After almost three months, Germany’s Federal Labor Court (Bundesarbeitsgericht, or BAG) has published the reasons for its decision that employers must record working hours in Germany. The guidelines for recording working time are clarified, and employers can be somewhat better prepared for what needs to be done. Employers are left with detailed questions, however. There is still no outlook on statutory changes from the legislature. The following is an overview.

What happened so far: Federal Labor Court affirms duty to record working time

The publication of the press release on the Federal Labor Court's decision of September 13, 2022 (Case No. 1 ABR 22/21) sent companies in Germany into a tizzy about three months ago. What they had already been waiting for after the European Court of Justice’s (ECJ) ruling in the CCOO case (14.vMay 2019 - C-55/18) became reality and the Federal Labor Court ruled on the question of whether employers must provide a system for recording working time and thus comprehensively record the working time of their employees. The decision was prompted by a works council's request to have the right of initiative to introduce electronic time recording confirmed.

The Federal Labor Court denied the right of initiative but confirmed a comprehensive legal obligation to record working time. The decision was perceived as a "game changer" by many German employers, first and foremost by those who had previously relied on trust-based working time and, to that extent, had deliberately refrained from monitoring their employees.

Since then, the detailed reasons for the decision have been eagerly awaited. In particular, because the Federal Labor Court did not derive the obligation to comprehensively record working hours from the Working Hours Act, but from the framework provision of Section 3 (2) No. 1 of the German Occupational Health and Safety Act (ArbSchG). Labor lawyers and company representatives were waiting for guidance regarding the implications for existing systems of working time recording, the concept of trust-based work and much more. As usual, the Federal Labor Court took its time in handing out its written opinion and has now answered at least some of these urgent questions with the reasons for its decision, which have now been published.

The reasons for the decision

From a legal point of view, the reasons for the decision are an example of the classic tools of the lawyer's trade, namely the methods of interpretation. The Federal Labor Court spends many lines explaining from which standards the comprehensive obligation to record working time cannot be derived and which arguments do not speak against the corresponding interpretation of Sec. 3 (2) No. 1 ArbSchG. However, we want to concentrate on the statements in the opinion, from which indications can be drawn for practical work in everyday business.

On the scope of the time recording obligation:

The wording of the first guiding principle is already interesting: According to this, employers are obliged under Section 3 (2) No. 1 ArbSchG ...

... to record the beginning and end of the daily working time of employees for whom the legislator has not adopted, on the basis of Article 17(1) of Directive 2003/88/EC, a provision derogating from the requirements of Articles 3, 5 and 6(b) of that Directive.

Many important conclusions can already be drawn from this. While the ECJ's ruling primarily focused on the fact that employers must set up and maintain an appropriate system for recording working time, the Federal Labor Court clarifies that a system for recording working time must not only be set up, but also properly applied. In addition, the scope of the obligation is clarified. The exceptions of the Working Time Directive apply, so that, for example, there is still no obligation to record working time in the case of executive employees.

The Federal Labor Court further states that Section 3 (2) No. 1 ArbSchG, when interpreted in conformity with European Union law, also contains the fundamental obligation for employers “... to introduce a system for recording the daily working time worked by their employees which includes the beginning and end and thus the duration of working time, including overtime.”

If the actual duration of working time is to be recorded, it is not sufficient for employees to "clock in" at the start of work and "clock out" again at the end of the working day. Comprehensive recording of working time then also means recording break times. On the one hand, this is in the interest of employers, which may be able to prove that employees have actually worked shorter hours than the mere recording of time by the start and end of working hours would suggest, and thus have not exceeded the limit of the maximum daily working time of 10 hours, for example. On the other hand, this calls into question the widespread practice in many companies whereby break times are automatically deducted with a certain duration (e.g., 30 minutes).

How and by whom the time recording must be established:

In addition, the Federal Labor Court also comments on the questions of how and by whom the specific recording must be carried out.

Since the legislator has not yet specified a concrete form, there is leeway for employers as to how working time recording is carried out. The recording of working hours does not have to be carried out electronically without exception. The type of working time recording that is appropriate and necessary in a specific company depends on the type of activity in question, but also on the company's circumstances. In individual cases, it may therefore also be sufficient to keep records in paper form, which may be the solution for small companies.

