08-10-2020  | Update Employment Law September 2020

New hires despite short-time work?




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Due to the Corona pandemic and the associated economic effects, numerous companies were forced to announce short-time work over the past few months. This raises the question for employers to what extent it is still possible to hire during short-time work and what effects this has on short-time working compensation.

NEW HIRES DURING SHORT-TIME WORK 

First of all, a distinction must be made between new hires before and after the introduction of short-time work. The decisive factor here is not so much when the work commenced, but when the employment relationship was concluded. 

While new hiring before the start of short-time work is basically unproblematic (and the newly hired person can then also receive short-time work benefits), new hiring after the start of short-time work may have problematic consequences for the employer. 

The establishment of short-time work requires a "significant loss of work" according to Section 96 (1) SGB III. A loss of working hours is significant if it is based on economic reasons or an unavoidable event, is temporary and unavoidable and at least 10 per cent of the employees employed in the company in the respective calendar month are affected by a loss of remuneration of more than 10 per cent of their monthly gross remuneration. 

New hiring after the establishment of short-time work thus entails the risk that the German Federal Employment Agency may no longer consider a "significant loss of working hours" to exist and that the requirements for receiving short-time work compensation may therefore no longer be met. This would result in a suspension of the claim under Section 48 (1) sentence 1 SGB X and, if applicable, a claim for damages by the Employment Agency under Section 108 (3) SGB III in the amount of the remuneration already received (Gagel/Bieback SGB III § 96 marginal no. 109). A loss of working hours could have been avoided, for example, if the position of the new hire could have been exercised by an employee on short-time work (BSG 21.02.1991, 7 RAr 20/90).

However, this does not mean that it is impossible to hire new staff during the period of short-time work. Nevertheless, there need to be factual reasons which justify the new employment and which can prove that a significant loss of working hours (otherwise) still exists. Such reasons would be, for example, the recruitment of a new employee for a job requiring special qualifications that none of the employees on short-time work have. 

According to the SPA, a significant loss of working hours despite new hires need to be determined by objective criteria as to what "can be expected from a careful entrepreneur in terms of precautionary measures and constant adjustment measures" (SPA 15.12.2005, B 7 a AL 10/05 R).

The risk of a loss of the prerequisites for short-time work exists even in the case of new hires in departments not affected by short-time work, provided that this work could also be performed by an employee working short-time. However, if, for example, the production department of the company is affected by short-time work, but not the HR department, it cannot be assumed as a rule - due to the lack of corresponding qualifications of the production employees - that they could have been employed in the HR department. In this case, a new employee can still be hired, even if other departments in the company have already implemented short-time work.

Consequently, a new employee can only be hired during short-time work if there is an objective reason for the new recruitment. Otherwise, it can be regularly assumed that there is no longer a significant loss of working time required to qualify for short-time compensation. 

EFFECTS ON THE SHORT-TIME WORK ALLOWANCE

If new employees are hired despite short-time work, they are generally not entitled to short-time compensation unless their employment contract was concluded before the short-time work started. There is an entitlement to short-time work compensation if the employment contract was concluded prior to the notification of short-time work, but the start of work falls within short-time work.

After the short-time work has started, newly hired employees are only entitled to short-time work compensation if compelling reasons exist (Section 98 (1), No. 1b, SGB III). What constitutes such a "compelling reason" is not regulated by law. For example, the new employment of an indispensable skilled worker who is urgently needed to ensure the continued existence of the business would be such a "compelling reason". In this case, the newly hired employee would also be entitled to short-time work compensation. 

The reimbursement of short-time work compensation for newly hired employees during an already established short-time work period is therefore regularly excluded. Only in exceptional cases - if there is a compelling reason - such a claim can be made. 

PRACTICE NOTE 

In principle, it should be noted that new hires after the establishment of short-time work should only be made in urgent cases and that any personnel gaps should primarily be closed internally by "bringing another employee (possibly also from another department) back” from short-time work. Otherwise, there is a high risk that there will no longer be any significant loss of working hours in the company required for short-time work and that a claim will be lost accordingly. If short-time work is granted without justification (e.g. since the hiring of a new employee), the employer may also be threatened with a claim for repayment by the Federal Employment Agency with regard to the short-time work allowance already received.

If, however, it is unavoidable for the employer to hire a new employee during short-time work, the employer should fully document the reasons for a planned new hire and, as a precaution, contact the responsible employment agency before concluding an employment contract in order not to risk the receipt or possible repayment obligations of short-time work benefits. 

It should be noted that as a rule, newly hired employees are not entitled to short-time work compensation unless there are compelling reasons for this. 

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