Employment contract

Employment contract - Arbeitsvertrag

April 04, 2024

An employment relationship is established when an employment contract is concluded between two parties (employer and employee).

How is an employment contract concluded?

The employment contract is ideally concluded between the employer and employee before the start of employment. Like any contract, it requires two effective declarations of intent relating to the agreed contractual conditions. This means that the parties to the contract must agree on the essential content. In the case of an employment contract, this would be, for example, the working hours, remuneration, holiday entitlement, duration and notice periods. If the employment contract is silent on individual points, the statutory regulations apply in case of doubt. According to the prevailing opinion, the employment contract is to be regarded as a subset of the service contract pursuant to Section 611 of the German Civil Code (BGB).

Are there any formal requirements?

The law does not prescribe any form. In principle, therefore, freedom of form applies. An employment contract can therefore be concluded in writing, verbally or tacitly in order to be effective. Written usually refers to the written form in accordance with Section 126 of the German Civil Code (BGB), according to which contracts must be drawn up in writing on a document and signed by all contracting parties in their own hand. However, employment contracts are also frequently concluded in electronic form in accordance with Section 126a BGB, whereby the document is provided with an electronic signature as an electronic document. Tacit means that the employee performs without the employer objecting to this.

However, in accordance with Section 2 I of the German Act on Documentation (NachwG), the employer must provide the employee with a written record of the main terms of the contract one month after the start of the employment relationship, sign the record and hand it over to the employee. This obligation under the NachwG also applies if the employment contract was concluded verbally or through tacit behaviour. This is intended to strengthen legal certainty on the labour market. Proof in electronic form is excluded (Section 2 I sentence 3 NachwG). However, if the contract has been concluded in writing in accordance with Section 126 BGB and contains all mandatory information from Section 2 I NachwG, this obligation does not apply in accordance with Section 2 (4) NachwG. It is therefore advisable to conclude the employment contract in writing in accordance with § 126 BGB.

What are the exceptions to the freedom of form?

There are exceptions to the freedom of form in the case of a fixed-term employment contract, which must always be concluded in writing (Section 126 BGB) in accordance with Section 14 IV of the Act on Part-Time Work and Fixed-Term Employment Contracts (TzBfG). If this is not done, the employment contract is initially concluded for an indefinite period.

Even if the employment contract contains a subsequent non-competition clause, the written form must be complied with in accordance with Section 126 BGB.

If a vocational training contract is concluded, it is effective without adherence to a specific form, but the trainee is entitled to have the content of the contract set out in writing (Section 4 of the Vocational Training Act = BBiG). Collective labour agreements and works agreements may also stipulate that employment contracts must be in a certain form.

What should be covered in the employment contract?

As Section 2 I NachwG entitles the employee to written evidence of the most important contractual conditions, these should always be regulated in the employment contract. These include, among other things

• the name and address of the contracting parties,
• the date of commencement of the employment relationship,
• in the case of fixed-term employment relationships: the foreseeable duration of the employment relationship,
• the place of work or, if the employee is not to work at only one particular place of work, an indication that the employee may be employed at various places,
• a brief characterisation or description of the work to be performed by the employee,
• if agreed, the duration of the probationary period,
• the composition and amount of remuneration, including supplements, allowances, bonuses and special payments as well as other components of remuneration and their due date,
• the agreed (weekly) working hours, agreed rest breaks and rest periods and, in the case of agreed shift work, their conditions,
• if agreed, the possibility of ordering overtime and its conditions,
• the duration of annual holiday leave,
• the deadlines and procedural rules for terminating the employment relationship and the deadline for filing an action for unfair dismissal,
• a general reference to any existing collective agreements, works or service agreements that apply to the employment relationship.

It is advisable to agree a probationary period as well as provisions on overtime and short-time working. It is also advisable to regulate the procedure in the event that the employee is absent due to illness.

Additional obligations of the employee should also be defined, such as a confidentiality obligation regarding company matters. This should also include a data protection agreement that limits the use, processing and forwarding of personal or business-related data to the fulfilment of work duties. In addition, the employer should consider making secondary employment subject to prior written consent in the employment contract and prohibiting secondary employment with a company that competes with the company. The employer can also secure the copyrights to all of the employee's work as part of the employment contract.

Finally, a written form clause should be agreed, whereby any changes to the contract must be made in writing, which also applies to the written form clause itself.

With regard to the content, the laws for the protection of employees, including the German Working Hours Act (ArbZG) and the German Part-Time Fixed-Term Employment Act (TzBfG), must be taken into account. In addition, the general principle of equal treatment must also be observed, according to which the employer must also apply the same regulations to comparable employees and may not carry out unequal treatment without objective justification.