Also, the recording of working time does not necessarily have to be carried out by the employer itself. The Federal Labor Court allows delegation of time recording to the employee. Employers can therefore require their employees to record their working hours independently. However, this still does not satisfy the employer's obligations, because employers must in any case regularly check the correct application of the system—otherwise they will not be fulfilling their duties to protect employees. Furthermore, the Federal Labor Court states:

However, in the selection and detailed design of the respective working time recording system, it must be borne in mind that improving the safety and health of employees at work are objectives which must not be subordinated to purely economic considerations.

Employers must therefore not simply introduce the system in their company that is the cheapest and easiest to implement but must examine which system best ensures the protection of employees.

What does this mean for employers now?

The following rules apply to the recording of working time:

• Employers must set up a system for recording working time which, measured against the specific circumstances, is suitable for ensuring the protection of employees.
• The time recording system must comprehensively record the beginning and end of working hours, break times and overtime. Whether automated time recording can offer an alternative here will have to be examined. In any case, this would have to allow corrections if the actual working time does not correspond to the automatically specified one.
• Employers that also offer their employees leisure facilities (e.g., the company gym, an after-work lounge, yoga classes, band rehearsal rooms) in particular must ensure that the times when such facilities are used are clearly differentiated from working hours and that employees then "clock out" accordingly. This also applies to after-work get-togethers at work, as this is the only way to ensure that not only maximum working hours are observed, but also rest periods after work. 
• No specific form of time recording is required. Working time recording can be done electronically as well as manually. There are already various providers in this area. Of course, the large HR software providers offer time recording, but so do many small apps in the meantime. It must be ensured that (1) data protection is maintained and (2) employees may have to install such apps on their private phones, since not all employees have work phones and recording on the computer is not feasible in every case. In addition, solutions are still needed for those employees who tend not to work in an office context and thus cannot easily record times digitally at all.
• Employers can delegate the duty to record working time to employees.
• Employers must ensure that the system is actually and correctly applied, for example, through regular spot checks. In our experience, it is advisable to really check working hours on a regular basis. It is not uncommon for employees to enter Sunday work despite a ban, which then only becomes clear to employers during an audit by the occupational health and safety authorities. Explaining here afterwards why regulations of the Working Hours Act were not observed is often very cumbersome.
• The exceptions to the Working Hours Act are applicable: Senior executives do not have to record working time.
• In companies with a works council, the design of working time recording (especially if it is to be done technically) remains the subject of co-determination. Just because the external framework is prescribed by law here, the way in which time is recorded must nevertheless be negotiated. In this respect, both parties, employer and the works council, must take joint action.

Some questions remain open: This relates in particular to the future of trust-based working.

In its coalition agreement, the current administration has made it clear that the option of agreeing to trust-based working time is to be retained. Up to now, however, one of its essential components has regularly been that precisely no time recording takes place. According to the decision of the Federal Labor Court of September 13, 2022, this means that trust-based working time is no longer conceivable in its current form. Creative solutions are now required to maintain the flexibility regarding working hours that is valued by many employees. However, there will no longer be a "business as usual" without any time recording.

Are there already reactions from the legislator?

The Federal Labor Court has also made it clear that the German legislature could in the future issue further specifications regarding the way in which working time is recorded. So far, nothing has become publicly known. In this respect, it is regrettable that the German legislature has not used the interim period to at least give German employers an outlook as to what regulations could still follow. After all, the introduction of a time recording system involves considerable effort for companies, especially those with works councils.

Until then, companies that do not yet have a working time recording system must introduce one now at the latest, in line with the points mentioned above. Companies that already have a system for recording working time should examine it to determine whether it allows net working time to be recorded and regularly check compliance with the system. German employers are currently burdened with considerable administrative work. The Verification Act required the conversion of employment contracts and workflows. Now the issue of time recording also needs to be addressed. HR departments will therefore remain busy.

Are employers facing immediate sanctions?

Since the time recording obligation was derived from an "old" law, it already existed before the Federal Labor Court's ruling. However, companies need not fear that they will now be immediately hit with sanctions if they fail to record working hours or do so inadequately: The Occupational Safety and Health Act only provides for such sanctions if a corresponding order issued by an authority is violated—in other words, only if employers fail to make adjustments despite official requests to do so.

We therefore recommend that the topic of working time recording be addressed promptly, put on the agenda for the new year, and in this respect not leave it at good intentions. However, it does not seem necessary to take any hasty measures.