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The law of minimum wage August 11, 2014 - the customer's liability pursuant to article § 13 law of minimum wage -

With effect from January 01, 2015 the law constituting the regulation of the minimum wages entered into force (MILOG). With the entry into force of this law it is quite evident that not everything is clear. The customer's liability is of high importance, because he is responsible for ensuring that the contractor pays the employees the minimum wage. But what is the liability like? Is the customer from now on obliged to control that the contractor pays his employees in accordance with the law of minimum wage?

1. Legal point of departure

§ 13 MiLoG: customer's liability
§ 14 of the legislation on the posting of workers is applicable.
§ 14 legislation on the posting of workers: the customer's liability

(1) An entrepreneur who entrusts the performance of work or services to another entrepreneur is responsible for ensuring that employees are paid the minimum wage. [...] like a guarantor who assumes the absolute guaranty under waiver of a plea of unexhausted remedies. [...]
(the author's emphasis)

In the initial bill of the MiLog there were guarantee conditions on the customer's liability. The current version of the law contains only a reference to the legislation on the posting of workers. (AEntG).

2. Who is the entrepreneur? – The legal situation is unclear.

In the MiLoG(law of the minimum wage) we do not find a definition for 'entrepreneur'. As for article § 14 AEntG the Federal Supreme Law Court interpreted very restrictly the wording 'contractor' and limited the customer's liability on the general situation of the contractor. (BAG, NZA 2007, 613; see also Sittard, Das MiLoG – Ein Ausblick auf die Folgen und anstehenden Weichenstellungen, in: NZA 2015, 951, 953): Based on the spirit and purpose of article § 14 AEntG only those entrepreneurs are liable who engage third parties to fulfill their duties (thus they behave as a general contractor).

There is some disagreement as to the limitation to the 'general situation of the entrepreneur'. Due to the inter-branch application of the legislation on the posting of workers on all contracts of work and services some are of the opinion that the restriction to the 'general situation of the contractor' is not correct. (Erfurter Kommentar zum Arbeitsrecht-Franzen, 15. edition, München 2015, § 13 MiLoG Rdnr. 2).
So far it is not clear if the courts will adhere to the legal principles laid down by the case-law , especially as far as article § 14 AEntG is concerned and interpret them for the purpose of the  MiLoG. According to us the grounds of the law do not make reference to the 'general situation of the contractor“. To be more precise (BT-Drucksache 18/1558 vom 28.05.2014, page 40) we find the following text:

§ 13 [MiLoG] defines apart from the civil enforcement of branch minimum wages in accordance with the legislation on the posting of workers the liability of the customer of works and services. The customer of works and services, in particular the so called 'general contractor' is liable in case [...]
(The author's emphasis)

If according to the ideas of the legislator especially the general contractors are liable for damages, then, following the interpretation of this disposition all customers of works and services should accept liability. We are of the opinion that one should be cautious about taking as a starting point the restriction of the 'general situation of the contractor'.

There is legal uncertainty on this point. The entrepreneurs, until a court law has clarified the matter, cannot rely on being excluded from liability if they are not 'general contractors'. At the moment every entrepreneur must assume that he has to pay the minimum wages.

3. The level of liability

The customer is liable pursuant to article § 13 MiLoG i.V.m. § 14 S. 1 AEntG „like a guarantor under waiver of a plea of unexhausted remedies“. This wording refers to article §§ 771, 773 paragraph 1 number 1 BGB. According to article § 771 BGB the guarantor can ask the creditor to sue the debtor (court proceeding). Only when the action against the debtor is not successful, can he pursue his claims against the guarantor. The waiver of a plea of unexhausted remedies is pursuant to article § 773 Abs. 1 Nr. 1 BGB excluded in case the guarantor renounces especially when he is liable as principle debtor. In accordance to article § 13 MiLoG i.V.m. § 14 S. 1 AEntG the customer shall bear liability as an absolute guarantor. This means that in any case the customer is liable and or alone or together with the contractor he shall be responsible for any damage.

4. Our approach

Entrepreneurs bear a high level of risk of liability and should consider the following measure in order to limit the risk:

  • If you are a general contractor or a customer of work or services you should examine all contracts and if necessary change them.
  • You should ask the customer to fulfill his obligations in accordance with the MiLog and the AEntG. Periodically you should check with the customer's tax consultant that he pays the employees the minimum wage of 8, 50€ (legal situation on March 11, 2015).
  • Subcontractors should only be employed with the assent of the customer or the general contractor and try to determine conditions in which your written declaration of consent is necessary.
  • Make sure that your agreements contain the necessary safeguards: Audits, the right of retention, bank guarantees for the case of breach of duty
  • Make sure that your agreements include penalties or special termination agreements

To download the article in PDF click here.