Reform promises and regulatory reality: The German Working Time Act amendment under economic scrutiny

Reform failure in the working time law: This is why businesses and experts are now sounding the alarm

Germany's working time law is facing a historic turning point – but the hoped-for modernization threatens to end in a bureaucratic labyrinth. Driven by landmark rulings from the European Court of Justice and the Federal Labour Court, the governing coalition had promised a contemporary reform: greater flexibility for employees and companies, a move away from rigid daily maximum working hours towards weekly working hours, and a streamlined approach to the new electronic timekeeping requirement. However, the draft bill now presented by the Federal Ministry of Labour and Social Affairs (BMAS) is drawing massive criticism across the business sector. Instead of paving the way for modern work models such as the four-day week, the law links urgently needed flexibility to collective bargaining agreements. For sectors with low rates of collective bargaining – especially the already struggling fast-food industry – this means they remain trapped in the rigid framework of the analog industrial age, while bureaucracy continues to grow. An economic and socio-political analysis of a draft law that contradicts its own promises.

When coalition agreements meet ministry drafts – and the result is disappointing

The starting point: A long overdue law hits a divided coalition

The German Working Time Act of 1994, in its basic structure, is a product of the analog industrial age. It stipulates a maximum daily working time of eight hours, or ten in exceptional cases, and mandates a rest period of eleven hours between shifts. For decades, this framework was considered a socio-political achievement – ​​a protective measure against the physical exploitation of workers in factories and mines. However, the world of work has fundamentally changed. Project work, shift work, the digital platform economy, and the profoundly altered preferences of younger employees are increasingly challenging this rigid daily working time regime.

The political impetus for the reform was clear: The European Court of Justice, in its so-called "time clock ruling" of May 14, 2019 (Case C-55/18), had already established that employers are obligated to implement an objective, reliable, and accessible system for measuring the daily working time of each employee. The German Federal Labour Court (BAG) followed suit in 2022, clarifying that the obligation to record working time already stems from existing German law. The legislature should have reacted swiftly to this double signal from the highest court – but it failed to do so for years.

The black-red coalition of the CDU/CSU and SPD therefore agreed on a comprehensive reform of working time law in their coalition agreement of April 2025. The core promises included: the introduction of a weekly instead of a daily maximum working time, greater flexibility for companies and employees in accordance with the EU Working Time Directive (2003/88/EC), and a streamlined regulation of the obligation to record working time electronically. The draft bill from the Federal Ministry of Labour and Social Affairs (BMAS) under Minister Bärbel Bas (SPD), which was published in June 2026, has significantly disappointed these expectations.

The draft bill: What the Federal Ministry of Labor and Social Affairs (BMAS) is actually planning

The draft proposal essentially proposes two main changes. First, collective bargaining parties should be able to agree on a maximum weekly working time instead of a daily one. The legally mandated rest period of eleven hours between shifts would then be eliminated – but only if collective bargaining agreements on health and safety regulations for employees are also included. While this sounds like a sensible compromise at first glance, in practice it has a significant selective effect.

Secondly, employers should generally record the start, end, and duration of daily working hours electronically on the day the work is performed. While the recording can also be done by the employees themselves or by third parties, the employer always remains responsible. Collective bargaining agreements should allow for exceptions, such as non-electronic recording or documentation no later than seven days after the work was performed. Alternative recording methods are permanently provided for micro-enterprises with up to ten employees.

The coalition agreement explicitly promised an "unbureaucratic" regulation. Instead, the draft from the Federal Ministry of Labor and Social Affairs (BMAS) presents a highly differentiated set of rules with a basic obligation, exceptions based on collective bargaining agreements, size-related special provisions, and transitional periods – a legal construct that will inevitably lead to disputes over interpretation. Furthermore, while the same-day electronic obligation complies with the ECJ's requirements in its protective intent, it simultaneously ties the flexibility of working time distribution to the existence of collective bargaining agreements. This creates a contradiction within the draft itself: the obligation to digitize applies to everyone, while the flexibility applies only to a few.

The problem of collective bargaining coverage: Reform for a privileged minority

The core structural flaw of the draft lies in linking the maximum weekly working hours to collective bargaining agreements. In Germany, in 2025, just under 48.7 percent of all employees worked in companies covered by collective agreements. This sounds like a narrow majority – but in reality, collective bargaining coverage varies dramatically across sectors and company sizes. While around 49 percent of companies in the overall economy are covered by collective agreements, the figure for the hospitality industry is a mere 23 percent. Looking at companies rather than employees, the rate is even lower, as it is primarily larger companies that conclude collective agreements: 77 percent of companies with more than 200 employees have collective bargaining coverage, while only 35 percent of companies with 21 to 50 employees do.

