The number of people infected with COVID-19 increases daily. This not only heightens the fear of becoming infected in the workplace. The COVID-19 crisis already has a negative economic impact on freelancers, companies and entrepreneurs of considerable and even existence-destroying economic losses (e.g. caused by massive supply shortfalls, decrease in orders or even closure of companies). Many companies ask themselves what to do best to survive the current economic crisis due to the COVID-19 virus on a short-term basis. Therefore, we have compiled a summary of the measures announced by the Government and from the labour law to mitigate the negative economic losses.
Due to the COVID-19 crisis, the German Federal Government announced numerous financial measures to support companies that are economically affected by the effects of COVID-19. However, these measures have not yet been finally implemented, so it is not possible to predict with certainty, which conditions will be established. In particular, the following measures were announced:
Please note that an application must be filed with the competent authorities for each of these measures.
One of the most current topics to mitigate the effects of the COVID-19 crisis in Germany is short-time work, especially as the parliament has passed an amendment to the law on March 13, 2020 relaxing the conditions. Because of the changes Germany expects over 2 million short-term workers in 2020 which costs the state 10 billion euros. Short-time work is the (partly or complete) reduction of the working time with a corresponding reduction of remuneration. The reduced earnings of the employees are partly compensated by the short-time work compensation paid by the Federal Employment Agency. The legal requirements are:
Bridging the crisis period by imposing compulsory vacation/ fur¬lough or demanding employees the employees is not a safe legal option. Demanding (unilaterally) that employees take unpaid vacation is in principle not possible as the employer bears to risk of ope¬ration (Sec. 615 S.3 BGB, Civil Code) and therefore needs to continue to pay the employees. Unilaterally ordering compulsory vacation/ furlough is also problematic as the employer needs to consider the employee‘s vacation requests according to Sec. 7 para 1 BUrlG, Federal Vacation Act. When push comes to shove it could be that the courts consider the vacation to be not taken so that the employees are still entitled of a unreduced amount of vacation. In view of the current situation, however, there is a debate in Germany as to whether the COVID-19 crisis does not constitute an urgent operational concern which could nevertheless entitle employers to unilaterally order so-called „company holidays“. If a works council exists, its co-determination rights would also have to be observed. In companies without a works council this is basically possible if there is an urgent operational need, but it is not clear how many days of leave could be ordered.
According to (not current) case law this could be up to a limit of 3/5 of the annual holiday. Further, subject to the contractual agreements it is thinkable that the employer orders paid time off in lieu regarding accrued overtime hours. Mainly it is recommended to speak with the employees and look for mutual flexible solutions on how to deal with the crisis. Employers should openly communicate the current situation and developments to the employees to make them aware of the complications and to openly discuss with the employees on what measures can be taken so that both sides benefit from it in the future and to avoid terminations.
If and under which prerequisites an employer can counter the COVID-19 crisis with dismissals cannot be answered in general terms as it depends on the individual circumstances. While smaller companies with operational units of no more than 10 employees are still relatively free to terminate employment relationships and may only have to observe the notice period and other formal requirements (wet ink signature; Sec. 623 BGB), the Act Against Unfair Dismissal generally applies above this threshold and dismissals are, among other factors, only permissible if one of the justifications stated in the Act is given.
In principle, a considerable loss of working hours could be suitable to constitute an urgent operational reason entitling to dismissal. However, this would require a permanent surplus of workers, whereas the COVID-19 crisis is currently regarded as temporary. However, dismissals for operational reasons would be conceivable if the COVID-19 crisis were merely the trigger for a more far-reaching entrepreneurial decision to close down a business permanently. Irrespective of this, operational redundancies are, however, subject to further conditions. First and foremost, all measures that are less severe than dismissals must be exhausted, which could also include bridging a period of crisis with short-time work. In business units with more than 20 employees, the effectiveness of dismissals may also require a mass dismissal notification towards the Federal Employment Agency prior to declaring any terminations, which should be carefully prepared. If a works council has been formed, it must be consulted before any dismissals are declared and negotiations on a balancing of interests and social plan benefits may be necessary, which may take significant extra time and costs extra money.
We therefore recommend to carefully analyse the current situation and its development on a day-to-day basis and to thoroughly evaluate whether there are any other options to overcome the crisis before lay-offs.