Employment contract

Employment contract - Arbeitsvertrag

December 16, 2022

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 concluded between the employer and the employee, preferably before the employment begins. Like any contract, it requires two effective mutual declarations of intent on the agreed terms of the contract. This means that the parties of the contract must agree on the essential contents. In the case of an employment contract, this would be, for example, the working hours, the remuneration, the holiday entitlement, the duration and the notice periods. If the employment contract is silent on individual points, the statutory provisions apply in case of doubt. According to the prevailing opinion, the employment contract is to be regarded as a subcategory of the service contract pursuant to section 611 German Civil Code (BGB).

Are there any formal requirements to be observed?

The law does not prescribe any form. In principle, therefore, freedom of form applies. In order to be effective, an employment contract can be concluded in writing, orally or tacitly. In most cases, the written form pursuant to section 126 of the BGB applies, according to which contracts must be drawn up in writing on a certificate and signed by all parties to the contract in their own hand. However, employment contracts are also frequently concluded in electronic form pursuant to section 126a BGB, whereby the certificate is provided with an electronic signature as an electronic document. Tacitly means that the employee performs without the employer objecting to it. However, according to section 2 I law on notification of conditions governing an employment relationship (NachwG), one month after the beginning of the employment relationship, the employer must put the essential terms of the contract in writing, sign the record and hand it over to the employee. This also applies if the employment contract was concluded orally or by tacit behaviour. This is intended to strengthen legal certainty in the labour market. Proof in electronic form is excluded (section 2 I p.3 NachwG). However, if the contract was concluded in writing pursuant to section 126 BGB, this obligation does not apply under section 2(4) NachwG. It is therefore advisable to conclude the employment contract in writing in accordance with section 126 BGB.

What exceptions are there 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 (§ 126 BGB) pursuant to § 14 IV TzBfG. If this is not done, the employment contract is deemed to have been concluded for an initially unlimited period. If a vocational training contract is concluded, it is effective without adherence to a specific form, but the trainee is entitled to have the contents of the contract set down in writing (§ 4 BBiG). Collective agreements and company agreements may also prescribe a form for employment contracts.

What should be regulated in the employment contract?

Since the Verification Act according to § 2 I NachwG grants the employee written verification of the most important contractual conditions, these should always be regulated in the employment contract. These include:

• the name and address of the contracting parties,

• the date of commencement of the employment relationship,

• in the case of fixed-term employment: the foreseeable duration of the employment relationship,

• the place of work or, if the employee is not working at only one particular place of work, an indication that the employee may be employed at different places,

• a brief characterisation or description of the work to be performed by the employee,

• the composition and the amount of the remuneration, including supplements, bonuses and special payments as well as other components of the remuneration and their due date,

• the agreed (weekly) working hours,

• the duration of the annual holiday,

• the periods of notice for termination of the employment relationship,

• a general reference to any collective agreements, works agreements or service agreements applicable to the employment relationship.

It is also advisable to agree on a probationary period and to regulate provisions on overtime, extra hours and, if applicable, short-time work. Ancillary obligations of the employee should also be stipulated, such as an obligation to maintain confidentiality on company matters. This should also include a data protection agreement limiting the use, processing and forwarding of personal or business-related data to the fulfilment of work duties. The employer should also consider making secondary employment conditional on prior written consent in the employment contract and prohibit secondary employment with a company competing with the company. The employer can also secure the copyright to all the employee's work through the employment contract. Lastly, a written form clause should be agreed by which any amendment to the contract must be in writing, which also applies to the written form clause itself.

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