In economically challenging times, such as the current corona crisis, companies are required to minimize economic risks to the most possible extend. Short-time work [Kurzarbeit] is a viable measure to achieve this goal. To account for the current situation, the German Federal Employment Office [Bundesagentur für Arbeit] published in February 2020 that "a loss of working hours due to or as a result of the corona virus and/or the associated safety measures is generally considered an unavoidable event or economic reasons within the meaning of Section 96 (1) No. 1 SGB III [German Code of Social Law]". Compensation for the loss of working hours by short-time working benefits is therefore admissible.

In a "fast-track procedure", the German Federal Government has recently created a legal basis for facilitating access to short-time working benefits in response to the current corona crisis. The corresponding "German Act on the Temporary Crisis-Related Improvement of the Regulations for Short-Time Working benefits " [„Gesetz zur befristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitergeld“] entered into force on March 15, 2020 and provides the legal basis for a Regulation of the German Federal Government. The actual measures are to be implemented by means of the respective Regulation of the Federal Government.

I. Requirements for receiving short-time working benefits

A companyis entitled to short-time benefits [Kurzarbeitergeld] in case the following requirements are fulfilled:

• Substantial interruption of the business including loss of wages and salaries, which is temporary and inevitable.

In general, the loss of working time has to concern at least one third of the employees, with the loss of wages and salaries amounting to 10% to 100% of the gross remuneration as a result of the reduction of the working time due to short-time work. Under consideration of the current situation, the German Government passed "Law for the Temporary and Crisis-Related Improvement of Governing Regulations Concerning Short-Time Allowances" [Gesetz zur befristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitergeld], reducing the benchmark of affected employees to 10%.

• Company requirements: minimum of one employee
• Personal requirements of affected employees: employment subject to compulsory social security insurance and not subject to grounds for exclusion, e.g. termination of the contract or existence of cancellation agreement, employees participating in professional training in full-time with remuneration, outworkers, trainees and inactive employments (e.g. parental leave).
• Notification of the Federal Employment Agency [Agentur für Arbeit] by due date, and submission of the required request by due date.

II. Mandatory agreement with employees

Short-time work cannot be imposed unilaterally by the employer, but mandatorily requires a contractual basis, e.g. by provisions under collective law (collective agreements or company agreements) or included in the contracts on an individual basis. The company's works council, if any, is to be consulted according to section 87 BetrVG [German Works Constitution Act] and any agreement is subject to the works council's approval.

In case no provisions under collective law are available due to a lack of collective agreements and works council, a separate stipulation is to be included in the individual contract of each employee in case such (valid) stipulation was not included in the original employment contracts. The respective agreement may be deemed to have been tacitly concluded in case the employee accepts the implementation of short-time work by the employer and, according to the jurisdiction of the Higher Labour Court Düsseldorf [Landesarbeitsgericht Düsseldorf], the payment of short-time allowances. However, we would highly recommend to obtain the explicit consent of the employee. In case employees refuse to consent, a notice of termination of the contract with the option of altered conditions of employment ("Änderungskündigung") is feasible to implement shorter working times. However, in this case the employee continues to be entitled to remuneration until expiry of the period of notice.

III. Procedure for short-time work and short-time working benefit

Short-time working benefits require a two-stage approval process:

Stage 1: Notification of the loss of working hours

The employer (or the responsible workers’ representative) is obliged to notify the local responsible Federal Employment Agency of the loss of working hours.

The notification must include information concerning the substantial loss of working hours and the fulfilment of the company requirements for short-time working benefits, as well as the relevant documents (e.g. company agreements, individual stipulations in the employment contracts concerning short-time work). After submission of the documents, the Federal Employment Agency provides a statement of whether the basic requirements for short-time allowances are fulfilled.

Caution! As a rule, short-time benefits are only paid starting in the calendar month in which the Federal Employment Agency receives the notification.

Stage 2: Application for short-time benefits

After that, am application requesting for short-time benefits must be submitted to the competent Federal Employment Agency by the employer or the responsible workers’ representative, if any.

Caution! In this regard, a peremptory time limit of 3 months after the calendar month during which the short-time work is performed was established. A reestablishment of rights restitutio in integrum [Wiedereinsetzung] is not admissible. The employer is obliged to calculate the short-time benefit at its own expense and pay the corresponding amount to the employee. In case the Employment Agency revokes the granted short-time working benefit retrospectively, the employer is obliged to reimburse the agreed loss of working hours at its own expense in the amount of the short-time working benefit that would have been granted to the employee.

IV. Duration and amount of the short-time working benefit

The short-time working benefit is to be granted in the amount of 60 % or 67 % (for employees with dependent children) of the loss of net earnings calculated on a flatrate basis, i.e. the difference between the remuneration of the respective employee in case of normal working hours (target remuneration) and the remuneration of the respective employee in case of short-time work (actual remuneration).

As a rule, short-time allowances may only be granted for a maximum of 12 months. In case of extraordinary circumstances on the employment market, as it is the case during the corona crisis, the German Federal Ministry of Labour and Social Affairs [Bundesministerium für Arbeit und Soziales] may extend the duration to 24 months by means of a regulation. This is currently planned and shall be issued with regard to the corona virus, soon.

V. Changes in the law due to the spread of the corona virus

The new "German Act on the Temporary Crisis-Related Improvement of the Regulations for Short-Time Working Benefits " [„Gesetz zur befristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitergeld“] entered into force on 15 March 15, 2020, contains the following facilitations, respectively, the authorization for the Federal Government to regulate the following facilitations without the consent of the Federal Council:

• Notification for short-time work is already possible if at least 10% of the employees are affected by the loss of working time. Previously, this threshold amounted to 30% of the workforce
• Complete or partial waiver to build-up of negative working time balances before paying the short-time working benefit shall be possible. The current law so far requires companies within agreements on flexible working time fluctuations in working hours to use these agreements to avoid short time work and to reduce working time accounts and build up negative time balances.
• In future, it shall be possible that short-time benefits is also granted allowance to temporary workers.
• The social security contributions that employers normally have to pay for their employees (in relation to short-time working benefits) will in future be fully reimbursed by the Federal Employment Office.

This law enables, the federal government is empowered from now on to implement significant facilitations for issuing short-time working benefits by means of a statutory ordinance. A corresponding ordinance, based on which employees affected by loss working time can receive short-time work allowance retrospectively as of March 1, 2020, is intended to be launched in the next few days. Thus, companies may probably apply for the improved short-time work in March.

Do you have any questions or queries about short-time work or do you need specific support for the introduction of short-time work? Feel free to contact us! Our team of experts will be happy to help you with any questions concerning short-time work!