For the chain restaurant industry, this means that a large part of the sector would simply be excluded from the flexibility promised in the coalition agreement because no collective bargaining agreement exists through which the necessary regulations could be negotiated. The German Association of Chain Restaurants (BdS) has sharply criticized this. BdS Managing Director Markus Suchert stated that the draft falls far short of the industry's expectations and fails to meet the reform goals agreed upon in the coalition agreement. Chain restaurants would first have to painstakingly secure the urgently needed flexibility through collective bargaining – a process that would take years and, given the existing power imbalances in the hospitality industry, would involve considerable economic concessions.

This structure not only undermines the economic policy objective of the reform but also exacerbates structural imbalances in competition: Market leaders like McDonald's or Burger King, which already have company-level collective bargaining agreements, could immediately utilize the new flexibility options. Smaller restaurant chains without such agreements, however, would remain trapped in the old, rigid regulations. Marc Biadacz, the CDU/CSU parliamentary group's spokesperson on labor and social policy, has therefore rightly pointed out that a maximum weekly working time must apply to all employees – regardless of whether a collective bargaining agreement exists or not.

Chain restaurants under pressure: The economic dimension

To understand the scope of the debate, the economic importance of chain restaurants must be grasped. In 2025, the sector generated total revenue of €36 billion in Germany – up from €35 billion in 2024 – representing approximately 40 percent of the entire German restaurant market. Member companies of the German Chain Restaurants Association (BdS) employ around 120,000 people and over 2,000 trainees at nearly 3,000 locations. This makes chain restaurants not only a significant employer but also a driving force for training and an integration laboratory for young professionals, students, and immigrants.

But the industry is under considerable pressure. The entire hospitality sector reported a real decline in revenue of 4.9 percent in September 2025 compared to the same month of the previous year. The number of restaurant and bar insolvencies rose to around 2,900 in 2025 – almost 30 percent more than in the previous year. At the same time, personnel costs are increasing: The statutory minimum wage was raised to €13.90 in January 2026, which translates to additional annual costs of around €2,275 per full-time employee. In this economic environment, greater flexibility in working time arrangements is not an abstract demand, but a concrete competitive advantage.

Added to this is the skilled worker shortage. The DIHK (Association of German Chambers of Industry and Commerce) report on securing skilled workers 2024/25 shows that the hospitality industry, at 64 percent, is among the sectors with the most pronounced skilled worker shortage – and 57 percent of businesses express a particularly strong desire for greater flexibility in working hours. More than 40 percent of positions in the hotel and restaurant industry are currently vacant. Half of all apprenticeships in this sector are not completed. In this context, it becomes clear why chain restaurants view flexible working hours not as a tool for increasing workload, but as a means of improving work-life balance and thus as a recruitment strategy. Those who can offer their employees the option of working four more intensive days instead of five equally long days, thereby enjoying a longer weekend, have a decisive advantage in the competition for scarce staff.

The obligation to record time: A contradiction to the reduction of bureaucracy

The second major point of contention is the obligation to record working hours electronically on the same day. This obligation is well-founded in terms of its protective logic: The 2019 ruling of the European Court of Justice (ECJ) unequivocally clarified that without objective recording of working hours, employees' rights to limit maximum working hours and to sufficient rest periods are de facto unenforceable. The 2022 decision of the Federal Labour Court (BAG) further specified this for German law. The statutory codification of an obligation long since mandated by the highest court is therefore legally consistent.

However, the specific implementation is problematic, given the tension with the coalition's stated commitment to reducing bureaucracy. The black-red coalition agreement promised to reduce bureaucratic costs for businesses by 25 percent (around 16 billion euros) and to lower compliance burdens for companies, citizens, and public administration by at least 10 billion euros. The National Regulatory Control Council (NKR) states in its 2025 annual report that the structural bureaucratic burden on businesses remains at around 64 billion euros annually. Against this backdrop, any new reporting requirement that burdens companies without providing genuine added value is politically inconsistent.

The fast-food industry already records the working hours of the vast majority of its employees – this is practically inherent to the sector due to the use of point-of-sale systems and shift schedules. The German Association of System Catering (BdS) is therefore not calling for a fundamental rejection of time tracking, but rather for the decision regarding the method of recording to be left to the companies themselves and tailored to their specific operational circumstances. The draft legislation is too rigid in this respect: it mandates electronic, same-day recording as the standard practice and allows exceptions only through collective bargaining agreements – thus creating the same problem of collective bargaining coverage.

For companies with fewer than ten employees, permanent relief measures are planned; for medium-sized and larger companies, only limited transitional periods apply. While the costs of implementing electronic time tracking systems are manageable—cloud-based solutions cost between two and twelve euros per employee per month—the crucial point is not the price of the software, but rather the question of entrepreneurial freedom. The principle that the state prescribes protective objectives, but not the method for achieving them, is a proven principle of good regulation—and the draft legislation violates this principle.

