New case law of the Federal Labor Court (BAG) on the obligation to record working time

The new case law has consequences for companies that have so far not offered or required the recording of working time at all or only for part of the workforce, as well as for companies that have so far deliberately limited themselves to the minimum standards of working time recording according to the current version of the Working Time Act (Arbeitszeitgesetz – ArbZG). So far, the prevailing view in legal literature has been that this – comparatively low – standard would not change as long as the German legislator (still) remained inactive and did not implement the requirements of the European Court of Justice (ECJ). This view is no longer tenable.

In the following, we summarize which obligations to act result from the Federal Labor Court's landmark decision and what consequences may arise in the event of non-compliance.

A. Introduction

The following changes result from the ruling of the Federal Labor Court (decision of 9/13/2022, case no. 1 ABR 22/21):

1. Employers are obliged to establish an objective, reliable and accessible working time recording system.

2. This applies to all employees.

3. The works council has no right of initiative for the introduction of a working time recording system.

B. Legal background

1. Statutory provisions

Except in certain special cases (such as in road transport and offshore work), there is so far no statutory regulation that explicitly obliges the employer to document the entire working time of employees.

In the starting point, the employer is only obliged to record the exceeding of the regular working time of 8 hours per day and to keep the corresponding documentation for 2 years (which can be checked by the Commercial Regulatory Authority (Gewerbeaufsichtsamt)). This obligation arises from § 16(2) Working Time Act. It applies to all employees except executive employees. The idea that the agreement on "trust-based working time" would spare the parties to the employment contract from having to record working time at all was therefore already wrong on the basis of the existing legal regulation and its interpretation. However, according to § 16(2) Working Time Act, it is sufficient to record the extent of the excess only for days on which the 8-hour limit was exceeded. In contrast, days without any exceeding working time do not have to be documented, neither do times of arrival and leaving nor break times. That means: According to the current German regulation on the scope of the obligation to record working time, very sparse forms of documentation are permitted; in the case of executive employees, it is even possible to dispense with it altogether.

2. ECJ case law from 2019

An EU-wide Working Time Directive of 11/4/2003 (Directive 2003/88/EC) is in force, which is intended to establish minimum regulations for the safety and health protection of workers in each member state in this respect.

On the basis of the Directive, the ECJ has already ruled in 2019 in the case CCOO ./. Deutsche Bank SAE (judgment of 5/14/2019, case ref. C 55/18) that an obligation of the member states follows from the Working Time Directive to regulate by law the necessity of a complete recording of working time. According to the ECJ, the Directive is only effectively implemented if each employer in the member states must provide an objective, reliable and accessible system to completely record the working time for each employee.

§ 16(2) Working Time Act does not comply with this requirement in several respects – already because the norm does not require a complete recording of working time, but possibly also because of the exception for executive employees.

Since the ECJ's ruling, there has been a dispute about whether stricter conditions did now apply immediately. However, the majority of legal commentators were convinced that the legislature first had to take action and amend the national provisions, as § 16(2) Working Time Act could not be interpreted in conformity with EU law in a way that was contrary to its clear wording.

However, the legislator did not hurry. Considering the major challenges faced by companies and employees in the COVID 19 crisis, many addressees of the statutory provision were quite grateful for this. To date, there is no draft bill for a comprehensive reform from the Federal Ministry of Labor and Social Affairs. At the beginning of 2022, a process was only initiated for the introduction of compulsory recording of working time with regard to holders of so-called "mini-jobs" and certain sectors susceptible to working time violations.

3. Development of the law by the Federal Labor Court

The Federal Labor Court has now intervened in the process in a spectacular manner. The opportunity for this were order proceedings concerning the question of whether a works council can take the initiative to introduce electronic working time recording in the company. The applicant works council based this view on the right of co-determination under § 87(1) no. 6 German Works Constitution Act (Betriebsverfassungsgesetz – BetrVG). The lower instance court (State Labor Court Hamm, decision of 27 July 2021, case ref. 7 TaBV 79/20) had decided in favor of the works council and based the right of initiative on § 87(1) no. 6 Works Constitution Act (= technical monitoring equipment), even though, according to the established case law of the Federal Labor Court, this provision specifically, as a pure "right of defense", does not constitute a right of initiative.

The works council lost on appeal before the Federal Labor Court. The 1st Senate found that there was no right of initiative, but stating an unexpected reason: The judges are of the opinion that the obligation to introduce (electronic) working time recording according to the criteria of the ECJ case law did not leave any room for maneuver that could open up the scope of co-determination or the works council's right of initiative. This was because the employer was already directly obliged to do so by law. The Federal Labor Court develops this concept from an interpretation in conformity with Union law of § 3(2) no. 1 Occupational Health and Safety Act (ArbSchG). This regulation is a general clause that requires the employer to take occupational health and safety measures and to provide employees with the appropriate means to do so.

