As from 1 January 2015, a minimum wage of € 8.50 has been introduced for the first time in Germany – this generally applies to all employees. However, there are some exceptions. For example, the minimum wage does not have to be paid to interns on a mandatory internship, apprentices, adolescents under the age of 18 without a completed apprenticeship, voluntary workers or former long-term unemployed people during the first six months of a new employment.
The amount of € 8.50 refers to the “normal performance” of the employee meaning that additional payments such as surcharges for night employment have to be paid in addition. According to a first judgment by a German labour court the same goes for voluntary payments by the employer, such as Christmas bonuses.
If an employer does not pay its employees the minimum wage, the German Custom Authorities may impose a fine of up to € 500,000.00. Furthermore, such companies may be excluded from the awarding of public contracts.
A very controversial aspect of the new Minimum Wage Act is how it applies to foreign employees in transit or during a short stay in Germany. In particular, it remains unclear if any application would be in line with the European principle of freedom to provide services. It could be argued that such a wide application would violate European law. Therefore, in January 2015, the EU Commission initiated a pilot process to clarify this question. Until clarification (not expected until June) the German Custom Authorities have suspended their control of foreign employees in transit or during a short stay for compliance with the Minimum Wage Act and the sanctions for any infringements.
In certain economic sectors, such as construction and logistics, an employer is obliged to document the start, the end and the duration of the daily hours of its employees – and save such data for two years. This duty is currently being politically challenged because it creates a lot of new bureaucracy for companies in these sectors – it remains to be seen whether this part of the Act will remain in force unchanged.
Furthermore, a general contractor who engages subcontractors in order to fulfil its contractual duties is strictly liable for the payment of the minimum wage by the subcontractors to their employees. This means that an employee of a subcontractor can sue the general contractor who hired his employer as a subcontractor if he is not paid at least € 8.50 per hour. This section of the Minimum Wage Act was included in order to actively engage all companies in a contractual chain to make sure that the minimum wage is paid by all their subcontractors – it bears substantial financial risks.
In order to avoid these risks, general contractors should always conclude liability agreements with their contractual partners which provide that liability for payment of the national minimum wage is transferred to the company which employs the relevant employees. Since the statutory liability itself cannot be excluded by contract, a financial risk in case of insolvency will always remain.