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The European coordinate system: What the EU directive actually allows

The Working Time Directive 2003/88/EC establishes minimum requirements, but deliberately uses a weekly rather than a daily reference system. It stipulates only a maximum average weekly working time of 48 hours (including overtime) over the reference period, as well as daily rest periods of eleven hours and a weekly rest period of 24 hours in addition to the daily rest period. The existing German Working Time Act, with its eight-hour day principle, goes beyond these European minimum standards – it therefore provides more protection than EU law requires.

This is legally permissible and in some respects desirable. However, it also means that Germany would have considerable leeway in implementing the reform without violating EU law. Introducing a general maximum weekly working time – without being linked to collective bargaining agreements – would be fully compatible with Directive 2003/88/EC, provided that the rest periods and upper limits stipulated therein are observed. This is precisely what was agreed upon in the coalition agreement: the abolition of the daily maximum working time limit in favor of a weekly one.

The draft legislation from the Federal Ministry of Labor and Social Affairs (BMAS), however, falls short of what is possible at the European level. It maintains the eight-hour workday as the basic legal standard and only allows for weekly flexibility through collective bargaining agreements. This approach reflects less the objective necessity than the political compromise within the coalition: At the insistence of the unions, the SPD Labor Minister included a clause restricting the reform to sectors covered by collective agreements. The result is a draft that circumvents the reform promise literally without formally breaking it.

A comparison with other European countries clearly reveals the anomaly of the German approach. With an average weekly working time of 33.9 hours, Germany is among the countries with the shortest working hours in Europe. At the same time, the legal regulations governing the distribution of this working time throughout the day are considerably more restrictive than in most neighboring countries. France, the Netherlands, and other EU members adhere directly to the weekly guideline – thus enabling a distribution of working time that in Germany can only be achieved through complicated, roundabout collective bargaining agreements.

Flexibility as a socio-political opportunity: The underestimated dimension

The political debate often narrows to the employer's perspective, overlooking an important dimension: flexible working hours are also highly valued by employees. The study "Next Work in the Hospitality Industry" by the German Future Institute for the Hospitality Sector shows that 77 percent of employees consider flexible working hours a key workplace characteristic. At the same time, only 40 percent of employees in the hospitality industry are satisfied with the availability of flexible working hours. The gap between aspiration and reality is therefore considerable.

Introducing a maximum weekly working time would allow employees to distribute their working hours over four instead of five days, thus gaining a three-day weekend – a model often referred to in public debate as a "four-day week." This would explicitly not involve more work, but rather a different distribution of the same number of weekly hours. For a cook who already works until 4 p.m. after the lunch service, a longer shift until 6 p.m. on four instead of five days would likely be far more attractive – if it resulted in a longer weekend. This potential for improving work-life balance is not addressed in the BMAS draft proposal.

Demographic trends lend additional weight to this dimension. The DIHK Skilled Workers Report shows that the hospitality industry is among the sectors most affected by the labor shortage, and that the desire for flexible working hours is particularly pronounced there. By 2030, assuming low immigration, the hospitality sector is projected to be short 610,000 employees. In this situation, flexible working hours are not a luxury, but a strategic tool for recruiting and retaining staff. The draft legislation misses a significant opportunity here.

Work-life balance research also shows that younger employees, particularly those from Generations Y and Z, value autonomy in working time arrangements significantly more highly than generally shorter working hours. For the fast-food industry, which relies heavily on young workers, the ability to offer attractive working time models is directly linked to the ability to recruit sufficient staff in the first place. A reform that restricts this flexibility to large, unionized companies therefore creates not only legal inequality but also structural distortions of competition.

Trust-based working hours: Another point of conflict

Another sensitive element of the draft bill indirectly concerns trust-based working time. The coalition agreement explicitly stipulated that trust-based working time without time tracking should remain possible in accordance with the EU Working Time Directive. This commitment is significant from the perspective of knowledge-intensive service companies and modern work organization: trust-based working time enables a results-oriented work culture that works particularly well in sectors with a high degree of project-based work.

Whether the draft bill will deliver on this promise in practice is legally disputed. Trade unions argue that time tracking is necessary, especially with trust-based working hours, to ensure compliance with maximum working hours and rest periods. Employers' associations, on the other hand, emphasize that a comprehensive recording requirement would effectively abolish the trust-based working hours model. This represents an unresolved conflict of legal norms between the ECJ ruling, the Federal Labor Court's decision, the coalition agreement, and the draft bill. The final legislation will have to provide clarity on this issue if the federal government does not want to provoke another years-long legal battle.

