Digitization and the German government’s Work 4.0 white paper

Shaping the legal landscape of tomorrow: Is German labor law prepared for the future?

By Dr. Bernd Borgmann, LL.M., and Tom Stiebert

Download article as pdf

The importance of Work 4.0

Times change, as does the way we work. It all started with Work 1.0 back in the 18th century: Fewer big companies, less regulation. Many changes came with Work 2.0 during industrialization: Companies got bigger and bigger, with more and more employees, but there was still very little regulation. This caused a lot of social problems and employees fought for their rights and social security. Finally, Work 3.0 connected with a social market economy and employees achieved many rights and a high standard of social security.

Now Work 4.0 will bring the next big step: Employees and work itself becoming more flexible, more digital and certainly more connected. The new working standards demand flexibility regarding working time and place of work. Home office replaces factory work, the smartphone replaces the office computer. This is both an opportunity and a risk: On the one hand, employees can work wherever and whenever they want, but on the other, the boundaries between private life and professional life vanish to a point where employees may be forced to work at any time and without any limits on availability or defined periods of rest.

But how does the law respond? Looking at the German labor laws, more or less unchanged for decades, one could say that the law thus far has not recognized that there is such a thing as Work 4.0 at all. We have Work 4.0 but no law for it. German legal literature, academics and practitioners alike have recognized this and begun to shape the legal landscape of tomorrow. The 2016 national conference for the legal profession (71. Deutscher Juristentag 2016) raised the topic of “Digitization of the working world – Challenges and need for regulation” as one of the six main themes that were widely discussed. Similarly, in April, 2017, the Employment Institute of the International Bar Association (IBA) compiled a report entitled “Artificial Intelligence and Robotics and Their Impact on the Workplace” (the IBA AI Report), which put forward proposals for lawmaking in the future.

Even the legislature is taking action. The German Federal Ministry of Labor and Social Affairs published a white paper in March, 2017  (www.bmas.de/EN/Services/Publications/a883-white-paper.html) that raised the question of what work will look like in the future and also tried to answer it with the help of social partners, associations, businesses and academia as well as members of the public.

This article is intended to provide an overview of some of the key issues in this area and summarizes the various blueprints for possible solutions.

Typical practical issues and potential solutions

As mentioned already, many industries are seeing tasks for their staff become increasingly independent. Digitization means that it is often unnecessary to have a permanent workplace,  a fixed working time or a permanent team.

Temporal independence

However, the German labor law is intended to protect the employee. In particular, the Working Hours Act (Arbeitszeitgesetz) imposes strict limits on working time. It limits maximum working hours (8 hours per day, section 3 (1) Working Hours Act; in special cases 10 hours per day, section 3 (2) Working Hours Act) and calls for an uninterrupted minimum period of rest after finishing a day’s work (11 hours, section 5 (1) Working hours Act). But nowhere does this law stipulate a distinction between working hours and rest time. It is simply clear that they are mutually exclusive (section 2 (1) Working Hours Act) and limit flexibility. Since the intention is to protect the employee, a deviation is not possible.

Taking the law literally, any short period of work would restart the period of rest again. For this reason, it would be impossible to work during the rest period. Even reading and writing an email on a smartphone or taking a call at home would restart the period of rest. A brief interruption would nullify the whole rest period. But would a change in the law help here? The answer is clearly no. It is not possible to regulate this issue by law because the legislature would have to define those interruptions that are adequate and those that are not – 1 minute, 5 minutes, 15 minutes? There can be no strict boundary. A better option is to keep the law as it is and apply a de minimis rule. An interruption should only be relevant if it is considerable. Here it is not the legislature but the courts that determine when this is the case. With this flexible approach, all new problems could be handled under the current law.

Another form of temporal flexibility is less relevant in Germany. The high level of worker protection prevents zero hour contracts or similar types of flexible contracts being implemented on a large scale. A German Federal Labor Court ruling from 2005 upheld a minimum income for employment contracts and said that the employer is responsible for paying, regardless of whether work is available or not (BAG, December 7, 2015 – 5 AZR 535/04). Just 25% of employment can be negotiated on an ad hoc basis. The employee is thus adequately protected.

Location independence

Dislocation leads to the introduction of new forms of work such as crowd working, cloud working or click working. Employees work together in different groups with the traditional business often ceasing to exist. This leads to the question of whether the traditional concept of being an employee still applies for this kind of work at all. However, the concept of the employee (Arbeitnehmer) is very openly formulated. Employees have to be distinguished from the self-employed. An employee must have a private contract with the employer and must be dependent on the employer and subject to his or her instructions. This definition, which is now also contained in section 611a German Civil Code (Bürgerliches Gesetzbuch), is more than 100 years old and applied all the time because of the flexibility of the courts in dealing with it. This is, however, not the same in other jurisdictions which, according to the IBA AI Report, seem to be less open to adaptation to new forms of collaboration and apply a defined number of legal structures that require amendment if a new form of collaboration does not fit.

This need not change because of digitization. Even if it means that some workers are not employees, this is acceptable. Work 3.0 did not give every worker employee protection, so there is no reason to extend protection in Work 4.0. This may continue to mean that not every worker is protected as an employee, but protection under labor law was never conceived for all scenarios. If a crowd or cloud worker is completely free in his or her work and not subject to directives and time restrictions, then he or she cannot be regarded as an employee and is instead considered a self-employed person. It is only necessary to carefully examine whether he or she is dependent or not. This is not a problem for Work 4.0 either. In Work 3.0 too, there are low-income self-employed people who are not covered by the law. Again, it is useful to leave the individual cases to the courts.

However, the changed structure of the company leads to another problem: Employees can organize themselves into companies and elect a works council. The works council is then responsible for the employees of this company. But if the structures of the companies change and the employees are more flexible, the assignment becomes more difficult. For this reason, the problems of such matrix structures are frequently discussed (Kort, NZA 2013, 1318; Witschen, RdA 2016, 38). But these problems are not new: In general, the works council represents the workforce of a company. Thus, if employees are employed by several companies, for example as temporary workers, it is always necessary to clarify which works council they are allied to in a specific case. Several works councils may also be responsible for an employee, but never in the same matter. Ultimately it will depend which works council is closer to the subject matter.

Again, this shows that the problems of Work 4.0 are not new in essence, merely in guise. They can therefore be easily solved with existing tools and the help of the courts.

Conclusion

The law should only be amended on a selective basis, as suggested in the white paper. For example, the Working Time Choice Act (Wahlarbeitszeitgesetz) proposed a sensible step: to allow deviations from the working time legislation where necessary and offer choices to employees as well. Other useful changes to the law are also proposed.

Law 1.0 is in principle good and powerful enough to handle the problems of Work 4.0. Flexibility is the big advantage of the openly formulated laws but a major task for lawyers advising in these areas. The adaptation to Work 4.0 can largely be left to the courts without excluding any necessary changes. They can react much faster to new developments and legislative changes. Otherwise the legislature would always lag behind reality and law would be much more old-fashioned than it is now.

Bernd.borgmann@dlapiper.com

Tom.stiebert@dlapiper.com