obligation to provide evidence is set out in § 2 Para. 1 sentence 1 NachwG. A separate obligation to provide evidence is not necessary if the objects of this obligation to provide evidence are set out in a written employment contract. A de facto written form requirement of the employment contract can therefore be read out here.

§ Section 2 NachwG stipulates that the proof must be in writing. Any other form, in particular the electronic form (Section 126 a BGB) is excluded (Section 2 (1) sentence 3 NachwG) and does not fulfill the formal requirements, but leads to invalidity.

The consequence of such a violation is an administrative offense punishable by a fine. According to § 4 para. 1 No. 1, No. 3 NachwG, anyone who fails to provide evidence “in the prescribed manner”, i.e. in disregard of the legally prescribed written form, is therefore acting in breach of the regulations.

Proof in text form (Section 126b BGB) should satisfy the claim in future

Reducing bureaucracy is the order of the day

wrote Federal Minister of Justice Marco Buschmann on March 21, 2024 on X (formerly Twitter). According to this motto, the traffic light coalition is planning to ease the burden on companies in the area of employment contracts and thereby advance the digitalization of the future world of work.

The first steps towards less bureaucracy were initiated by the Bureaucracy Relief Act IV (BEG IV). This provides for evidence in electronic form (Section 126a BGB), i.e. using electronically qualified signatures (qeS).

However, the amendments to the Evidence Act are intended to go one step further. It is envisaged that text form (Section 126 b BGB) will suffice in future instead of the currently mandatory written form for proof. This means that proof in the form of a legible declaration stating the name of the declaring employer, submitted on a durable medium, will be sufficient.

In principle, this makes it possible to conclude an employment contract by e-mail within the meaning of the NachwG. Federal Minister of Justice Buschmann explained in a letter:

Specifically, the Evidence Act should in future allow evidence of the essential contractual conditions to be provided in text form, provided that the document is accessible, storable and printable for employees and the employer receives proof of transmission and receipt.

No exemption without exception: written form on request

Every principle has its exceptions. For example, the employer must provide written proof if employees expressly request this.

There are to be further exceptions in economic sectors that are highlighted in accordance with § 2a Para. 1 of the Act to Combat Clandestine Employment. Here, written proof should continue to be mandatory in order to effectively combat undeclared work.

However, the parliamentary process is not yet complete. It is still possible that further restrictions and clarifications will be included.

There are also still questions regarding technical requirements. For example, it is not yet clear to what extent a document must be made permanently accessible. For example, does a company have to set up a separate area for employees’ personal documents on the intranet or is it sufficient to simply send the proof as a PDF document? Companies with limited IT and software capacity in particular need clarification here.

Another problem, both technically and legally, can be the creation and provision of proof of receipt. According to current case law, an email has been received if the recipient has confirmed that it has been read. Merely referring to the “sent status” or the absence of a notification of non-delivery is not sufficient for legally secure proof of delivery (LAG Cologne, judgment of January 11, 2022 – 4 Sa 315/21; see on the time of receipt of an email in business transactions in particular BGH, judgment of October 6, 2022 – VII ZR 895/21).

Furthermore, according to the decision of the OLG Hamm, a file attachment in which, for example, the employment contract or the required evidence is attached, is only received when the file attachment is actually opened (OLG Hamm, decision of March 9, 2022 – 4 W 119/20).

Should such proof of receipt become mandatory for companies, employers have various options. In any case, it is recommended that digital proofs are at least also sent to the employees’ business accounts and that a read confirmation is also attached. In addition, a corresponding confirmation of receipt or read receipt could be sent to the employees by email, in which the acknowledgement, including the file attachments, is confirmed.

The employer can demand the submission of such a confirmation by means of an individual instruction based on its right to issue instructions.

Furthermore, there is probably a secondary obligation under the employment contract for employees to submit such a confirmation of receipt. Only if a works council exists could the right of co-determination under Section 87 para. 1 no. 1 BetrVG could be affected, as the requirement to submit a confirmation of receipt is likely to be regularly qualified as a behavior-controlling measure.

Consequently, there are problems but also solutions aimed at solving them with regard to the planned changes. It remains to be seen what the Evidence Act will look like at the end of the parliamentary process.

Planned introduction of text form in the NachwG makes digital employment contract possible

However, the government draft of BEG IV does not introduce any innovations in other areas of formal requirements under labor law.

An effective termination of an employment relationship is still subject to the written form requirement in accordance with Section 623 BGB. The consequence of a breach of this requirement would be that the termination is invalid as to form and ineffective. However, as such a termination has considerable consequences for employees, adherence to stricter formal requirements is to be welcomed.

The government draft of the BEG IV does not address Section 14 para. 4 TzBfG, according to which the effective limitation of an employment relationship must be in writing within the meaning of § 126 Para. 1 BGB is required. This omission is problematic, particularly in the context of the planned introduction of a “digital employment contract”, as the Federal Labor Court has ruled that the automatic termination of an employment relationship upon reaching the standard retirement age is considered a fixed term in accordance with Section 14 TzBfG (see BAG, judgment of October 25, 2017 – 7 AZR 632/15). Such an agreement by email would therefore be formally invalid and consequently ineffective.

No changes are envisaged in the government draft with regard to post-contractual non-competition clauses. The conclusion of such a post-contractual non-compete clause, which is generally included in the employment contract, still requires the written form in accordance with Section 74 para. 1 HGB in writing. A digital employment contract with an integrated non-competition clause is therefore still not possible here.

Finally, the government draft of BEG IV provides that employment references pursuant to Section 109 GewO can also be issued in electronic form pursuant to Section 126a BGB with the employee’s consent. However, the requirement to obtain consent in a verifiable form remains, which is unlikely to reduce the bureaucratic burden. It is therefore questionable whether this will actually lead to a reduction in bureaucracy.

The planned introduction of the text form in the NachwG would be an important step towards reducing bureaucracy and promoting digitalization. However, it remains to be seen whether possible bureaucratic obstacles elsewhere could counteract this goal. This applies in particular to the “proof of transmission and receipt” that Federal Minister of Justice Buschmann mentioned. Regrettably, BEG IV does not affect other important formal requirements under employment law, which also cause a considerable administrative burden.

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