Germany is a federal republic made up of 16 states (Länder). Employment legislation is primarily a federal matter, though the laws of individual states are important in several areas, such as educational leave and public holidays.

The Basic Law (Grundgesetz), or constitution, sets out a number of principles relevant to employment law, such as non-discrimination and equality, and freedom of association and collective bargaining. In some areas of law, legislation is consolidated into a single code, and several of these are relevant to employment — notably the Civil Code (Bürgerliches Gesetzbuch, BGB), which governs employment contracts, and the Social Security Code (Sozialgesetzbuch), which deals with matters including sickness benefits. However, employment legislation itself is not codified in this way but takes the form of numerous individual statutes (often influenced by EU law). The case law of the specialist labour courts plays a significant role in interpreting employment legislation.

Pay and conditions for a majority of German employees are set directly or indirectly by collective agreements, which are signed mainly at industry level. In some areas, employment legislation allows collective agreements to deviate from statutory provisions. Other important sources of law are “works agreements” signed at establishment level by employers and works councils, and individual employment contracts. In employments covered by a collective agreement, individual employers and employees cannot agree terms and conditions that are less advantageous to employees than those stipulated in the collective agreement, unless the collective agreement permits this.

This topic refers to employment law in the private sector only.

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