On September 13, 2022, the German Federal Labor Court published a decision (Case No. 1 ABR 22/21) with important ramifications for employers. The court held that it is (and has always been) an employer’s duty to record working hours. This decision stands in line with a 2019 ruling of the European Court of Justice (ECJ). The decision has been described as a "seismic shift" and will require significant changes for employers that currently do not track working hours at all. It will be necessary to examine what leeway now remains, how occupational health and safety authorities react, and whether the federal government will come to employers’ rescue by amending the law.

What did the Federal Labor Court decide?

Under German law, prior to the decision, it was well-established that employers are obliged to track working hours exceeding eight hours per day as well as work on public holidays and Sundays. In practice, many employers did not comply with these minimum standards, as the risk of being audited by the competent authorities was relatively low. Now, the Federal Labor Court has confirmed that German employers are obliged to track working hours more broadly than previously understood.

In summary, the Federal Labor Court held:

• Employers are obligated to implement a comprehensive working time recording system.

• A works council has no right of initiative in the introduction of a system for recording working hours.

The proceedings in dispute initially dealt with the question of whether a works council is entitled to a so-called right of initiative in the introduction of working time recording, i.e., whether it can demand documented time recording. The Federal Labor Court answered this question with “no.”  

In the decision, the judges of the Federal Labor Court held that there is a general legal requirement for all employers to provide a time recording system in Germany. The Federal Labor Court interpreted the German legal situation in light of the ECJ's case law on timekeeping (Federación de Servicios de Comisiones Obreras [CCOO] v. Deutsche Bank SAE, May 14, 2019 - Case C-55/18).

The German government’s earlier promise to regulate recording of working hours

After the 2019 ECJ decision, the German government had promised in its coalition agreement that it would amend the law to allow for trust-based¹ working hours systems with no extensive time-recording. Now, German employers are left with only the decision from the court about recording requirements. The German government’s response over the next weeks will show if it will provide for a new regulation minimizing the burdens resulting from the decision and clarifying employer requirements.

Expected effects and initial considerations

So far, only the press release on the ruling has been published. Employers should consider waiting for the detailed reasons underlying the decision before implementing any measures. Employers may wish to consult with counsel to develop reasonable and customized solutions to the extent possible. In sum, there is no reason to act prematurely.

Nevertheless, and while all proposals are subject to change quickly as the situation develops, employers may wish to consider the following points:

• According to the court’s announcement, the obligation to ensure that working hours are recorded applies with immediate effect (strictly speaking, it has always applied).

• Employers that already maintain detailed time recording procedures may not need to implement changes to their existing practices.

• According to the ECJ, daily and weekly working time must be recorded. This requirement concerns the beginning and end of the daily working time as well as rest breaks and rest periods. If we assume the Federal Labor Court adopts the ECJ’s approach in its full opinion, the comprehensive recording of working time is also to be expected in Germany.

• In an ARD [German Public Broadcasting] podcast "Die Justizreporter*innen", Inken Gallner (President of the Federal Labor Court) stated that the recording of working hours is intended to protect against "self-exploitation and exploitation by others" and, among other things, to prevent employees from answering emails during rest periods. This comment also indicates the court will favor comprehensive recording of working time.

• Exact requirements for the type and manner of time recording (technical, organizational) are not yet known. This will also depend on the type of activity and the company as well as the number of employees (small business vs. corporate group).

• There will be many follow-up questions, some of which are noted below.

• It likely is not a work-around for the timekeeping requirement to not agree on concrete working hours, as this would be a violation of the just-renewed German Evidence Act.

• Previous trust-based working time without any time recording should be rethought. Insofar as employers are concerned with adherence to agreed working hours, one option may be to agree on average weekly and monthly hours or more long-term working time accounts.  

• It is not to be expected that sanctions will be imposed immediately if working time recording is not immediately ensured. The provision of Sec. 3 para. 2 No. 1 of the Occupational Health and Safety Act does not initially provide for a fine.

• However, according to the Occupational Health and Safety Act, the occupational health and safety authority, in individual cases, can order which measures the employer must take to fulfill the obligations. In doing so, the competent authority must set a reasonable deadline for execution. If an order is not carried out within a set period, the competent authority can, in the worst case, shut down the operation (Sec. 22 para. 3 of the Occupational Health and Safety Act). As mentioned, however, we do not expect any immediate proceedings by the authorities.

Lingering questions

From our point of view, the following questions remain open at present and call for further examination:

• What requirements must the timekeeping system meet? Is manual recording by employees also sufficient?

• How closely must an employer control time recording? Are random checks sufficient or must this be more closely monitored?

• Can an employer oblige employees to install apps for time recording on private phones?

• What are the concrete legal consequences if employers do not record working time (keeping in mind that the Federal Labor Court does not derive the obligation from the Working Time Act, but from the Occupational Health and Safety Act)?

• Does the obligation to record working time also apply, for example, to executive employees?

• What applies to (exempt) works councils in the case of works council working time?

• How can trust-based working time be redesigned so that any existing systems do not completely lapse?

We recommend that employers pause for a few weeks before taking any hasty action. Employers should stay tuned to see whether there will be any political reactions, what practical guidance will emerge, and what further instructions may be found in the reasons for the decision of the Federal Labor Court. Nonetheless, companies should start considering how they may prepare for extended working time recording.