Employment contracts are generally free of formal requirements
In principle, the law does not prescribe a specific form for employment contracts. Employment contracts can therefore be concluded without any particular form – theoretically even orally.
However, this statement on the freedom of form of employment contracts must be relativised in the same breath. Compliance with a certain form can result from collective agreements or works council agreements. Exceptions to the freedom of form also arise in the case of fixed-term employment contracts. Here, the written form is mandatory to prevent the fiction of an unlimited employment contract. Written form means that the employment contract must be wet-ink signed (handwritten) by both contracting parties in person with their full name signature on paper. It must not be forgotten that fixed-term employment contracts also include contracts limited to the reaching of the standard retirement age. Employment contracts containing post-contractual non-competition clauses must also be concluded in written form.
In practice, it is common to conclude employment contracts that do not fall under one of the aforementioned exceptions by means of an electronic signature. The advantages are evident: the digital conclusion of contracts saves costs, speeds up processes and protects the environment.
Changes to the Verification Act (Nachweisgesetz) trigger discussion on written form for employment contracts
The draft of the German law implementing the European Directive on Transparent and Predictable Working Conditions (“Working Conditions Directive”) caused new discussions in relation to the form of employment contracts. The German employer implements the EU Directive by amending the German Verification Act (Nachweisgesetz). The law contains a non-exhaustive catalogue of working conditions about which employees must be informed by the employer. Among other things, the implementation law provides for an extension of this catalogue, e.g. to include information on the conditions for overtime work. The Verification Act requires the strict written form for the proof of essential working conditions and explicitly prohibits the electronic form. The EU Working Conditions Directive, on which the implementation law is based, on the other hand, explicitly allows the provision of the required information in digital form. The hope was therefore big that the German legislator would now dare to digitalise and de-bureaucratise the world of work by allowing text form to be sufficient for proof in future. The text form is also complied with in the case of transmission by e-mail. Unlike other European countries, it has not seized this opportunity. In future, there will even be a fine of up to two thousand euros (per violation) if employers do not provide the essential contractual conditions in writing.
Written form requirement for employment contracts depending on the practical implementation of the obligations under the Verification Act
For the form of employment contracts, this means the following: First of all, a distinction must be made as to which method employers and HR departments have chosen to fulfil the obligations under the Verification Act: The working conditions to be proven can be integrated directly into the employment contract or summarised in a separate information sheet.
Should employers decide to include the information required by the Verification Act in the employment contract, the employment contract must be hand-signed and given to the employee no later than the first day of work. Even though the legislator does not require the employment contract to be in writing, it still requires the proof to be in writing. This means that with this option, a written form for employment contracts actually applies through the back door.
However, before the first day of work, employment contracts can still be concluded digitally by means of an electronic signature for the time being. Given that contracts are sometimes concluded several months before the start date of the job and original signatures cannot always be organised quickly, this can be a relief in practical terms. Should employers choose to keep the evidence of material contractual terms separate from the employment contract, the strict written form requirement only applies to the document with which the evidence requirements are to be fulfilled. In this case, no specific form has to be observed when concluding employment contracts under the conditions mentioned above.