One facet of the so-called energy price brake that has so far received little attention in the public debate are the labor law requirements introduced by the legislature for the granting of state support in favor of companies. The following article provides a brief overview.
I. Energy price brake
On December 15, 2022, the Bundestag passed various price controls for gas, heat and electricity. The law introducing an electricity brake (StromPBG) and the law introducing price brakes for performance-related natural gas and heat (EWPBG) are intended to counteract massive price increases for electricity, natural gas and heat and the associated financial burdens that threaten the existence of energy consumers. Where particularly high relief is granted, the law ties state support to certain conditions, which are also relevant under labor law and restrict employers’ freedom of action in the current crisis.
II. Jobs must be preserved
A central concern of the legislator is to secure jobs in the energy crisis. Relief of more than 2 million euros in the relief period from January 1, 2023 up to and including December 31, 2023 will therefore only be granted to companies if the company undertakes to maintain jobs.
Two options for implementing the job retention obligation
Employers have two different means of retaining their jobs.
a) Job preservation through collective regulation
The legislator sees collective bargaining agreements or company agreements on job security as the primary means of maintaining jobs. In order to meet the requirements of the energy price brake, the collective agreement must exclude redundancies for operational reasons until at least April 30, 2025. The law does not provide for any concrete content of these agreements that goes beyond the time aspect; in particular, there are no specifications as to the minimum size of the workforce that must be maintained. In this respect, collective bargaining agreements and company agreements can also provide for a workforce size of less than 90% to be maintained. However, it has not yet been clarified where the testing authorities will draw the line here, nor has the question of whether typical reservations such as e.g
b) Voluntary commitment of the employer
Alternatively, a job security agreement can be replaced by a self-declaration by the employer that jobs will be retained. However, this is only possible if a works agreement or a collective agreement has not been concluded. For this reason, in addition to the employer’s self-declaration, statements by those involved in the negotiations (e.g. works council or trade union) on the reasons for the non-conclusion of a collective agreement or a company agreement must also be submitted. The self-declaration must include a commitment to maintain a workforce of at least 90% of the number of full-time equivalents (FTE) available on January 1, 2023 by at least April 30, 2025. Regularly employed temporary workers are included in the calculation. It has not yet been clarified to what extent fixed-term employees and seasonal workers are to be included. However, there is some evidence that these groups of people must also be included proportionately if there is a permanent or recurring need behind them. From the wording of the provision, it also follows that the employer is obliged to maintain the employment level of at least 90% of the FTE over the entire period, ie from January 1, 2023 up to and including April 30, 2025. The obligation applies to the sole proprietorship; there is no group consideration here.
Employers must provide evidence of job retention
In order to receive government relief for energy costs in the magnitude described above, employers have certain obligations to provide evidence both in the case of the employment security agreement and the self-declaration. You must submit either the collective agreement or the company agreement or the self-declaration (including the statements) to the audit authority by July 15, 2023, otherwise the funding is limited to a maximum of 2 million euros. Excess relief amounts will be reclaimed by the audit authority.
Special proof obligations also apply in the case of a declaration of self-commitment. At the end of the period in which jobs must be maintained, the employers concerned must submit a so-called final report to the audit authority, in which the job development is presented and, in the event of job cuts, the reasons for this are explained. Even if the law does not contain any time specification for this, this must be done at a reasonable time after April 30, 2025, but before December 31, 2025 at the latest. If investments are planned for 2026, a later submission may be justified in exceptional cases.
Violation of the duty to maintain a job may result in repayment
If a company agreement or a collective agreement was concluded for the purpose of job retention, the legal consequences in the event of a violation of the job retention obligation are based exclusively on the provisions of the company agreement or collective agreement.
If the employer has submitted a self-declaration, the audit authority is entitled to reclaim granted relief of more than 2 million euros at its discretion if the 90% limit is not reached. In doing so, the authority must take the following considerations into account:
- The amount of the claim should correspond to the percentage of the shortfall in the guaranteed number of jobs to be retained, but should be at least 20 percent.
