On January 1, the Fourth Bureaucracy Relief Act (Viertes Bürokratieentlastungsgesetz– “BEG IV”) entered into force. This legislation brings important changes to the requirements regarding the form of contracts in Germany with the objective of simplifying some administrative processes, among them the termination of employment contracts.
What is the status quo?
Until the end of last year, “written form” was a standard requirement for employment contracts. In order to comply with the written form requirement as defined in Sec. 126 of the German Civil Code (Bürgerliches Gesetzbuch), the document must be signed with a “wet-ink” signature by the issuer or, in the case of a contract, by both parties to the same document. Although an employment contract can theoretically be concluded orally, the main contractual elements are required to be in written form by the Act on the Notification of Terms and Conditions of Employment (Nachweisgesetz) which provides for fines of up to €2,000.00 per violation, so this is a piece of theory not worth investigating further.
What does “text form” mean?
BEG IV now aims to simplify administrative processes for employers, in particular by replacing the written form with a “text form” request (Article 126b of the Code) for certain matters. Unlike written form, the text form requirement is met by a legible statement naming the declarant made on a durable medium. The tool must enable the recipient to keep a record and save the statement. This allows employers to meet this requirement, for example,
- sending the document by email or fax,
- or scan and save it as a PDF before submitting it to a suitable medium such as a flash drive.
What are the specific implications for labor law and HR processes?
In relation to employment law, BEG IV is particularly relevant in the following three areas:
Employment contacts
- It includes an amendment to the Law on the Notification of Terms and Conditions of Employment (Nachweisgesetz), which previously required that material contractual terms and their amendments be in writing and signed by both parties.
- As of January 1, this allows employers to use the text form for most employment contracts.
- The changes allow the use of text form for the time frame for the retirement agewhich is usually included in employment contracts, but from article 14 of the Part-Time and Limited-Term Employment Act (Gesetz über Teilzeitarbeit und befristete Arbeitsverträge), this does not apply to any other employment contract with a limited term. Therefore, regular fixed-term contracts must comply with the written form requirements and therefore continue to require a wet signature from both parties.
Request for parental leave
- BEG IV allows requests for parental leave to be submitted in text form, e.g. by email, which previously had to be submitted in written (signed) form.
Job references
- Another consequence of BEG IV is that, with the express consent of the employee, employment references can now be issued in “electronic form” instead of the previously mandatory written form. Therefore, job references will no longer require wet signatures. An employee who is only offered a verbal reference can take legal action to force the former employer to provide it in writing.
- It should be noted that “electronic form” differs from text form, so it cannot be provided through a simple email or any of the other examples mentioned above. This form requires the employer to use an electronic document that bears their official “signature,” for example using DocuSign.
- Consequently, since that signature can only be used by employers with adequate software and only by those employees who have access to it, apart from the need for express employee consent, it does not represent a significant simplification of HR processes as far as belongs to references. .
Where will the written form still be required?
While BEG IV affects a number of employment law cases and enables employers to modernize and digitize some elements of their administrative processes, the written form will still be required for some important tasks. For example, termination notices, termination agreements and post-contractual non-compete clauses must still be in writing, ie. with a signature in wet ink. If they are not, they will simply be void and completely ineffective under the law. As mentioned above, fixed-term contracts continue to require a written form.
Moreover, these simplifications will not apply to labor contracts in sectors regularly affected by illegal work. This includes economic sectors such as food, industrial cleaning, private security services and others listed in Sec. 2a of the Law on Combating Undeclared Work and Illegal Employment (Schwarzarbeitsbekämpfungsgesetz). Pre-2025 requirements will continue to apply in these sectors.
What should your organization do now?
In light of these new regulations, companies should establish clear guidelines on which form is sufficient for which task. It is particularly important to distinguish between the specific requirements of written, text and electronic form. To summarize:
“written” means in writing bearing one or more signatures in wet ink
“electronic” means in writing that has an electronic signature
“text” means in writing without any specific form of mandated agreement.
Consequently, while the pre-2025 processes for issuing and terminating employment contracts remain legally effective for those employers who are comfortable with them, there is now scope for companies to conduct a review of their standard contract systems to determine whether they define a stricter form than is now required by law.
Lutz Hoheisel contributed to this article.
