On 1 January, the Fourth Bureaucracy Relief Act (Viertes Bürokratieentlastungsgesetz– “BEG IV”) came into effect. This legislation introduces significant changes to requirements around the form of contracts in Germany with the objective of simplifying certain administrative processes, among them the completion of employment contracts.
What is the status quo?
Until the end of last year, the “written form” was a standard requirement for employment contracts. In order to comply with the written form requirement as set out in Sec. 126 of the German Civil Code (Bürgerliches Gesetzbuch), the document must be signed with a “wet-ink” signature by the issuer or, in the case of a contract, by both parties on the same document. Although an employment contract can theoretically be concluded orally, the main contractual elements are required to be in written form by the Act on the Notification of Terms and Conditions of Employment (Nachweisgesetz) which provides for fines of up to EUR 2,000.00 per breach, so that is one piece of theory not worth exploring further.
What does “text form” mean?
BEG IV now aims to streamline administrative processes for employers, particularly by replacing the written form with a “text form” requirement (Section 126b of the Code) for certain matters. In contrast to written form, the text form requirement is satisfied by a legible declaration naming the declaring party made on a durable medium. The medium must enable the recipient to keep a record of and store the declaration. This allows employers to comply with that requirement by, for example,
- sending the document via email or fax,
- or scanning and saving it as a PDF before handing it over on a suitable medium, such as a flash drive.
What are the specific implications for employment law and HR processes?
With regard to employment law, BEG IV is particularly relevant in the following three areas:
Employment contacts
- It includes an amendment to the Act on the Notification of Terms and Conditions of Employment (Nachweisgesetz), which previously required material contractual terms and variations of them to be in writing and signed by both parties.
- As of 1 January, this allows employers to use text form for most employment contracts.
- The changes allow the use of text form for the time limit on retirement age, which is typically included in employment contracts, but by Section 14 of the Part-Time and Limited Term Employment Act (Gesetz über Teilzeitarbeit und befristete Arbeitsverträge), this does not apply to any other time-limited employment contracts. Regular fixed term contracts must therefore still comply with the written form requirement and therefore continue to require a wet signature by both parties.
Parental leave request
- BEG IV allows requests for parental leave to be submitted in text form, e.g. via email, which previously had to be submitted in written (signed) form.
Job references
- Another consequence of BEG IV is that, with the employee’s clear consent, job references can now be issued in “electronic form” instead of the previously mandatory written form. Hence, job references will no longer require wet signatures. An employee offered an oral reference only can take legal action to compel the former employer to provide it in writing.
- It should be noted that “electronic form” differs from text form, so it cannot be provided via a simple email or any of the other examples mentioned above. This form requires the employer to use an electronic document bearing their official “signature”, for example using DocuSign.
- Consequently, as that signature can only be used by employers with adequate software and only by those employees with access to it, in addition to the need for express employee consent, this does not represent a significant simplification of HR processes so far as references are concerned.
Where will written form still be required?
While BEG IV affects a variety of instances in relation to employment law and enables employers to modernise and digitalise certain elements of their administrative processes, the written form will still be required for several important tasks. For example, notices of termination, termination agreements and post-contractual non-competition clauses must still be in written form, i.e. with a wet-ink signature. If they are not, they will simply be void and so totally ineffective at law. As mentioned above, fixed-term contracts continue to require written form as well.
Furthermore, these simplifications will not apply to employment contracts in sectors that are regularly affected by illegal work. This includes economic sectors such as catering, industrial cleaning, private security services and others listed in Sec. 2a of the Act to Combat Undeclared Work and Unlawful Employment (Schwarzarbeitsbekämpfungsgesetz). The pre-2025 requirements will continue to apply in those sectors.
What does your organisation need to do now?
In light of these new regulations, companies need to establish clear guidelines as to which form is sufficient for which task. Distinguishing between the specific requirements of written, text and electronic form is especially important. To recap:
“written” means in writing bearing one or more wet-ink signatures
“electronic” means in writing bearing an electronic signature
“text” means in writing with no specific form of agreement mandated.
Consequently, while pre-2025 processes for the issuing and completion of employment contracts remain legally effective for those employers which are happy with them, scope now exists for companies to conduct a review of their standard contract systems to determine whether they stipulate a stricter form than is now required by law.
Lutz Hoheisel contributed to this article.