GERMANY: An Introduction
After the burdens of the COVID-19 pandemic, the year 2022 has brought considerable new challenges for Germany and its employers, in particular due to the war in Ukraine. So far, the German economy has come through the crises relatively unscathed. For 2023, however, the forecasts are more pessimistic. The German Bundesbank expects Germany's gross domestic product (GDP) to decline by 0.5%. Negative factors are inflation, especially caused by rising energy prices due to the massive deterioration in energy supply caused by the halt in Russian gas deliveries, higher financing costs, a weaker increase in foreign demand and a continuing shortage of qualified workers. Since the German economy is still industrial to a relatively large extent and thus energy-intensive, the loss of relatively cheap Russian gas has led to considerable pressure on competitiveness. Private households also consume less due to high inflation. Both the retail sector and other consumer-related service providers are likely to suffer from this.
To help enterprises, the simplified access to short-time work introduced in the context of the Corona pandemic will therefore be extended. At present, it is sufficient for short-time work if 10% of the employees in the company are affected by a work stoppage and not - as previously - one third of the workforce. This simplified access to short-time work is now valid until the end of June 2023.
Furthermore, at the end of 2022, the German Bundestag has passed the so-called “Gas Price Brake Act” and the “Electricity Price Brake Act”. While supporting enterprises, however, both laws also contain considerable encroachments on entrepreneurial freedom. If a threshold of EUR2 million (per company) of subsidies/financial relief under the Gas Price or Electricity Price Act is exceeded, a collective bargaining or company agreement to safeguard jobs until at least 30 April 2025 must be submitted. If that is not possible, a voluntary commitment by the company must be submitted stating that by 30 April 2025 a workforce must be maintained that corresponds to at least 90% of the FTE employed on 1 January 2023. In addition, a declaration on the reasons for not reaching a collective or company agreement on job security must be submitted. In view of the partly open wording of the law, it remains to be seen what standards the authorities will apply. Companies that are already in ongoing negotiations on a collective agreement including a provision on job security would be well advised to consider the effects on energy price relief in parallel.
Also at the end of 2022, the German Parliament (Bundestag) passed the Whistleblower Protection Act (“Hinweisgeberschutzgesetz” - HinSchG), which comes into force at the beginning of 2023 after approval by the Bundesrat. This Act in particular covers violations that are punishable by law, as well as violations that are subject to a fine, insofar as the violated provision serves to protect life, limb, health or the rights of employees or their representative bodies. In addition, various other violations of the law, such as violations of fiscal legal norms applicable to corporations and commercial partnerships, are expressly mentioned. The Whistleblower Protection Act goes beyond the scope of the EU Whistleblowing Directive because it includes not only violations of legal acts of the EU, but also violations of national law to a certain extent in its scope of application.
For private employers, the Whistleblower Protection Act makes it obligatory to set up an internal whistle-blowing/reporting system under certain conditions. This applies in principle to companies with more than 50 employees. Companies with up to 249 employees still have a transitional period until 17 December 2023 to set up internal hotlines. Employers can also set up a joint hotline with other companies. Anonymous reporting must also be possible. In addition to the internal reporting system, the Whistleblower Protection Act provides for a central external reporting office at the Federal Office of Justice, which is responsible for both the public sector and the private sector. In addition, existing reporting systems at the Federal Financial Supervisory Authority (BaFin) and the Federal Cartel Office will be continued as further external reporting offices with special responsibilities.
Reprisals or sanctions against whistle-blowers are prohibited, as is the threat or attempt to use them. The prohibition of reprisals is secured by a reversal of the burden of proof in favour of the person making the report and a claim for damages. In addition, violations of the main provisions of the Whistleblower Protection Act are punishable as administrative offences with a fine.
On 1 January 2023 the Supply Chain Due Diligence Act (Lieferkettensorgfaltsgesetz – LkSG) came into force. This obliges companies to comply with human rights and certain environmental due diligence obligations along their value chain in an appropriate manner. The obligations to be fulfilled are graded according to the actual possibilities of influence, depending on whether the company is dealing with its own business sector, a direct contractual partner or a more indirect supplier.
In 2023 the Supply Chain Due Diligence Act applies to companies with 3,000 or more employees, from 2024 to companies with 1,000 or more employees. By 2027 at the latest, the EU Supply Chain Act will come into force for companies with 500 employees.
The due diligence obligations of companies under the German Supply Chain Due Diligence Act include: the establishment of a risk management system and the performance of a risk analysis, the adoption of a policy statement on corporate human rights strategy, the establishment of preventive measures, the immediate implementation of remedial measures in the event of identified violations of the law, the establishment of a complaints procedure as well as a documentation and reporting obligation for the fulfilment of due diligence obligations.
The Supply Chain Due Diligence Act obliges companies to conduct a risk analysis with regard to their own activities and business relationships in the supply chain. This analysis serves as a basis for the subsequent definition of preventive and remedial measures with the aim of identifying, preventing, ending or at least minimising human rights risks and violations of legal rights along supply chains. Identified risks must be assessed and prioritised. If the facts are unclear, there is a duty to investigate if further information is needed.
Management and compliance officers should therefore now become active in terms of corporate governance in order to also supplement existing compliance management systems with regard to the new requirements, as well as to adapt the contractual agreements with suppliers to the new requirements.