New Year – New Legislation: What Changes in German Employment Law in 2023

The turn of the year not only brings good resolutions for every individual, but also regularly brings numerous changes to laws and regulations. We have summarized the most important (new) employment law regulations entering into force in 2023 for you below:

Electronic Certificate of Incapacity for Work

On January 1, 2023, Germany will begin to implement digitization processes in the statutory health insurance system. As a result, the paper certificate of incapacity for work, previously known as the “yellow certificate”, which doctors usually issue to an employee to certify their sickness, will largely be a relic of the past. From now on, employers will be informed electronically by the relevant statutory health insurance fund about the incapacity to work of employees who are insured under the statutory health insurance.

This replaces the previous obligation of employees to provide evidence of their incapacity to work with a mere obligation to see a doctor if they become ill. The further process will then be done electronically by the respective health insurance provider and the employer without any further action on the part of the employee. Upon receipt of the data of an employee by a doctor, the employee’s health insurance provider creates a report that the employer is then obligated to obtain as proof of the employee’s sickness.

Although the new reporting procedure will be mandatory as of January 1, 2023, experience has shown that such extensive technical changes are likely to cause various problems in the initial period. According to the German Federal Ministry of Labor and Social Affairs (BMAS), in order to avoid these problems, insured persons will be able to request a certificate of incapacity in paper form from their doctor to submit to their employer in order to provide proof of incapacity for work. The National Association of Statutory Health Insurance Physicians has expressly urged its members to comply with such requests.

Attention: The electronic reporting procedure does not apply

• for employees with private health insurance,
• for the determination of incapacity for work by private doctors,
• for incapacity for work established by a doctor abroad,
• for parents who have to take care of a sick child,
• for gradual reintegration and rehabilitation services as well as
• in the event of a ban on employment.

Here, the previous procedure remains in place.

The obligation of employees to report incapacity for work remains unchanged. As before, employees are obligated to inform employers of their inability to work immediately.

Recording of Working Time

In December, the decision of the German Federal Labor Court on the subject of time recording caused a stir. Until now, it was widely believed that there was no obligation to comprehensively record working time because there was no legal basis for doing so. However, the German Federal Labor Court sees such a legal basis. According to their statement, the local regulations for the protection of employees and workers would have to be interpreted in conformity with European law. It is now clear that employers must record the working time of employees completely and comprehensibly.

Please also read our detailed article regarding this subject.

Limitation of Paid Leave Entitlements

No less relevant for practice is the Federal Labor Court decision from December 2022 regarding the question of the statute of limitations for paid leave claims. According to this decision, statutory vacation entitlements will from now on only be subject to the regular three-year statute of limitations if the employer has previously fulfilled their obligations to cooperate. This means that the employer must inform all employees in the vacation year of their existing vacation entitlements and the impending expiration of paid leave entitlements. This also applies to the forfeiture of paid leave for employees who have been on long-term sick leave.

Please also read our more detailed blog posts here and here.

Whistleblower Protection Act

In July 2022, we informed you about the ongoing legislative project to implement the EU Directive RL 2019/1937, the so-called “Whistleblower Directive”. The legislative process has now resulted in the Whistleblower Protection Act, which passed the Bundestag on December 16, 2022. As planned, the Bundesrat will deal with the legislation draft on February 10, 2023, and the law will enter into force in mid-May 2023. We will report on this separately in a future article.

Supply Chain Act

The Supply Chain Care Obligations Act (LkSG) entered into force on January 1, 2023.

The aim of the law is to improve compliance with human rights and environmental protection. To achieve this goal, German companies must ensure that human rights, such as the right to fair wages or the prohibition of child labor, are observed within their supply chains. Initially, the law only obliges companies to introduce a risk management system that identifies, evaluates and prioritizes existing risks within a supply chain. In this context, a company should also determine who is responsible for monitoring their supply chains. The law proposes the appointment of a human rights representative on a non-binding basis. A violation of the obligations of the Supply Chain Care Obligations Act constitutes an administrative offense that can result in a fine of up to EUR 100,000.00 or more.

Note: The law initially applies only to companies that regularly employ at least 3,000 people in Germany. As of January 1, 2024, the threshold will drop to 1,000 regular employees. However, smaller companies that are suppliers of such companies may also be indirectly affected.