- In the event of a reduction in the size of the workforce due to conversion measures or transfers of operations, the extent to which jobs have been retained by the legal successor must be taken into account.
- A reduction in employment of up to 50% can be offset by investments in transformation, climate and environmental protection and energy security. In this case, however, a corresponding investment plan must be attached to the aforementioned final report (see above).
III. Remuneration limits and “bonus ban”
On the recommendation of the Committee for Climate Protection and Energy, a ban on bonuses and dividends as well as a limitation on remuneration found their way into the StromPBG and the EWPBG at the last minute. This is based on the consideration that companies that take advantage of a particularly large amount of state aid should save on expenditure that is particularly beneficial to individuals for the period of the subsidy.
Restrictions depend on relief amount
Depending on the specific relief amount, companies make the following restrictions with regard to remuneration.
- Relief sum of over 25 million euros:
- Until the end of December 31, 2023, no bonuses, other variable or comparable remuneration components that were agreed or decided after December 1, 2022 may be granted to the management or members of the supervisory board. This applies equally to any increases in the aforementioned remuneration.
- No voluntary remuneration or severance payments may be granted to senior management or members of the supervisory board until December 31, 2023.
- There is a cap on the base salary of senior management. Compensation for existing members of the Executive Board may not exceed the base salary prior to December 1, 2022. For persons who have only been members of the Executive Board since December 2, 2022, the upper limit is the base salary of members of the Executive Board with the same level of responsibility three months before December 1, 2022.
- Relief sum of over 50 million euros:
- The bonus ban mentioned above also applies without restriction to bonuses that were agreed or decided before December 1, 2022.
Ambiguities in the calculation of the relief amount
The aforementioned restrictions raise numerous follow-up questions. For example, when calculating the relief amount to determine the threshold for the bonus ban, the wording of the law suggests that the focus should be on the individual company. Finally, unlike elsewhere in the law, affiliated companies are not expressly included. However, this contradicts the FAQ list on the gas and heat price brake of the Federal Ministry of Economics and Climate Protection of February 1, 2023, according to which individual companies and affiliated companies including the group board are affected if they are based in Germany and have a total relief of more than 25 million euros received in the group. This would mean that group companies that do not claim high tax relief themselves would nevertheless be affected by a bonus ban. It remains to be seen how the authorities will position themselves in this regard in the future. In principle, the FAQ list has no legally binding effect.
Scope of bonus ban is fuzzy
The scope of the bonus ban also opens up room for interpretation. The term “grant” used in the law is generally understood to mean the payment of the amount or the granting of another economic advantage. No bonuses or other variable remuneration may be paid out until December 31, 2023. However, the explanatory memorandum to the law adds that the ban should also apply to payments after December 31, 2023, since otherwise the ban would be ineffective if the payment were postponed. In this respect, bonus claims for the year 2023 may not be paid out, regardless of the specific payment date. However, the question of how to deal with bonus claims that have already been earned but whose payout period is in 2023 remains open.
Companies can opt out (“opt out”)
The law offers companies the opportunity to submit an informal declaration to the audit authority by April 31, 2023 that they do not wish to claim funding under the StromPBG and the EWPG with a relief amount of more than 25 million euros. In this respect, there is the possibility of renouncing the bonus ban.
VI. Practice Notes
In view of the not insignificant employment law implications of the energy price brakes, companies are advised to familiarize themselves with their regulations. This applies in particular with regard to the numerous formal regulations, such as the obligation to provide evidence, which are often linked to short deadlines. This is the only way to avoid large sums of money being reclaimed by the testing authorities at an early stage. A large number of questions in connection with the new regulations are still unresolved and require careful analysis.
For further information, please contact:
Dr. Timon Grau, Partner, Linklaters
timon.grau@linklaters.com
