The end of trust-based working time? The “time clock ruling” of the ECJ and the legal obligation to introduce a time recording system according to the BAG

In its ruling of 14.05.2019 (C-55/18), the ECJ ruled in a landmark decision that member states must require employers to introduce a working time system. To date, the German legislature has not transposed the directive into national law. Now, in its decision of September 13, 2022 (1 ABR 22/21), the Federal Labor Court (Bundesarbeitsgericht – BAG) has ruled that the employer’s obligation to introduce a working time recording system can be fulfilled by interpreting Section 3 (1) of the German Labor Code in conformity with EU law. 2 No. 1 ArbSchG has been established. The reasons for the decision have not yet been published, but the BAG’s press release on this decision is already making waves. In the following, we will show which concrete obligations to act arise for employers.

The lack of implementation of the ECJ’s “time clock ruling” on the mandatory introduction of a working time recording system by employers has so far triggered speculation and uncertainty regarding the obligation itself and its content and technical requirements due to the lack of implementation in Germany. After individual labor courts had already referred to the ECJ ruling in their decisions, there was uncertainty as to whether and how employers should comply with the obligation to record working hours even before implementation by the legislature. In its decision of May 4, 2022 (5 AZR 359/21), the BAG has already clarified in this regard that the principles on the allocation of the burden of proof and presentation in proceedings for overtime compensation continue to apply irrespective of the obligation under EU law to introduce a working time recording system. Nevertheless, the legislature remained inactive until the end, although the implementation mandate remained unchanged. In its decision of September 13, 2022 (1 ABR 22/21), the Federal Labor Court (Bundesarbeitsgericht – BAG) has now ruled in a landmark decision that employers are not entitled to claim damages under Section 3 (1) of the German Labor Code (Bürgerliches Gesetzbuch – ABR), which is to be interpreted in conformity with EU law. 2 No. 1 ArbSchG are obliged to introduce a system that makes it possible to record the hours worked by employees. The works council has no right of initiative for the introduction of a system for (electronic) recording of working time, since such a right only exists under Section 87 of the Works Council Constitution Act (BetrVG) if and to the extent that the company matter is not already regulated by law – which is precisely the case here according to the interpretation of the BAG. Content-related and technical requirements for the system are apparently – and correctly – not the subject of the BAG’s decision. There is also no implementation deadline for the introduction of a time recording system.

What are the content requirements of the ECJ ruling?

The starting point for the introduction of a general time recording system was a question referred by the Spanish national court as to whether employers are obliged under Spanish law to document overtime worked by employees and whether the documentation is compatible with the European Directive 2003/88/EC (Working Time Directive) and the Charter of Fundamental Rights (CFR). In its ruling of May 14, 2019, the ECJ ruled that member states must require employers to establish an “objective, reliable and accessible system” with which to measure the daily working time worked by each employee. This is essential for monitoring compliance with minimum rest periods and maximum weekly working hours. Simply documenting overtime would not do it justice. The German legislator has not yet followed this request.

What is the legal situation resulting from the interpretation of the ArbSchG?

The interpretation of the BAG in conformity with Union law with regard to Sec. 3 para. 2 No. 1 ArbSchG confirms the existing legal obligation of employers to introduce a time recording system for employees. This applies regardless of whether a company is co-determined by a works council. Previously, employers could assume that they only had a duty to record working hours that exceeded working hours on workdays in accordance with Section 3 Sentence 1 ArbZG (Section 16 (2) ArbZG). Further documentation requirements existed only in a few, but practically quite relevant, exceptional cases, such as the recently amended Section 6 of the Act on Securing Employee Rights in the Meat Industry, by Section 17 of the German Minimum Wage Act (MiLoG) or Section 19 of the German Act on the Appropriateness of Employment (AEntG).

Should legislators take action?

By its decision of 13.09.2022, the BAG has now created a new legal framework through its interpretation of Section 3 (3) of the German Stock Corporation Act (AktG) in conformity with EU law. 2 No. 1 ArbSchG a legally standardized obligation of employers to introduce a working time recording system. The BAG has now dispelled any final doubts about a legally binding obligation to record working hours. Notwithstanding this, the legislator should nevertheless ensure legal certainty and, above all, take action with regard to the design of working time recording. In this way, it can contribute to resolving the tension between modern work (time) concepts and the occupational health and safety of employees. In this respect, the government’s announcement that it intends to enact legal regulations for unbureaucratic recording of working hours in the near future is to be welcomed.

Will there continue to be trust work?

Trust-based working time should still be possible. Trust-based working time means that employers only specify the scope of the weekly or monthly working time, but leave it up to the individual employees to organize their working time independently. Employers can use leeway in the design of time recording for this purpose. The BAG has only determined the “whether” of time recording, i.e. has specified the obligation to introduce a time recording system. It also did not specify that the working hours of all employees must be recorded by the employer. However, employers should keep occupational health and safety in mind regardless. A control of the employees, which leads to a restriction of their liberties, does not have to result from it. However, the recognizability and precise traceability of the hours worked could lead some employees to want to limit their workload and working hours or to demand higher compensation.

What regulatory approaches by the German legislature can be expected?

The legislator could, for example, use the following as a guideline. on the new Section 6 GSA Meat or on the draft bill of the Federal Ministry of Labor and Social Affairs (BMAS) to amend the MiLoG. According to this, employers must electronically record the beginning, end and duration of working time on the day of the working time in a tamper-proof manner and store this record electronically. The draft bill for the Mobile Work Act (MAG) of 14.01.2021 also expressly refers to the fact that a recording obligation can be delegated to the employees.

What do employers have to do now?

Employers are first of all liable according to § 3 para. 2 No. 1 ArbSchG (German Occupational Health and Safety Act), the employer is obliged to introduce a system with which the working time worked by employees can be recorded. The system should be an “objective, reliable, and accessible system.” Those employers who do not yet have a corresponding time recording system in place are now generally required to introduce one. However, the reasons for the BAG’s decision should be awaited prior to the concrete design, as the requirements for such a system could be described more concretely therein. In addition, employers should keep an eye on whether legislators are addressing the issue.

Should the works council be involved?

The development of a working time recording system should be carried out in cooperation with the works councils in companies subject to co-determination, even if they do not have a right of initiative or a right of co-determination within the company with regard to the introduction (“whether”) of a time recording system. The situation may be different with regard to the design of the time recording systems (“how”). The works councils and trade unions should therefore be involved at an early stage, as it may also be necessary to adapt existing works agreements and collective agreements with regard to the recording of working hours.

What are the consequences?

A significant consequence of the decision is the regulatory expression. The BAG decision makes compliance with and monitoring of the Working Hours Act transparent and verifiable. In the future, time recording systems can be demanded by the occupational health and safety authorities. The obligation to observe working hours will therefore be increasingly incorporated into compliance systems in the future. Employers should be able to intervene in a timely manner when maximum working hours and break and rest periods are not observed by employees. For example, a violation of the maximum working hours already constitutes a misdemeanor within the meaning of § 22 para. 1 No. 1 ArbZG, which can be punished with a fine of up to 30,000 euros.

Conclusion

The BAG preceded the legislator and, by interpreting Section 3 para. 2 No. 1 ArbSchG identifies a legal obligation to introduce a working time recording system. Those employers who do not yet have a corresponding time recording system are now basically obliged to introduce one. We will be happy to inform you about any new developments resulting from the legislator’s taking action or the BAG’s reasons for its decision in connection with this topic.