German Federal Labour Court on The Employer’s Obligation to Record Working Time - The Most Important Elements

On 2 December 2022, the German Federal Labour Court ("BAG") published the full judgment of its "Working Time Recording Decision" (“Arbeitszeiterfassungs-Beschluss”; BAG, decision dated 13 September 2022, 1 ABR 22/21).  

The following Q&A provides an overview of the core elements.

What was the pre-judgement legal situation?

Previously, there was only a statutory obligation to record working time in exceptional cases and for certain industry sectors. Most employers were previously only required to record working hours when the maximum daily working time of eight hours was exceeded and when work was performed on Sundays and public holidays (see below). The corresponding records must be kept for at least two years.

However, many employers assumed that there is no obligation under statutory law to systematically record employees’ working hours in general.

In a judgment from 2019, the European Court of Justice ("ECJ") (ECJ, judgment of 14 May 2019, C-55/18) had ruled that member states were obliged to require employers to establish "an objective, reliable and accessible system for the recording of working time" in order to implement the European Working Time Directive. However, this judgment initially remained inconsequential in Germany and there was no change of law.

The BAG has now pre-empted the legislator by ruling that employers are required, i.e., without any action by the legislator, to establish a system with which the employees’ working time can be recorded.

Which working time has to be recorded according to the BAG?

In its decision, the BAG states that employers already have a general obligation to record the working hours of their employees. There is no transition period for the implementation. 

The BAG uses section 3 of the German Occupational Health and Safety Act (“ArbSchG)” as basis for the ruling. Pursuant to section 3, para. 1, sent. 1 ArbSchG, employers are obligated to take the necessary occupational health and safety measures, considering the circumstances that influence the safety and health of employees at work. According to section 3, para. 2, no. 1 ArbSchG, employers must ensure suitable organization in this respect and provide the necessary resources. In the opinion of the court, this includes, based on an interpretation of section 3 ArbSchG that is in conformity with European law, the obligation of employers to provide a system for recording the daily working time worked by their employees. This system should record the beginning and end and thus the duration of working time, including overtime. This means that rest breaks must also be documented, at least indirectly, via the respective start and end of working time, even if the BAG does not explicitly list them.

How must working time be recorded?

There is leeway for employers as to how the recording must be implemented. According to the BAG, the recording of working time does not necessarily have to be carried out electronically. Rather, depending on the activity and the company, records in paper form may suffice. Taking into account the ECJ decision from 2019, any form of time recording should be sufficient, but it must be carried out by means of an "objective and reliable" system.

Does the time recording obligation apply to all groups of employees?

According to the BAG, the obligation to record working time applies to all employees employed in an establishment within the meaning of section 5 para. 1 sent. 1 of the German Works Constitution Act (“BetrVG”). According to our interpretation, it is not clear from the BAG's decision whether the obligation to record working time also applies to executive employees, even though the BAG's statements at the relevant section can be understood as meaning that executive employees are not covered.

Is it sufficient to provide a time recording system for self-use?

A distinction must be made here: The BAG recognizes that the employer can delegate the recording of working hours to the employees. At the same time, however, the BAG specifies requirements for delegation. For example, it is not sufficient to merely provide employees with a working time recording system for their exempt use, but this system must actually be used. The employer will have to monitor this, for example, through spot checks. Furthermore, if employers wish to delegate the recording, they should explicitly instruct employees to properly record their working hours.

What rights does the works council have?

According to the BAG, if a works council is in place, it cannot enforce the implementation of the time recording system. However, a works council can trigger a consultation about how time is recorded. 
 

Is trust-based working time still possible?

This is primarily a question of definition and depends on how trust-based working time is interpreted in the respective company. There is no doubt that the obligation to record time generally applies to all employees in the company. Groups of employees who have been able to freely allocate their working hours are also covered by this (except probably for executive employees, see above). The BAG therefore rejects a model in which entire groups of employees would generally not have to record their working hours.

On the other hand, however, this does not mean that self-determined working with free planning of time allocation will no longer be possible in the future. Rather, it only means that employees who work in a time-sovereign manner will also have to record their working times in accordance with the requirements of the BAG in the future and that the employer must also monitor these times. 

Violations of the maximum working hours pursuant to section 3, para. 1 ArbZG or the uninterrupted rest period of at least eleven hours after the end of the daily working time pursuant to section 5, para. 1 ArbZG were already generally inadmissible up to now and were also subject to the recording obligation pursuant to section 16, para. 2, sent. 1 of the ArbZG (see above).

What sanctions do employers face?

Under the current law, a violation of the obligation to record working hours is not sanctioned directly by law, but only if the employer fails to make an adjustment despite an official request by the authorities to do so.

A fine of up to EUR 30,000 can be imposed for violations of the ArbZG. Theoretically, this maximum fine can even be imposed several times (e.g., based on the number of employees involved, the number of incidents, etc.). 

In our opinion, however, the lack of complete time recording (from the first hour of work) does not constitute a violation of the ArbZG because there is no explicit legal requirement in the ArbZG for such a sanction. In addition, as already mentioned, the BAG expressly does not infer the obligation to record working time from provisions of the ArbZG.

A violation of section 3, para. 2, no. 1 ArbSchG, the legal provision in which the BAG sees the obligation to record working time, is not subject to a fine (cf. section 25 of the ArbSchG). According to section 21 ArbSchG, the monitoring of occupational health and safety is a state responsibility, which is why the competent state authorities must conduct a certain number of routine inspections and reviews in companies each year. During these inspections, compliance with the provisions of the ArbSchG is checked and thus, in the future, probably also the existence of a time recording system.

If the inspection reveals a violation of the obligations arising from the ArbSchG, the authority can order the employer to take measures to fulfil the obligations. Only if the competent authority orders the introduction of the working time system in an individual case and the employer violates an enforceable order, can a fine be imposed, which can amount to up to EUR 30,000 per violation.

What is the expected legislative response?

The Federal Ministry of Labour and Social Affairs ("BMAS") has officially announced that a statutory regulation on the recording of working time is planned - initially in the form of a draft bill expected in the first quarter of 2023. This is urgently needed, especially since there are quite a few concerns about such a far-reaching further development of the law by the Federal Labour Court. 

What should employers do until the expected legislation is enacted?

As a first step, employers should therefore evaluate their internal processes and systems for (recording) working time and compare them with the requirements of the BAG. This also includes taking stock of how the general requirements of the ArbZG regarding rest periods, breaks and maximum working hours as well as the prohibition of work on Sundays and public holidays are complied with in the company. In the event of deviations, the extent to which these can be justified or designed should be examined with regard to the legal leeway. 

In addition, concepts should be developed on how to deal with any risks identified regarding comprehensive recording of working hours. Of course, a comprehensive time recording system cannot be created overnight, since extensive data protection clarifications are necessary for its design. In this respect, interim solutions may also be possible until a statutory regulation is in place.