By establishing the principle that this general clause was to be used directly for the obligation to record working time, and was drafted in such an open manner that it could be interpreted in conformity with European law, the Federal Labor Court circumvents the problem that the specific legal provision on the recording of working time – § 16(2) Working Time Act – is probably not open to interpretation. In this roundabout way, the Federal Labor Court arrives at the conclusion that the obligation to introduce the recording of working time already exists without a legislative act.

C. Open questions

The reasons for the ruling of the Federal Labor Court of September 13, 2022, are not yet available. Based on the press release, with regard to some aspects it can only be speculated how far-reaching the consequences for practice will be.

For example, it remains to be seen whether the new case law will result in changes to the scope of workplace co-determination. At first glance, this does not seem to be the case: Up to now, it had been recognized that the works council has a right to have a say on "HOW" a system of working time recording is introduced. That continues to apply. However, the works council cannot influence the "IF” in this regard. The fact that, (also) according to the recent BAG decision, the works council is not entitled to a right of initiative is in line with this previous case law.

Dogmatic criticism of the decision will not be long in coming. Whether the provisions of the Working Time Act, and in particular § 16(2) Working Time Act, are in a priority or supplementary relationship to the provisions of the Occupational Health and Safety Act is largely unresolved. At best, the two laws complement each other. What reasons the BAG will state that § 3(2) no. 1 Occupational Health and Safety Act should take precedence over § 16(2) Working Time Act in this case is awaited with interest.

D. Consequences for practice

Regardless of the questions that are still open, some consequences are already clear:

1. Working time recording for all

The Occupational Health and Safety Act has a wider scope of application than the Working Time Act. The Working Time Directive does not make distinctions here, either. If the employer's obligation to set up working time recording arises from the Occupational Health and Safety Act, this therefore means: for everyone – including executive employees.

2. Companies with and without a works council

The question of whether a works council exists is also irrelevant according to the new case law of the Federal Labor Court. In companies without a works council, the obligation exists without any restrictions, just as in companies that have a works council.

3. No risk of fines (yet)

At least – subject to future initiatives by the legislator – there should be no threat of fines. The law does not provide for any regulation on administrative offences and/or fines for violations of § 3(2) no. 1 Occupational Health and Safety Act. Within the framework of § 16(2) Working Time Act, this is different, meaning that employers who do not meet even the minimum requirements (see above under B.1) must certainly expect appropriate proceedings and sanctions. However, even according to the new case law of the Federal Labor Court, § 16(2) Working Time Act is not the basis of the obligation to introduce comprehensive recording of working time; therefore, the offence linked to this provision does not apply.

4. Other enforcement options

The employer can be required to comply with the obligation to introduce working time recording in various ways:

• The supervisory authority (usually the Commercial Regulatory Authority (Gewerbeaufsichtsamt)) is authorized to issue orders to this effect.

• In the Federal Labor Court’s view, the works council does not have the right to initiate the introduction of working time recording. However, it is to be expected that co-determination will still not stop at the questions of the exact design of such recording. It is unlikely that the employer will be allowed to determine the issue of working time recording entirely on its own in the future. It remains to be seen to what extent the Federal Labor Court will address the distinction in the reasons for the ruling.

• Employees can also demand that working time recording be set up on the basis of § 618 of the German Civil Code (BGB).

A claim for damages may arise from § 618 BGB. In this context, employees for whom no recording of their working hours exists may in future benefit from an easing of the burden of proof. This is an incentive for employers to take the initiative.

5. Claims for overtime pay

However, the absence of a working time recording system does not alleviate the burden of demonstration and proof in the context of an action for the payment of overtime – according to the current case law of the Federal Labor Court (judgement of May 4, 2022, case ref. 5 AZR 359/21). The employee claiming overtime pay cannot therefore refrain from explaining when he or she worked which hours as required. The Fifth Senate of the Federal Labor Court rejected the notion that, in the absence of a record of working hours, the employee's statements on this issue must be assumed to be correct. This is already logical because working time that is considered as such according to the laws on occupational health and safety is not necessarily identical to working time that is subject to remuneration.

Nevertheless, employees will naturally be tempted to refer to the documentation of working time from the area of occupational health and safety if they want to claim remuneration for overtime. Whether and to what extent there is an overlap is regularly also a question of the provisions of the employment contract. Therefore, following the current legal developments, it is all the more advisable to think about specific regulations in the employment contract on overtime compensation and on the assessment of travel and on-call time, if this is not already regulated by company agreements or collective agreements.