The new German Minimum Wage Act: Challenges for the Games Industry


August 18, 2015 Leave a comment
The introduction of the German Minimum Wage Act (MWA) on 1 January 2015 has had a big impact for Digital Business companies. Indie developers, studios and start-up companies in particular should be aware of a number of requirements and risks for anyone now hiring employees, interns and/or (purported) freelancers.

Liability for subcontractors

The principal of a work or service agreement (e.g. for the external production of audio, artwork or animation assets) is liable for employees of the subcontractor if the subcontractor does not pay the minimum wage to their employees.

This rule brings considerable risks for all companies, going as far as the assumption of the insolvency risk of the minimum wage obligation of the sub-contractor. Principals’ liability is a statutory liability which cannot be contractually excluded.

However, the risks can be limited in the work or service agreement with the client. Features of such agreements may include audit rights rights, extraordinary termination rights as well as contractual penalties.

Minimum wage for interns

Very important for many companies especially in the field of digital business is the issue of internships: generally, the minimum wage of EUR 8.50 gross per work hour is also applicable for interns. Excluded from the statutory regulation are mandatory internships according to study regulations and trainee regulations as well as internship for student interns or for the purpose of orientation in the choice of profession or study.

The internship may however not exceed a period of three months and there must not have been an employment or trainee relationship with the intern in the past. In case the internship exceeds three months, it is still unclear whether the complete period or only the period beyond three months will have to be compensated with minimum wage. There are many however reasons to believe only the additional period will fall under the minimum wage obligation – at least as long as both periods are contractually kept separate from each other.

Contractual time-barring deadlines invalid?

Many current standard employment contracts include time barring deadlines, pursuant to which any claims between employees and employers must be made within a certain time of becoming due (usually: three months); otherwise, the claims lapse.

The MWA expressly excludes any time-barring for minimum wage claims. Many employers are now uncertain whether or not time-barring deadlines are generally invalid if they do not include wording explicitly stating that entitlements to minimum wage are exempted. Such invalidity would have the effect that all entitlements from the employment relationship would only be subject to the general civil limitation periods of three years – which would be very disadvantageous for employers.

Subject to more detailed legal review, it may make sense to conclude amendments to existing employment agreements to address this risk.

 

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Annabel Lehnen

Annabel Lehnen

Partner at Osborne Clarke
Annabel advises international and national companies in relation to strategic employment law issues. She focuses on providing long-term legal guidance for HR departments, in particular on collective employment law.

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