The topic covered in our current newsletter is: “Amendments to the Verification Act”.
Amendments to the Verification Act
Numerous amendments to the Verification Act came into force on 01.08.2022. The Verification Act contains requirements on how, and within which deadlines employers must prove the essential working conditions to their employees. The amendments implement the European Directive on Working Conditions (Directive 2019/1152, hereinafter the Working Conditions Directive). The previous requirement of the strict written form per the regulation – i.e. handwritten signature on paper – remains in place and, proof in electronic form is explicitly prohibited. This anachronism is all the more regrettable, as the directive itself contains the option of electronic transmission. Germany has not made use of this option. The main changes and additions to the Verification Act to implement the Working Conditions Directive, relate to information on work on call, requirements on the procedure to be followed in the event of termination, additional information on the identity of the user companies in the case of temporary work, information on the modalities and remuneration of overtime, the duration and conditions of the probationary period if applicable and any entitlements of the employee to training provided by the employer. Additional information obligations have been regulated for the area of employee posting. The deadlines within which employees must be provided with the essential contractual terms in writing have also been shortened. Previously, employers had one month from the start of the employment relationship to do so. In many cases, this led to the pragmatic solution of concluding the employment contract with the relevant details electronically and then handing the employee another manually signed version of the printed document when he or she starts work. According to the amended version of the Verification Act, this must now be done on the first day of work, specifically with reference to the names and addresses of the contracting parties, the composition and amount of the remuneration (this also includes employer-financed commitments to company pensions as “pension remuneration”, Section 2 (1) no. 7 NachwG) and the working hours. For other relevant information to the working contract, a period of seven days applies, in some cases one month also applies. It remains somewhat puzzling how the legislator envisages an effective “handover”, where initially the start of employment takes place in the home office or if the employer maintains a dependent branch in Germany and is therefore based abroad – thus, in many cases it amounts to delivery by post to ensure the employee has a manually countersigned employment contract in thier hands at the latest on the first day they start work. A new fine has also been introduced. Employers now face a fine of up to EUR 2,000 per employee if they fail to comply with the information requirements under Section 2 of the Verification Act. The obligation to provide proof has also been extended with regard to occupational pension schemes. Pursuant to Section 2 (1) No. 13 NachwG, an employer who promises an employee a company pension via a pension provider must provide the name and address of the pension provider. The deadline for this is one month. The obligation to provide proof does not apply if the pension provider is obliged to provide this information. The explanatory memorandum to the Act cites pension funds, Pensionskassen and life insurance companies as examples which, according to §§ 234k et seq. of the Insurance Supervision Act in conjunction with the VAG Information Obligations Ordinance, must also provide members with the name and address of the pension institution at the start of the pension relationship, so that the employer is exempt from an obligation in this regard. This exemption does not apply to pension provision via a support fund, which is why the EPF EuroBetriebsPensionsFonds e.V. (EPF), for example, provides this information to beneficiaries in its data protection notices. In addition, changes to essential contractual conditions must be communicated, so that, for example, information must also be provided about changes to an existing pension plan before the change comes into force. It is questionable whether this also applies to deferred compensation in view of the new wording of Section 2 (1) no. 7 of the Act. De lege lata, deferred compensation changes the remuneration. If the amendment were to be taken literally, the employer would have to confirm in writing any deferred compensation (possibly initiated or modified via a portal). There are good reasons for rejecting this. The Federal Ministry of Labor and Social Affairs (BMAS) also clarified its understanding of proof of deferred compensation in a letter dated 07.07.2022: “The Verification Act obliges the employer to inform its employees in writing about the agreed essential contractual terms, which also includes the composition and the amount of the remuneration. Accordingly, the employer must provide information about the remuneration, but not about what the remuneration will be used for by the employees in the next step. Therefore, per the opinion of the BMAS, the Verification Act does not apply to occupational pensions in the special form of deferred compensation.”
Important: All the described changes apply to employment relationships beginning on the 01.08.2022. In the case of employment relationships that already existed before 01.08.2022, information about the employer-financed occupational pension must be provided in writing by the employee within seven days of the information request. (Section 5 NachwG).
What is to be done?
Probably the most important advice at this point is not to panic unnecessarily. As explained above, most of the regulations are not new. However, our clients would be well advised to make specific reference in future to the existing employer-financed company pension scheme in the written employment contract and to hand over to their employees the text of the commitment (benefit plan, pension scheme) together with the data protection information of the pension provider (e.g. that of the EPF) as an annex to the employment contract on the first working day at the latest. This largely fulfills the employer’s information obligations regarding the occupational pension plan. Further-reaching information obligations regarding occupational pensions are essentially derived from the German Occupational Pensions Act (Betriebsrentengesetz).
Our clients do not need to worry about this either: the completion of these tasks has always been part of the service agreement in place with Profion.