As a reaction to the strains of the coronavirus pandemic on the economy, German companies have the option to reduce the working time of their employees (by up to 100%) if there is a loss of work and to apply for state support in form of a short time work allowance (Kurzarbeitergeld). In the case at hand, the applicant for such short time work allowance, a company based in another EU country, employed approximately 350 flight attendants in Germany, which it provided to airlines in the form of personnel leasing. In addition, the applicant operated a training and education center for flight personnel under an own company registration number at a German airport with approximately seven employees. The education and training center was also responsible for issuing employee ID cards to the flight personnel and for providing work clothing. All of the applicant’s employees resided in Germany and were subject to German social security contributions.
Due to the corona-related restriction of travel, the applicant’s German flight personnel temporarily suffered a complete loss of work. However, the competent Federal Employment Agency denied the application for short-time work compensation arguing that the applicant did not operate a permanent establishment in Germany and was, therefore, not eligible for receiving short-time work allowance for its employees.
The Social Court of the State of Bavaria, like the previous instance, confirmed the decision of the Federal Employment Agency in a preliminary injunction proceeding. The court found that the applicant did not have a permanent establishment in Germany. The applicant’s actual business purpose, namely the leasing of its 350 employees to airlines, was not carried out in Germany by an office or other establishment equipped with material and personnel resources but rather, and almost without the applicant’s participation, through the operational planning carried out by the airlines themselves. Apart from the training and education center, in which the 350 employees were not incorporated, the applicant had not established any operational structures in Germany.
As a result, the court found that the Federal Employment Agency was entitled to refuse the application for short-time work allowance. In particular, the court saw no violation of the general principle of equal treatment vis à vis companies with registered seat in Germany. Pursuant to previous rulings of the Federal Social Court, there is no constitutional requirement to establish actuarial equivalence between contributions paid into the social security systems and entitlement to benefits. Therefore, the compulsory inclusion of the applicant’s employees in the German unemployment insurance did not automatically result in an entitlement to benefits such as the payment of short time work allowance.
After the decision of the court in the preliminary injunction proceeding, the applicant tried appealing the decision in front of the Federal Constitutional Court, but was turned down as the main proceeding in front of the social courts needs to be completed first. Therefore, it remains to be seen whether the decision of the state social court will uphold.
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