Employment law
for small businesses and start-ups

Under German law, an employment contract can in principle also be concluded orally. Only a fixed term must be agreed in writing. Otherwise, the fixed term is likely to be invalid. Employers must document the essential terms of the contract in accordance with Section 2 of the Act on the Documentation of Essential Employment Conditions (Nachweisgesetz, NachwG). These include, in particular, the job, working time and place of work, pay, holiday, probationary period and the rules on termination of employment.

This documentation can be sent electronically in text form if the document is accessible to the employees, can be saved and printed, and the employer asks them to confirm receipt when sending it. On request, the employer must hand over signed documentation on paper without undue delay. For the sectors listed in Section 2a(1) of the Act to Combat Undeclared Work and Unlawful Employment (SchwarzArbG), such as construction and hospitality, signed documentation on paper remains mandatory. The statutory deadlines for providing the documentation must be observed. Breaches can be punished with an administrative fine.

Whether someone is falsely self-employed depends largely on how the working relationship operates in practice. What matters most is how far the person is integrated into the organisation of work and bound by instructions, whether they bear entrepreneurial risk and how many businesses they work for. The consequences fall mainly on you as the business engaging the freelancer: back payment of social security contributions for up to four years (or even 30 years in cases of intent) and liability for wage tax. A status determination procedure gives you legal certainty. I am happy to advise you on this.

Where an establishment (Betrieb) regularly has ten or fewer employees, general protection against dismissal under the Protection Against Dismissal Act does not in principle apply (Section 23 KSchG). Apprentices are not counted. Part-time staff count as 0.5 if they work no more than 20 hours a week, as 0.75 if they work no more than 30 hours, and as 1 above that. Special transitional rules may apply to employment relationships that already existed before 1 January 2004.

Sections 4 to 7 KSchG continue to apply even in small businesses, in particular the time limit for a claim challenging a dismissal, which is in principle three weeks. Notice of dismissal must be given in writing with a handwritten signature. An email is not enough. Notice periods must be observed, and the dismissal must not be discriminatory or contrary to good faith. Special protection against dismissal, for example during pregnancy or parental leave or in the case of severe disability, may also apply.

Where developers are employees, the rights of use in the code typically belong to the employer by law. With freelancers, by contrast, it depends on how the contract is drafted. Without an express grant of rights, the contract has to be interpreted case by case. This becomes a problem particularly if you later want to rework the code, license it to others or sell it together with the business. That is why investors, too, often look very closely at the chains of title and expect express and comprehensive IP clauses.