According to a new decision of Germany’s Federal Labor Court, the Bundesarbeitsgericht (BAG), employers are now obliged to record the entire working time of their employees - not only overtime and work on Sundays and public holidays, as previously already provided for in section 16 (2) of the Working Time Act (ArbZG). This applies regardless of the size of the company or the existence of a works council. Until now, most experts had assumed that the obligation to fully record all working hours could only be introduced by an amendment to the Working Hours Act. 

The decision of the BAG of 13.09.2022 (1 ABR 22/21) has far-reaching consequences for employers, and will likely prompt a swift response from the legislator.

What does German law say?

The Working Time Act does not yet contain a general duty to record working time: employers are only obliged to record overtime and work on Sundays and public holidays. A fine of up to €30,000 can be imposed for a breach of this duty (section 22 ArbZG). However, the legislator has not prescribed a specific format for the employer to fulfil this obligation. For example, timesheets, payrolls, card indexes or digital files can be considered proof. Employees' own records and the delegation of the duty to keep records to employees are also permissible. However, the employer is ultimately responsible, and must therefore take suitable organizational measures to ensure that employees actually comply with the delegated obligation to keep working time records, for example, through regular spot checks.

Extensive timekeeping obligations are not really compatible with trust-based working time, which is popular not only with employers but also with employees. The characteristic of trust-based working time is that the employer trusts that the employees will carry out their work in the agreed amount of time, even without checks. Employees are permitted to determine the location and distribution of their working time themselves, taking into account their responsibilities and the interests of the company.

What does Europe say?

The European Union Working Time Directive gave rise to a landmark decision by the ECJ in 2019 (judgment of 14.05.2019, C-55/18). Accordingly, member states must oblige all employers to set up a system for recording working time. However, the ECJ leaves the member states some leeway with regard to the modalities of implementing such a system, in particular with regard to its form, provided that the system is "objective and reliable".

What consequences did Germany draw from this decision? The federal legislator's court has not yet implemented any immediate and direct obligation on employers to record time in line with the ECJ's decision. German politicians seem to have endorsed this ‘wait and see’ point of view. According to the "traffic light" coalition agreement, it is to be examined "what need for adjustment we see in view of the ECJ's case law on working time law".

So far, only one local Labor Court in Emden has taken a different view. In two decisions from 2020, the Labor Court Emden assumed that, due to the European legal requirements, there was a direct obligation on the part of the employer to introduce a system for recording working time. Specifically, the cases concerned claims for payment of hourly wages, which the plaintiffs justified on the basis of their own time records. The employer disputed the accuracy of the records, but  did not have its own timekeeping records to produce as evidence. The court upheld the employee’s claim because the employer had not implemented a system for recording working time, although it was obliged to do so according to the ECJ's requirements. This shows a significant risk for employers, which do not comply with the new obligation.

How did the current decision of the BAG come about?

A works council applied to the Minden Labor Court for the establishment of a conciliation board after its request to introduce working time recording had been refused by the employer. The Minden Labor Court rejected the application. The Higher Labor Court (LAG) of Hamm overturned the decision in the second instance, and ruled that the works council was entitled to negotiate the introduction of a time recording system in a conciliation board. Both the Labor Court and the Regional Labor Court failed to consider European law.

The BAG rejected the works council's right of co-determination and thus the establishment of a conciliation body. This is because - according to an established principle - there is only a right of co-determination insofar as there is no statutory or collectively agreed regulation. However, a legal obligation to introduce a time recording system by the employer already resulted from section 3 (1) of the Occupational Health and Safety Act (ArbSchG), as interpreted in compliance with EU law. The BAG ruled that the employer must therefore introduce a system for recording working time. 

This decision creates an important precedent.  In short: Recording of working time is already mandatory for all employers!

What does this mean in practice?

So far, the BAG has only issued one short press release. The detailed reasons for its ruling will probably still be a few weeks away. However, we can already draw some conclusions.

According to the BAG, all employers are now obliged to set up a system to measure the working time of each employee. This will involve a considerable bureaucratic effort for many employers. Employers, which do not have a time recording system will be at risk of being subject to the above-described risk in wage payment lawsuits, because they will not be able to adequately refute their employees' records. This will become particularly relevant when claiming overtime. According to two recent rulings of the BAG (4.5.2022, 5 AZR 359/21 and 5 AZR 474/21), the obligation to record working hours does not change the burden of proof in overtime proceedings.

There is currently no threat of fines because the statutory provision of section 3 (1) of the Occupational Health and Safety Act, from which the BAG derives the obligation to record time, is not yet backed up by a standard on fines. However, it cannot be assumed that this will remain the case.

It is unclear what leeway employers have in introducing such a time recording system. According to the ECJ, it must in any case be "objective and reliable". Self-documentation by employees can be considered suitable, provided it is designed accordingly. Here, the specific reasons for the court’s decision or a possible legal regulation would be helpful.

The obligation to record all working time will have negative effects on trust-based working time. It will be difficult to reconcile pure trust-based working time, in which no monitoring of any kind is carried out, with a time recording system.

It is to be expected that the legislator will now act promptly to include the obligation to record time in the Working Time Act. In this context, it is very likely that the existing penalty provision of Section 22 of the Working Time Act will be extended to include the general time recording obligation. This will result in a further substantial risk of possible non-compliance for employers in the future.

We will, of course, continue to follow further developments and will be happy to keep you informed.