The German Parliament (Bundestag) adopted the second Social Protection Package in May 2020 (Official Journal (Bundesgesetzblatt, "BGBl.") I pp. 1055 et seq.) after access to social services was made easier under the first Social Protection Package in March 2020. The "Act on Social Measures to combat the Corona Pandemic" (Gesetz zu sozialen Maßnahmen zur Bekämpfung der Corona-Pandemie) (Social Protection Package II) took effect on 29 May 2020 and has resulted primarily in the following (temporary) changes in the area of employment law and social security law:

• Increase of compensation for cut in employment hours starting respectively with the fourth and the seventh month in which benefits are granted
• Expanded possibilities for workers with reduced hours to earn money on the side
• Extension of the period of entitlement for unemployment benefits
• Expansion of the possibilities for video conferences in labor courts and social benefits courts

Scheduled increase in compensation for workers with reduced hours after a longer period of receiving benefits

According to the previous rule, compensation for reduced hours was uniformly set at 60 % of the lost wages (67 % for workers with children). The following applies under the new rule:

• Starting with the fourth month of receiving benefits, calculated starting with March 2020, compensation for workers with reduced hours is increased to 70 % (77 % for workers with children) of the lost wages if the working hours have been reduced by at least 50 %.
• Under the same prerequisites, compensation for reduced hours increases to 80 % (87 % for workers with children) of the lost wages starting with the seventh month of receiving benefits.

Employees who have had reduced working hours since March 2020 (and whose working hours have been reduced by at least 50 %) already are entitled to increased compensation for reduced hours starting with June 2020. Employees whose working hours are reduced (in the future) by less than 50 % are excluded from the new rule and will continue to receive compensation for reduced hours in the amount of 60 % and 67 % respectively of the lost wages.

The rule is limited until 31 December 2020 at the latest. Employees who continue to have reduced hours in January 2021 will again receive compensation for reduced working hours in an amount of 60 % and 67 % respectively of the lost wages under the current law. The temporary increase of compensation for reduced hours is implemented by insertion of a corresponding subparagraph 2 in section 421c of Book Three of the Social Security Code (Sozialgesetzbuch Drittes Buch “SGB III”).

Expansion of the possibilities for workers with reduced hours to earn money on the side

In addition to increasing compensation for reduced hours, the new Social Protection Package expands the possibilities for workers placed on reduced hours to earn money on the side. In general, section 106 para. 3 SGB III provides that earnings from any work on the side must be credited against the compensation for reduced working hours. Under the first Social Protection Package in March 2020, an exception to this general rule was established in section 421c SGB III. Since that time, crediting such earnings has been precluded if the earnings on the side result from working in so-called "essential industries and professions" (medical personnel, agriculture, food supply etc.).

The restriction to essential industries and professions was eliminated under the new Social Protection Package. Employees affected by reduced hours can now earn money on the side in all industries and professions up to the amount of their previous monthly income without having to fear a reduction in the compensation for reduced hours. The maximum time limit on the temporary possibilities to earn money on the side without the money being credited against benefits was extended at the same time from 31 October 2020 to 31 December 2020.

Employees should be aware of prohibitions on competition which continue to exist without any change during a period with reduced working hours. Any contractually agreed reservation for approval by the employer must also be complied with prior to commencing work on the side.

Extension of the period of entitlement for unemployment benefits

Employees whose entitlement for unemployment benefits would end during the time between 1 May and 31 December 2020 will receive unemployment benefits for up to three months longer. The background is that the legislature assumes that looking for jobs will require a greater amount of time due to the current economic situation. This rule was implemented by inserting a new section 421d SGB III.

Expansion of the possibilities for video conferences at the labor courts

The (legal) possibilities for using video conferences in labor courts has been expanded by inserting a new section 114 German Act on the Labor Courts (Arbeitsgerichtsgesetz, "ArbGG"). The rule applies on a temporary basis until 31 December 2020.

"Hearings by way of transmission of images and sound" were already possible at the labor courts under section 128a German Code of Civil Procedure (Zivilprozessordnung, "ZPO") for parties, legal counsel and representatives (as well as witnesses and experts). As a result of the new rule, the court can now also permit layjudges to participate in an oral hearing by means of a video conference. The prerequisite for this is that there is an "epidemic situation of national scope under section 5 (1) sentence 1 of the German Act on Protection against Infectious Disease (Infektionsschutzgesetz, "IfSG")", as a result of which the layjudge cannot be "reasonably expected" ("unzumutbar") to be physically present at the oral hearing. Under the new rule, layjudges can also participate, subject to the same prerequisites, by video conference in consultation, voting as well as announcing decisions. The German Parliament determines whether there is an "epidemic situation" (section 5 (1) IfSG). This occurred on 25 March 2020.

Furthermore, section 114 (3) ArbGG contains the requirement that the court, acting on the own initiative, should permit the parties, their counsel and representatives (as well as witnesses and experts) to participate in oral hearings by video conference in the case of an "epidemic situation of national scope under section 5 (1) sentence 1 German Act on Protection against Infectious Disease". However, there is no duty to participate by means of a video conference.

