News on the German Evidence Act (update)

At a glance

Update: 27 March 2024

• On 21 March 2024, the Federal Government agreed on amendments to the Evidence Act (Nachweisgesetz) (NachwG).
• Under the proposed changes, employers in Germany will be able to establish digital employment contracts. These wouldn’t necessitate additional written proof to meet the requirements of the NachwG.
• Amendments to the Evidence Act, made in August 2022, which require written information about employment terms are seen as burdensome for employers.
• In November 2023, the CDU/CSU parliamentary group proposed amendments to the law to provide the option of electronic employment terms.
• Now, in January 2024, the Federal Ministry of Justice has submitted a draft Bureaucracy Relief Act which would permit the provision of evidence of employment terms by electronic means, subject to certain narrow qualifications.

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Update: 27 March 2024

On 21 March 2024, the Federal Government agreed on amendments to the NachwG. In the future, the NachwG is to stipulate that employment contracts can also be concluded in text form in addition to the traditional written form. This would mean the digital employment contract would become reality.

Prior to this, on 13 March 2024, the German government had adopted the government draft for the Bureaucracy Relief Act (Bürokratieentlastungsgesetz) (BEG IV), which also contains amendments to the NachwG. The amendments to the NachwG announced by the Federal Government on 21 March 2024 are now to be retroactively integrated into this government draft.

The amended government draft has not yet been published. Currently, the anticipated modifications have been deduced from a letter from the Federal Minister of Justice, Marco Buschmann, to the associations impacted by the new rule.

According to Buschmann’s letter, employers in Germany could establish digital employment contracts. These wouldn’t necessitate additional written proof to meet the requirements of the NachwG. In the future, the NachwG will permit the presentation of essential contractual terms in text form. Emails are also considered a valid text form (under section 126b of the German Civil Code (BGB)). An electronically qualified signature (under section 126a BGB) is not necessary.

For a digital employment contract to be valid, it should be sent to employees in a format that can be saved and printed. The employer should obtain proof of transmission or receipt. Employees should also have the option to request written confirmation from the employer. Exceptions are applicable to certain economic sectors and industries under section 2a (1) of the Act to Combat Clandestine Employment.

The current government draft of BEG IV dated 13 March 2024 will now be amended in accordance with the above-mentioned changes and then forwarded to the Bundesrat for a statement. It will then be advanced to and discussed in the Bundestag. It is not yet clear what the NachwG will look like when it enters into force.

Since 1 August 2022, the revised version of the Evidence Act (NachwG) has been in force, transposing the Transparent and Predictable Working Conditions Directive into national law. The August 2022 amendments to the NachwG were heavily criticised due to the strict requirements for written documentation. Employers saw the explicit exclusion of the ability to record essential working conditions and any changes to them in electronic form as a source of a large amount of paperwork and effort. The requirement for written documentation was justified on the basis that it provided protection for employees in the low-wage sector who are often employed without an employment contract or with sparse information about their employment terms.

The NachwG could soon be amended again. This time, the changes would be in favour of employers. In November 2023, the CDU/CSU parliamentary group introduced a draft amendment to the law, which essentially provides the option of electronic employment terms as an alternative to the written form. More recently, on 11 January 2024, the Federal Ministry of Justice submitted a draft bill for a Bureaucracy Relief Act to the Federal Parliament. As part of this draft bill, NachwG would be amended to include the option of signing employment documentation by qualified electronic signature.

Records of essential working conditions: previous position

In principle, employment relationships can be concluded informally. However, under the provisions of the NachwG, employers are currently obliged to issue a hand-signed notification letter containing the key terms and conditions of employment or any changes to these terms. Instead of being able to sign employment contracts electronically and send them by email, for example, the legislator requires a paper version.

A new hope?

The CDU/CSU parliamentary group's motion from November 2023 provided new impetus in this regard. Their draft bill provides for electronic form to be sufficient in addition to written form. Electronic records of terms would be possible, provided that the contractual conditions are accessible to the employee, can be saved and printed out, and the employer receives proof of transmission or receipt. A breach of these employer obligations under the NachwG would remain subject to a fine, so employees would not be left unprotected if the written form requirement is relaxed.

Employers' associations and companies had already criticised that the law for failing to reduce bureaucracy before it came into force in summer 2022. However, their objections were unsuccessful. When asked about the new draft, they have cited the revision of the strict written requirement as being of enormous practical importance.

January 2024 update

In a further development, on 11 January 2024, the Federal Ministry of Justice (BJM) submitted a draft bill for the Bureaucracy Relief Act to the Federal Parliament. Part of the draft is an amendment to the NachwG, which would permit a qualified electronic signature to fulfil the obligation to provide evidence of employment terms. To this end, Sections 2 and 3 NachwG would be amended to include the option of signing by qualified electronic signature (Section 126a German Civil Code).

Under this draft bill, an employment contract in electronic form (Section 126a German Civil Code), which contains the essential contractual terms and conditions as well as the other information required by the NachwG (Section 2 para. 1 - 4 NachwG) and was sent to the employee in a printable format, should fulfill the requirements of the NachwG. In this case, it would not be necessary in future to provide additional written proof of the working conditions. The electronic form is excluded for persons working in the economic sectors and industries listed in Section 2a of the Act to Combat Clandestine Employment.

Unlike the CDU/CSU parliamentary group's motion, the BJM's draft is significantly less focused on digitalisation. This is because it only makes an exception to the written form requirement of the NachwG if the contracting parties have concluded an employment contract with a qualified electronic signature that sets out the essential terms of the contract in accordance with Section 2 para. 1 NachwG and the other information required in the NachwG (Section 2 para. 2- 4 NachwG).

If the contracting parties have previously concluded a contract that does not contain the essential terms and conditions pursuant to Section 2 para. 1 NachwG - regardless of whether this is in written, (qualified) electronic form or informal - proof of the essential terms and conditions of the contract (Section 2 para. 1 NachwG) may still not be provided electronically. Instead, the written form requirement remains in place.

In view of the fact that the draft represents significantly less progress and less bureaucratic relief than the CDU/CSU parliamentary group's draft bill, it is to be hoped that the January 2024 draft bill will be amended as part of the legislative process.