Economic policy inconsistency: Reform as a self-contradiction

The fundamental problem with the draft bill lies in its inherent contradiction. In its coalition agreement, the Federal Government committed itself to a dual objective: greater flexibility for businesses and employees on the one hand, and a substantial reduction in bureaucracy on the other. The draft bill from the Federal Ministry of Labor and Social Affairs (BMAS) fails to achieve both goals simultaneously. It does not create genuine flexibility because it ties the crucial flexibility option (maximum weekly working hours) to a requirement of collective bargaining coverage, which is least common in the most flexible sectors. And it does not reduce bureaucracy because it introduces a rigid electronic daily timekeeping requirement that cannot be relaxed for companies without a collective bargaining agreement, even through industry-specific agreements.

The coalition's already achieved successes in reducing bureaucracy – reportedly around three billion euros in savings in the first six months – would be at least partially counteracted by the new reporting requirements. This is particularly true for the predominantly medium-sized hospitality and catering sectors, which are already under considerable cost pressure. In its 2025 annual report, the National Regulatory Control Council (NKR) warned that, despite initial progress, the structural bureaucratic burden on businesses remains at around 64 billion euros annually. New documentation requirements without any real added value directly contradict this finding.

It is not without a certain irony that a draft bill from the SPD-led Ministry of Labor is blocking the promised modernization. Linking flexibility to collective bargaining agreements follows a logic closely aligned with union interests: those who want more freedom should earn it through dialogue with the unions. This is understandable from a social policy perspective – but it contradicts the economic reform goal that the coalition itself agreed upon. And it discriminates against those employers and employees who work in sectors not covered by collective agreements and would nevertheless benefit from more flexible working time models.

The call for genuine reform: What lawmakers should do

The criticism from the BdS (Association of German Self-Employed) and large segments of the business community is not aimed at abolishing employee protection, but rather at its intelligent design. From an economic analysis perspective, the following reform principles can be derived:

First, a maximum weekly working time should be introduced without reservations regarding collective bargaining agreements. The EU Working Time Directive permits this; the coalition agreement stipulates it; and the economic necessity is evident. Employee protection can be guaranteed by maintaining the 48-hour weekly maximum and ensuring rest periods. Eliminating the reservation regarding collective bargaining agreements would not be an attack on such agreements—which could still stipulate stricter protection standards—but rather would create a level playing field for all companies.

Secondly, the obligation to record working hours should be designed to be method-neutral. The ECJ ruling requires an objective, reliable, and accessible system – but not necessarily an electronic one. According to the coalition agreement, the decision regarding the specific form should be regulated in an unbureaucratic manner. A regulation that leaves the choice of method to employers and only prescribes the objective of data protection would be compliant with EU law, favorable to employers, and would simultaneously safeguard employee rights. Industry-specific features – such as the cash register-based timekeeping systems already widely established in the chain restaurant sector – could thus be recognized instead of being replaced by rigid legal requirements.

Thirdly, the Federal Government should seize the opportunity to modernize working time law as a whole. This includes clear regulations on trust-based working time, the legal safeguarding of modern working time models (annual working time accounts, lifetime working time accounts), and the abolition of anachronistic detailed regulations that no longer serve any practical protective function. A 21st-century working time law should set a framework, not prescribe methods.

Overall assessment: Half-hearted reform is a complete failure

The draft bill from the Federal Ministry of Labor and Social Affairs (BMAS) to amend the Working Time Act is not a step towards modernization – it is a step towards regulated complexity. It codifies supreme court rulings (which is correct) without compensating for the resulting bureaucratization with genuine flexibility (which is incorrect). It opens up the possibility of a maximum weekly working time (which corresponds to the coalition agreement), but makes it unattainable for half of German employees through the collective bargaining agreement requirement (which contradicts the coalition agreement).

The impact on chain restaurants and the hospitality industry as a whole is particularly serious: a sector suffering from cost pressures, a shortage of skilled workers, and increasing competition, which urgently needs flexible working hours as a personnel management tool, yet is excluded from the key benefits of the reform. The 23 percent collective bargaining coverage rate in the hospitality industry means that around 77 percent of businesses in the sector would have to remain under the old, rigid system. This is not a reform outcome that lives up to its self-imposed goals.

The German Association of Independent Entrepreneurs (BdS) rightly appeals to the Federal Government to fundamentally improve the draft legislation in the further legislative process and to consistently implement the reforms promised in the coalition agreement. This appeal should not be understood as representing the special interests of one industry, but rather as a reminder of democratic credibility: coalition agreements are political promises. A draft bill that circumvents these promises without breaking them undermines confidence in the German state's capacity for reform – and, given the economic policy challenges of our time, this is a price Germany cannot afford.