Rules with almost identical wording were introduced for the social benefits courts (on a temporary basis until 31 December 2020) in section 211 German Act on the Social Benefits Courts (Sozialgerichtsgesetz, "SGG").

Under the second Social Protection Package, a further statute (BGBl. I pp. 1044 et seq.) created the (also temporary) legal basis for using video conferences for works councils. Pursuant to section 129 German Works Constitution Act (Betriebsverfassungsgesetz, "BetrVG"), meetings of works councils can be conducted using video conferencing and conference calls if there is assurance that third parties cannot gain knowledge about the content of the meetings. Under the same prerequisites, meetings of employees can be conducted with video conferencing. This rule applies retroactively as of 1 March 2020, so that resolutions adopted after that date by way of video conferencing and conference calls are not invalid simply for that reason. The rule also applies until 31 December 2020.

Effects of increased compensation for workers with reduced hours on business practice

Companies where reduced working hours had already been introduced on the basis of the German Regulation on Compensation for Reduced Hours (Kurzarbeitergeldverordnung, "KugV") on 1 March 2020 and in which at least 50°% of the working hours were reduced must be prepared to make higher payments in advance for compensation for workers with reduced hours for payment of salary for June 2020.

The amount of the compensation for reduced working hours under the law can furthermore especially have an effect on so-called extra amounts which are paid by employers in addition to compensation for reduced working hours (normally on the basis of a shop agreement). The following will describe the potential effects of the statutory increase of compensation for reduced working hours on various rules concerning extra payments:

Topping up the compensation for reduced working hours to a flat (percentage) amount of the original net salary

If employers make additional payments on top of the compensation for reduced working hours up to a certain flat amount (e.g. "increase up to 80°% of the original net salary"), the employers also profit from the statutory increase in compensation for reduced working hours because the difference to be paid by the employer is reduced accordingly. If the originally agreed amount is completely reached by means of the compensation for reduced working hours, the duty of the employer to make additional payments is completely eliminated. Based on the current situation in the law, the duty to make additional payments would apply again starting on 1 January 2021.

Topping up the compensation for reduced working hours in the amount of a percentage of such compensation

Caution should apply in the case of agreements which are linked as a percentage directly to the compensation for reduced working hours. As a result of increasing the compensation for reduced working hours, the percentage link would result in an increase of the amount to be paid additionally by the employer. Based on the text of such a rule, this could lead to payments of salary which (incl. compensation for reduced working hours) could exceed 100°% of the original net salary, which would de facto be equivalent to an increase in salary.
Companies with corresponding rules on additional payments should examine these rules. A claim of the employer against the works council for adjustment of the shop agreement might be conceivable based on the principles of interference with the basis of the transaction (section 313 German Civil Code, Bürgerliches Gesetzbuch, "BGB").

Reasonable reference point for additional amounts: the amount of the difference compared to the previous net income

A rule on additional payments which appropriately reflects the interests of the parties should generally provide for a fixed percentage of the amount of the difference between the original net salary and the actual net salary after introduction of reduced working hours, including the benefits for reduced working hours. In this situation, a statutory increase of the benefits for reduced working hours leads on the one hand to a reduction in the top-up amount for the employer, but on the other hand - from the employee's point of view - it does not cease entirely.. Therefore, both parties profit from a statutory increase in the benefits for reduced working hours. Furthermore, caps can be agreed which limit an increase for the employer (e.g. to a maximum of 90°% of the original net salary).

Conclusion and relevance for business practice

The increase in the benefits for reduced working hours as well as the extensive possibilities to earn money on the side under the new Social Protection Package can partially mitigate the financial losses for employees with reduced working hours. At the same time, the top-up amounts of the companies can decrease when the benefits for reduced working hours increase. On the other hand, primarily the employees and the employers who have already had reduced working hours for several months profit from the new rule. This involves mostly companies which are very severely affected by the economic consequences of the COVID-19 pandemic. In the case of employers which do not or cannot pay extra amounts on top of the benefits for reduced working hours, the advance payments for benefits for reduced working hours increase, anyway. It can be hoped that the reimbursement from the Federal Labor Agency (Bundesagentur für Arbeit) will be made in a more timely manner in the future.
It remains to be seen to what extent the new possibilities for using video conferencing will be implemented in practice. Especially the technical prerequisites for the courts do not appear to be present at many locations. In this respect, the Federal Council (Bundesrat) states in its position paper dated 15 May 2020 (Printed Materials of the Federal Council – Bundesrat-Drucksachen, BR-Drs. 245/20):

"As a precautionary measure, the Federal Council also points out that implementation of the (intended) target state of conducting hearings and taking testimony by way of audio-visual transmission under the new rules in the legislation concerning the labor courts and the social courts will practically, technically and financially not be possible until the announced expiration of the rules in most of the German states. Contrary to the assumption forming the basis of the underlying draft statute, the equipment needed for video conferences is not yet available at all courts and also cannot and must not be obtained by private measures or replaced by hardware and software procured privately."

In any event, there are doubts that the hoped-for "digitalization effect" will take place as a result of the new changes in the law.

Tobias Nuxoll
Hamburg