Employment Contract Act

Anyone who works for money enters into a contract with the business. This contract regulates what work one performs, what one receives in return, and how long the arrangement lasts. An Employment Contract Act would be a single code of law in which all the basic rules for such contracts are laid down. In Germany, this still does not exist today. Instead, the rules are spread across many individual laws, and a large part of them has been shaped by courts through their rulings over decades. For over a hundred years, legal scholars have therefore repeatedly called for all of this to be consolidated into one law.

Why fragmented labor law is a problem

Anyone who wants to know what rights they have at work today must search in many different places. Basic rules on contracts are found in the Civil Code, the general code for contracts of all kinds. Dismissals are regulated by a separate law, vacation by another, working hours by yet another. On top of that come collective bargaining agreements, i.e. agreements between unions and employer associations.

A particularly large amount is not found in law at all, but in rulings of the Federal Labor Court. When someone counts as an employee and when as a self-employed contractor was long clarified only through such rulings. For businesses, this means extra effort: without legal advice, it is hardly possible to say with certainty what applies. For employees, it means they often don’t know their own rights.

A unified code of law would make this legal situation clearer. Critics counter that consolidation makes the rules more rigid. Courts can react quickly to new forms of work, whereas a law must be amended each time for that purpose.

How such a draft would be structured

The best-known drafts follow the life cycle of an employment relationship. At the beginning come initiation and conclusion: What questions may a business ask in a job interview? What must be recorded in writing? Then follow the obligations during employment, i.e. pay, working hours, vacation, and illness. At the end come the rules on termination, above all on dismissal.

A core point of every draft is the definition of the employee. Because only those who count as employees enjoy the full protection of labor law. What is usually decisive is how strongly someone is integrated into another company and must follow instructions. Anyone who arranges their own working hours and location and has several clients is more likely to be considered self-employed. In 2017, the legislature wrote exactly this distinction into a section of the Civil Code – a small step toward a closed code of law.

It is also important that many of these rules are not negotiable. A contract may promise more vacation than the law requires, but not less. Legal scholars call such provisions mandatory law. They are the actual reason why labor law exists as a field separate from the rest of contract law in the first place.

Why tech corporations and platforms are affected by this topic

In business news, the term usually comes up when new forms of work are at issue. Drivers for delivery services or ride-hailing apps formally work as self-employed contractors. Whether they are in truth employees keeps courts across Europe busy. A modern Employment Contract Act would have to answer this question clearly, instead of settling it ruling by ruling.

For companies, a great deal of money is at stake here. Employees mean social security contributions, minimum wage, entitlement to vacation, and protection against dismissal. An EU directive on platform work from 2024 obliges member states to establish binding criteria on this. Germany must translate these requirements into national law, and in doing so, the old idea of a closed code of law regularly comes back onto the table.

This topic is also closer to you personally than it sounds. A summer job, an internship, or a mini-job is legally an employment relationship. Which rights apply in such cases is today scattered across several laws. That is exactly what an Employment Contract Act would bundle into one place.