As part of the introduction of the Supply Chain Care Obligations Act, § 106 (3) of the Works Council Constitution Act (BetrVG) was also amended and expanded to include a point 5b. From January 1, 2023, “issues relating to corporate due diligence in supply chains in accordance with the Supply Chain Care Obligations Act” will thus also be expressly included in the catalog of economic matters that the economic committee and the employer must discuss.

Electronic Work Certificates

Not only health insurance companies, but also the Employment Agency will become more digital in 2023. As of January 1, 2023, employment certificates, EU employment certificates, and secondary income certificates must be transmitted digitally to the Employment Agency at the request of the employee.

Skilled Worker Immigration

With a key points paper published on November 30, 2022, the German government is considering modernizing the Skilled Worker Immigration Act.

The aim is to make it easier for foreign specialists from non-EU countries to take up employment in Germany and to offer them more long-term prospects in Germany. For example, experienced professionals should be allowed to work in their respective industry in the future, even without a degree recognized in Germany. It should also be easier for them to obtain an EU Blue Card and enable their close families to follow them to Germany. To this end, the salary threshold required for this will be lowered.

However, it is still unclear when a corresponding legislation draft will be introduced in the Bundestag and how many of the current ideas will be reflected in such a draft.

On the other hand, it has already been decided to extend the so-called “Western Balkans regulation” for workers from the Western Balkan states of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, Northern Macedonia and Serbia until December 31, 2023. Employers will still be able to hire workers from the Western Balkan states with the corresponding work permit, without their formal qualification for training or employment in Germany being an issue.

Foundation Laid for Cross-Border Home Office

The Statutory Health Insurances Association has reached an agreement (German version) with the responsible Austrian Federal Ministry on a framework agreement that is intended to facilitate the provision of work from a home office located in the other state.

According to this framework agreement, in cases of “usually recurring cross-border telework using information technology”, it is possible to perform up to 40% of the work from the home office abroad without the social security regulations of the country of residence being applied.

Although the framework agreement will formally enter into force on January 1, 2023, it will be overruled until June 30, 2023, by the COVID special regulations that will continue to apply until then. Therefore, the framework agreement will not actually take effect until July 1, 2023.

In order to benefit from the scheme, the employer and the employee must submit an application to the competent authority of the state whose legislation is to apply.

Note: The A1 certificate must still be applied for in the country in which the employee resides.

What Else is New?

Additionally, we would like to take your attention to the following smaller changes or points:

• Until March 31, 2023, it remains possible to obtain a sick note from a doctor by telephone for up to seven days in the case of minor respiratory illnesses.
• The possibility of claiming the home office for tax purposes has been extended. The home office flat rate of EUR 6.00 per day can also be claimed in the tax return in 2023, now even for 210 days/year.
• In contrast to works council meetings, works meetings and meetings of the conciliation committee (§ 129 BetrVG), among other things, must be held in person again from April 8, 2023.
• The access relief for short-time work allowance will initially continue to apply until June 30, 2023. This means that short-time allowance can still be applied for and granted if at least 10% of employees are affected by a loss of pay of more than 10%. In addition, the prior reduction of overtime continues to be dispensable.
• As of January 1, 2023, audits of financial statements following the receipt of short-time allowance in the period from March 2020 to June 2022 will generally only be carried out if the total amount paid out exceeds EUR 10,000.00. The only exception is if a company requests an audit of its financial statements or if there are indications that short-time allowance is being misused.
• Another change relates to supplementary income opportunities for pensioners. At the turn of the year, the additional earnings limit for early retirement pensions will be abolished. As of January 1, 2023, pensioners who receive an early retirement pension will be able to draw the full amount of their pension regardless of the amount of their additional earnings. In the case of pensions for reduced earning capacity for health reasons, the supplementary income limits have been raised significantly. When drawing a pension for partial reduction in earning capacity, the annual supplementary earnings limit in 2023 will be EUR 35,650.00, and EUR 17,820.00 for pensions for full reduction in earning capacity.
• As expected, the income thresholds will also change as of January 1, 2023. The income threshold for statutory health insurance will rise to EUR 59,850.00 per year (EUR 4,987.50 per month) and the compulsory insurance threshold to EUR 66,600.00 per year (EUR 5,550.00 per month). As of January 1, 2023, the contribution assessment limit in the general pension insurance is EUR 7,100.00 per month in the new federal states and EUR 7,300.00 per month in the old federal states. A summary of the new contribution limits can be found here (German vesion).

We will, of course, keep you informed of further developments in legislation and case law.

We wish you a Happy New Year 2023!